Hi I'm Sandhya,
My husband and I are Indians. WEa re on H1b visa. We got married in June 2012. We currently claim 1 allowance "married." Is that correct? Are we eligible to file under "married status?" Please let me know if it legal or whether the "married status" is applicable only to US green card holders and citizens!
Thanks,
Sandhya

Yes you can file joint return as residents that is as Married Filing Jointly.
You must report your worldwide income for the year.