Atlanta tax expert,
I am on H1B and my tax filing status is 'married filing jointly'

If I contribute to 401k while I am on h1b and if I leave US after 3-4 years can I withdraw less than 10K each year and thereby avoid paying taxes besides the 10% penalty? Please advise. Thanks.

You would have to file Form 1040NR as a non-resident alien, so you cold NOT claim any dependents nor be allowed to claim the standard deduction.

Hence, the ONLY exemption you could claim is your own personal exemption of about $4,000, so $4,000 would be the most you could withdraw each year to pay ONLY the $10% Early Withdrawal Penalty.

1)I am from India so will I get standard deduction when I file 1040NR.
2)Do I have to file state tax return as well?
3) I understand that 10% penalty and 20% tax will be deducted at source do I need to file return to get a tax refund?

Thanks for all your help.

1) You only get the standard deduction when you are a STUDENT on a F-1 visa or an INTERN on a J-1 visa. Non-resident aliens from India who are NOT on these visas do NOT get the standard deduction.

2) No state returns will be required if you do not live in the state when the withdrawal is made.

3) Yes, a tax return WILL need to be filed to get the refund.