Many Indian professionals working in the U.S. on an L-1 visa face confusion about tax residency, dual-status returns, foreign salary, and tax treaty benefits. Worse, most CPAs are unfamiliar with the specific tax compliance obligations and misreport global income or skip necessary forms like FBAR, FATCA, or Form 1116.
At Kewal Krishan & Co, we’ve helped hundreds of Indian L-1 visa holders legally save tens of thousands of dollars through accurate tax residency determination, correct foreign income treatment, and IRS-compliant filings.
Who Is an L-1 Visa Holder?
The L-1 visa is a non-immigrant work visa that allows Indian professionals employed by a multinational company to transfer to a U.S. office. There are two types:
- L-1A: For executives and managers
- L-1B: For employees with specialized knowledge
L-1 holders are generally paid in the U.S., but may also continue receiving salary or benefits in India-which creates cross-border tax complexities.
Tax Residency Rules: Are You a U.S. Tax Resident?
Under IRC §7701(b), you are a U.S. tax resident if:
- You pass the Substantial Presence Test (SPT) in the calendar year, or
- You’re a Green Card holder (not applicable to L-1 directly)
Substantial Presence Test (SPT)
- Present in the U.S. for at least 31 days in 2025, and
- 183 weighted days over 3 years
- 2025: Full count
- 2024: 1/3 count
- 2023: 1/6 count
If you meet SPT, you are considered a resident alien for tax purposes.
IRS Forms & Code References for L-1 Filers
| Form | Purpose |
|---|---|
| Form 1040 | Resident return |
| Form 8938 | FATCA foreign asset reporting |
| FinCEN 114 (FBAR) | Foreign bank account reporting |
| Form 1116 | Foreign tax credit for Indian taxes |
| Form 2555 | Foreign Earned Income Exclusion (if qualified) |
| W-2/1099 | U.S. income reporting |
| Form 1040-NR | For dual-status filers only (if newly arrived) |
Example: How L-1 Taxes Work
Ankit transferred to California on L-1A in March 2025. He:
- Earns $12,000/month in the U.S. (W-2 from U.S. company)
- Still receives ₹50,000/month from India entity for past services
- Holds ₹25L in Indian mutual funds and bank accounts
Tax Implications:
- U.S. salary = Fully taxable in U.S.
- Indian salary = Reportable, but eligible for Foreign Tax Credit (FTC)
- Indian mutual funds = May trigger PFIC reporting (Form 8621)
- Must file FBAR + Form 8938 for foreign accounts
- May benefit from U.S.-India Tax Treaty
Step-by-Step Filing Tips for Indian L-1 Holders
- Determine Your Residency
Use SPT to confirm if you are a resident alien or dual-status for the year.
- Collect Global Income Documents
- U.S.: W-2, 1099s
- India: Form 16, salary slips, TDS certificates
- Bank, demat, mutual fund statements for FBAR
- File Form 1040 (Not 1040-NR)
If you meet SPT, file Form 1040 as a U.S. tax resident.
- Report worldwide income
- Claim Foreign Tax Credit (Form 1116) for Indian TDS
- Consider itemized deductions over standard deduction
- FBAR & FATCA Compliance
- FBAR (FinCEN 114): Required if all foreign accounts exceed $10,000
- Form 8938: Triggered if foreign assets > $50,000 (Single) or $100,000 (MFJ)
- Consider PFIC Rules
If you hold Indian mutual funds:
- File Form 8621 for each fund
- Complex reporting, must be done annually
- Consider exiting before U.S. tax residency if possible
- Track Indian Taxes Paid
If India taxed your salary or interest, keep:
- TDS slips or Form 16
- Use these to claim FTC via Form 1116
Conclusion
Tax filing for Indian L-1 visa holders is complex, involving global income, treaty provisions, foreign asset disclosures, and dual compliance with IRS and Indian tax authorities. Filing incorrectly can result in penalties, audits, or double taxation.
Call to Action
Anshul Goyal, CPA EA FCA is a U.S.-licensed Certified Public Accountant and Enrolled Agent authorized to represent clients before the IRS. He provides expert help to Indian professionals on L-1 and H-1B visas for FBAR, PFIC, FATCA, and dual-status filings.
About Our CPA
Anshul Goyal specializes in helping Indian nationals comply with U.S. tax laws, especially those on temporary work visas like L-1, H-1B, or F-1. From first-year elections to tax treaty benefits, he ensures your return is IRS-compliant and optimized.
Disclaimer
This blog is for general educational purposes and does not constitute legal or tax advice. Please consult a licensed tax advisor for personalized guidance.
Top 5 FAQs
1. Do I need to report Indian salary if I’m on L-1 in the U.S.?
Yes. If you meet SPT, you must report worldwide income, including India salary.
2. Can I avoid double taxation on Indian income?
Yes, via the Foreign Tax Credit (Form 1116) or tax treaty provisions.
3. What if I only arrived mid-year on L-1?
You may be a dual-status alien, requiring special filing rules.
4. Are Indian mutual funds reportable in the U.S.?
Yes. They are usually treated as PFICs and must be reported on Form 8621.
5. Do I have to file FBAR for my Indian bank accounts?
Yes, if combined foreign accounts exceed $10,000, even for a day.