[lalji]

Atlanta tax expert,

I have permanently moved back to India in March this year after working on H1B visa for 6 years. In 2016, am I supposed to pay taxes on interest income earned in India after moving back to India? I would appreciate a response. Thanks.

[AtlantaTaxExpert]

It depends on HOW you file for 2016.

You have the option to file as a resident for 2016 and declare all world-wide income. In such a case, you would declare the interest earned in your Indian bank accounts for all of 2016.

OR

You can file a dual-status return, paying taxes ONLY on income earned while in the U.S. The cut-off date would be the day you left the U.S. On such a dual-status return, you would pay taxes on the interest in the Indian banks up to the date of your departure from the U.S.

Since you cannot claim the standard deduction on a dual-status return, it is often better to file as a resident in your last year. Further, the full-year resident return can be filed electronically, whereas the dual-status return must be mailed.

In either case, you must submit a Residency Termination Statement to inform the IRS that you have returned to India and will not be filing U.S. returns after 2016.

If you need professional help with this process, you can email me at the email address in my profile.