Indian-Americans: India's 2024-26 changes plus the TCJA sunset

The India-US DTAA, signed in 1989, caps interest tax at 15% under Article 11 and dividends at 25% (or 15% with conditions) under Article 10. None of those rates moved in 2024-26. The treaty's Saving Clause means India must extend treaty rates regardless of US-side residency rules.

Default Indian TDS for non-residents under Section 195 is 30%. Without TRC + Form 10F on file, your Indian bank deducts 30% even though the treaty allows 15%. The gap is 15 percentage points on every rupee of NRO interest.

A New Jersey-based engineer with a ₹30 lakh NRO FD at 7% earns ₹2.1 lakh interest annually. At 30% default TDS: ₹63,000 lost. At 15% treaty: ₹31,500. Annual gap: ₹31,500. Over 6 years: ₹1.89 lakh recoverable plus Section 244A interest.

This is the recovery math your Indian CA usually doesn't run.

Section 148 reopening cut to 3 or 5 years from 1 September 2024. Most pre-FY 2019-20 reassessments are now closed.

Section 148A faceless mandate confirmed by the Supreme Court (July 2025). JAO-issued Section 148 notices are void. If your last Indian notice came from a Mumbai or Bengaluru AO directly, you can ignore it.

Budget 2024 LTCG. NRI property sales taxed at 12.5% flat without indexation, or 20% with indexation, whichever lower. Effective 23 July 2024.

Black Money Act 2015 safe harbour raised to ₹20 lakh for movable foreign assets, September 2025. Your Vanguard 401(k), your Charles Schwab brokerage, your Roth IRA balances under ₹20 lakh equivalent are no longer reportable on Schedule FA. Above that line, full disclosure stands.

The Tax Cuts and Jobs Act of 2017 sunsets on 31 December 2025. Without Congressional action, individual provisions revert to pre-2018 rules from 1 January 2026.

For Indian-Americans the practical changes:

Standard deduction reverts from $14,600 (2024) to roughly $7,800 inflation-adjusted, more than halving the simple-filer threshold.

Personal exemption returns at roughly $4,500 inflation-adjusted, which had been zero since TCJA.

State and local tax cap of $10,000 expires, so high-state-tax NRIs in California and New York recover full deduction.

The Foreign Earned Income Exclusion stays at the inflation-adjusted level.

For Indian-Americans with significant Indian-source NRO interest, the change matters because IRS foreign-tax-credit calculations interact differently with the higher personal exemption. Your effective foreign tax credit may rise by 200 to 400 basis points.

Indian-Americans get their TRC equivalent through Form 6166, issued by the IRS only after Form 8802 is filed.

Form 8802 application: $85 per request, available on irs.gov. You need to file your most recent 1040, attach the application, and wait. IRS turnaround: 6 to 8 weeks; sometimes 12 weeks during peak season.

Form 6166 covers the calendar year. Renew every January. The IRS only issues it after the prior year's 1040 is processed, so a US filer who delays past 15 April 2026 may not get a 2026 TRC until July, leaving 6 months of TDS at the default rate.

File Form 8802 in February or March every year, not later. The Indian Form 10F needs Form 6166 as the supporting TRC, and your bank reverts to 30% TDS the moment your prior-year TRC expires.

Indian mutual funds are PFICs (Passive Foreign Investment Companies) for IRS purposes. Default treatment is the punitive 'excess distribution' regime: regular tax + interest charge on every distribution and gain.

Elect QEF (Qualified Electing Fund) status by filing the IRS 8621 in year of acquisition. Most AMC SIDs don't provide the PFIC Annual Information Statement, which makes QEF election impractical. Mark-to-market election is the next best, but only for marketable PFICs.

FATCA disclosure threshold for single filers living abroad: $200,000 at year-end or $300,000 at any time during the year. NRO + NRE balances in aggregate cross the threshold for most Indian-Americans with property or substantial deposits.

FATCA disclosure is separate from FBAR (FinCEN 114), $10,000 aggregate threshold across all foreign accounts. Both have penalty exposure.

Section 119(2)(b) gives 6 years of rolling lookback in India. The condonation itself is independent of US filings.

A Bay Area engineer with a ₹50 lakh NRO FD at 6.8% over 6 years paid ₹6.12 lakh in default 30% TDS. At the 15% treaty rate: ₹3.06 lakh. Gap: ₹3.06 lakh recoverable.

Add Section 244A interest at 6% simple per delayed year. Total Indian recovery: ₹3.5 to ₹3.8 lakh.

On the US side, the recovered Indian TDS gap reduces your foreign tax credit carry-forward, which means a one-time tax adjustment in the year of recovery. That's something your US CA factors into the 1040 amendment if needed.

We've coordinated with US-side enrolled agents on every recent client engagement. Most Indian-American clients run their US returns themselves and we're focused on the Indian side.

Upload your 26AS or AIS. We read every TDS line, apply the 15% Article 11 treaty rate, and quote the recoverable amount in dollars.

If you want us to take it on, a US-specialist CA files the current-year ITR at 15% and a Section 119(2)(b) condonation for past years. We handle AO correspondence under Section 288 so you don't fly to Mumbai for it.

We charge 15% of what we recover. Zero if we recover zero. Form 10F renewal after that is ₹799 a year on a flat fee.

If you'd rather book a free CA appointment first and ask PFIC-specific or TCJA-specific questions, that's free, no card, no commitment, 15 minutes. We're happy to walk through the Indian side without selling anything on the US side.

Q: I'm a green card holder, not a citizen. Does anything change?

A: For India-side compliance, no. You're a US tax resident either way for treaty purposes. Form 6166 is issued to green-card holders the same way. India-US DTAA covers permanent residents.

Q: I have Indian mutual funds I bought in 2010 before moving to the US. PFIC penalty is huge. Should I sell?

A: Run the math both ways. Holding triggers annual interest charges on growth; selling crystallizes the lump-sum tax. For positions held over 10 years the cumulative interest can exceed 50% of the gain. Most Indian-American clients sell out, eat the one-time tax, and reinvest in US-domestic funds. Book free CA appointment for the specific math on your folios.

Q: Does TCJA sunset affect my Indian Schedule FA?

A: No. Schedule FA is India-side disclosure. Black Money Act 2015 ₹20 lakh safe harbour is set in INR by Indian Parliament, independent of US tax law.

Q: My Form 6166 lapsed and my bank started deducting 30% again. How fast can I fix it?

A: File Form 8802 today. IRS turnaround is 6 to 8 weeks. Once Form 6166 lands, file fresh Form 10F online and submit to your bank. Next interest credit cycle should apply 15% TDS. Anything deducted at 30% in the meantime is recoverable through ITR claim under Article 11 of the treaty.