US ↔ India employer transfer: the cross-border tax reset

If you work for a US-headquartered multinational and your job involves a relocation between the US and Indian offices — for a project, a long-term assignment, or a permanent move — your tax situation gets significantly more complicated. Each jurisdiction has its own rules about which income belongs to it, and your equity comp can end up partially-sourced to both countries.

This post walks through the most common scenarios and the playbook for each.

The two main directions

We'll cover both directions:

1. US → India transfer: you've been working in the US (typically on H-1B or L-1) and you're being transferred back to India.
2. India → US transfer: you've been working in India and your employer is transferring you to the US (often L-1 visa).

Each has different tax mechanics.

Direction 1: US → India transfer

The residency change

You were a US tax resident (whether on H-1B, L-1, or as a green card holder). You move back to India. Indian residency starts to accumulate.

Quick recap of Indian residency:

• ≥ 182 days in India in a financial year → Indian resident.
• 60–181 days, with prior-year conditions → variable status.
• < 60 days → typically NRI.

If you arrive in India in October (FY 2026–27), you'll be in India for ~180 days that year. You may or may not cross the 182-day threshold. The next FY (2027–28), you're in India ~365 days; clearly resident.

The RNOR window

Critically: even after becoming an Indian resident, if you've been an NRI for at least 9 of the previous 10 years, you qualify for RNOR (Resident but Not Ordinarily Resident) status for 2 years.

During RNOR:

• Foreign-source income (US-source) is NOT taxable in India.
• No Schedule FA disclosure required.
• Capital gains on foreign assets sold during this window are NOT taxable in India.

This is the same structure as the NRI returnee post.

What happens to your RSUs

Suppose you have:

• 200 vested RSUs in your Fidelity account from US years.
• 100 unvested RSUs that will continue vesting after your move.

Vested RSUs: yours. They sit at the broker. Schedule FA disclosure resumes once you become Ordinarily Resident (post-RNOR).

Unvested RSUs: continue vesting per your employment relationship. But the tax treatment of each vest depends on where you are when it vests:

• If you vest while in US: US perquisite tax (W-2 income).
• If you vest after moving to India but during RNOR: complex sourcing rules. Often: the RSU vest is allocable to where the work was performed during the vesting period.

The "sourcing" rule: if a 4-year RSU was granted while you were in the US, and you spent 3 years working in the US and 1 year in India before this particular tranche vested, 75% of the vest value is sourced to the US (US-sourced income, US tax) and 25% sourced to India (Indian-sourced income, Indian tax).

This is called the dual-sourcing approach. It's the standard treatment for cross-border RSU vests under the US-India treaty.

The practical implication

For each vest after your move, your employer (or their tax advisor) needs to determine:

1. What % of the underlying earning period was in the US.
2. What % was in India.
3. Apportion vest value accordingly.
4. Withhold US tax on US-portion, Indian tax on Indian-portion.
5. Issue you both a US W-2 (for US-portion) and Indian payslip entry (for India-portion).

This is messy but standard. Most US multinationals handle it via internal mobility/equity teams.

Form 67 for cross-border vests

If both countries tax the same income (e.g., a vest where India and US both claim sourcing), you can claim FTC in India via Form 67 for the US tax paid. Standard mechanism.

For dual-sourced vests with clean apportionment, no double tax — each country taxes its share.

Direction 2: India → US transfer

The reverse. You worked in India for years; your employer is transferring you to the US (typically L-1 visa).

The residency change

You become a US tax resident under the substantial presence test. The day you arrive in the US, your US-resident status begins (or after a partial-year transition).

Indian residency: depends on how many days you spent in India before the move. If you moved in October, you're likely Indian-resident for FY 2026–27 still.

Subsequent FY: if you're in the US for 365 days, you're NRI for Indian purposes.

What happens to your RSUs

Suppose you had ₹50 lakh of vested RSUs in your Indian-employer-related US brokerage.

Vested RSUs: yours. The transfer doesn't trigger any sale. They stay in your account.

Unvested RSUs: continue vesting. Same sourcing logic as Direction 1, but reversed:

• A vest after your US move is mostly US-sourced (you're working in US during the vesting period).
• But if any of the earning period was in India, that portion is India-sourced.

Indian tax on the India-portion still applies until the relevant tranche has fully transitioned to US-only sourcing.

Capital gains on shares already-held

If you sell vested shares after moving to the US:

• During the year you became NRI: capital gains on Indian-equity sales are still subject to Indian tax (if you were resident at sale time). Foreign equity (US RSUs in your case) is also Indian-taxable if you're still resident.
• Once fully NRI: only Indian-source income is Indian-taxable. US shares (sold while NRI) are NOT Indian-taxable. They're taxed in the US under US capital gains rules.

The "exit" planning window

When moving from India to the US, there's sometimes an opportunity to realize Indian-source capital gains in the year before becoming NRI:

• Sell appreciated Indian listed equity in your last Indian-resident year.
• Pay Indian LTCG @ 12.5%.
• Move to the US.
• Reinvest in US-equity equivalent.

Why? Because once NRI, your Indian-listed equity is still taxed in India when sold (Indian-source income for NRIs). Selling before transitioning gives you a clean reset.

This is rarely the optimal move on its own — it's only worth doing if you have other reasons to rebalance — but worth considering.

A worked example: US → India transfer

Setup: You worked in the US for 8 years on H-1B. You're being transferred back to India in October 2026.

RSU position:

• 300 vested shares in Fidelity (cost basis: $40k from various vests over the years).
• 150 unvested shares: 2-year remaining vesting schedule.

Plan:

Pre-transfer (April–September 2026, still in US)

1. Verify residency status: full-year US tax resident for FY 2026–27 still likely.
2. Top off any tax-advantaged accounts (401k, Roth IRA, HSA).
3. Review whether to roll 401k → IRA before move.
4. Update broker accounts with anticipated address change.

Move (October 2026)

1. Update Fidelity / Vested / IBKR with Indian address.
2. Re-file W-8BEN with Indian residence.
3. Update with employer's mobility team to ensure correct vesting source-allocation going forward.

Post-move, RNOR window (October 2026 – approx. April 2029)

1. Claim RNOR status if eligible. Foreign-source income (your US salary's tail-end, US RSU vests) potentially exempt from Indian tax during this window (depending on facts).
2. Review whether to sell appreciated US-equity holdings during RNOR (no Indian tax on the gains).
3. Indian salary kicks in normally. Tax in India on Indian-source income.

Continuing RSU vesting

• For each vest after Oct 2026, apportion based on time-spent in US vs. India during the vest period.
• Initially, most vests will be heavily US-sourced (you spent most of the vesting period in US).
• Over 2–3 years, vests become mostly India-sourced.

Becoming Ordinarily Resident (~2029)

1. RNOR window ends.
2. Schedule FA disclosure begins (for all foreign assets).
3. Form 67 for any FTC on cross-border RSU vests.
4. Full Indian taxation of all income.

Common mistakes in cross-border transfers

Mistake 1: Not informing the employer of the move

Sometimes employees are transferred and the equity-plan administrator isn't updated promptly. RSU vests then get treated as full-US-source (incorrect once you're in India).

Update HR, mobility, and the plan administrator within 30 days of the move.

Mistake 2: Selling RSUs in the wrong year

If you became NRI in October 2026, and you want to realize Indian capital gains before Indian tax obligations end, sell before September 2026 (while still resident). After NRI status, Indian-source income tax obligation ends, but you've also lost the LTCG efficiency.

Mistake 3: Forgetting India side compliance

Even after moving to the US, if you held ₹X of Indian assets at any point in the FY, Indian compliance applies for that portion.

Mistake 4: Double taxation due to FTC mistakes

Cross-border vests with sourcing-allocation can be complex. If apportionment isn't correct, both countries might tax the same dollar. FTC corrects this — but only if you file Form 67 timely in India (and US 1116/1118 timely in the US).

Hire a cross-border CA for the transition years. The cost is well below the tax mistakes prevented.

Mistake 5: Not updating brokerage W-8BEN / W-9

When moving:

• US → India: update from W-9 (US person) to W-8BEN (non-US person).
• India → US: update from W-8BEN to W-9.

Mismatched paperwork can create unnecessary withholding or reporting issues.

Tax treaty articles that apply

For cross-border equity comp, the relevant US-India treaty articles:

Article	Topic	Application
Article 16	Employment income	Generally taxable in country of residence and where work is performed
Article 24	Independent personal services	For non-employee compensation (rare for typical RSUs)
Article 25	Relief from double taxation	The FTC mechanism

Most cross-border RSU vests fall under Article 16. Sourcing follows where the work was performed.

Plan administrator / employer responsibilities

For US multinationals with Indian operations, the equity / mobility team typically:

• Tracks employees who relocate between countries.
• Updates payroll allocations for cross-border vests.
• Issues consolidated tax documents for the year (W-2 + Indian salary slips, with apportionment notes).
• Coordinates with the broker for sell-to-cover withholding correctness.

If you find your employer's mobility team isn't on top of this, escalate. Self-correcting these issues at filing time is much harder than getting them right at vest.

Indian compliance during the transition

During the year of the move, your Indian filing is more complex than usual:

• ITR-2 likely required (foreign income).
• Schedule FA may be partial (depending on residency status mid-year).
• Foreign tax credit on US tax paid via Form 67.
• Possibly dual-status treatment.

Hire a CA experienced in cross-border transitions for at minimum the first 2 years post-move. Most large CAs (KPMG, PwC, Deloitte) have specialized teams. Independent CAs with cross-border practice work too, often at lower cost.

A summary checklist for cross-border movers

Before the move (60+ days out)

• Identify residency status changes by date.
• Notify employer's mobility / equity team.
• Plan account address changes.
• Identify pre-move tax optimization opportunities.

At the move

• Update broker addresses, W-8BEN/W-9 forms.
• Update payroll for the new country.
• Document the move date for residency calculations.

Post-move year 1

• File partial-year tax returns in both countries as applicable.
• Claim FTC for any double-taxed income.
• Update Schedule FA / RNOR status as applicable.

Ongoing (years 2–3)

• Maintain cross-border CA relationship.
• Track vests with proper sourcing.
• Schedule FA disclosures once Ordinarily Resident.

The summary

Cross-border employment transfers create some of the most complex tax situations a working professional can face. For Indian residents:

1. Direction matters: US → India and India → US have different mechanics.
2. The RNOR window is valuable for US → India transferees — use it for tax-efficient sales.
3. Sourcing rules apply to RSU vests that span the move date.
4. FTC via Form 67 prevents double taxation when sourcing overlaps.
5. Hire a CA experienced with cross-border employment for the transition years.

Done thoughtfully, a cross-border transfer is just an extra layer of administration. Done sloppily, it can mean lakhs of unnecessary tax, missed FTC opportunities, or compliance failures discovered years later. Plan ahead.