L-1 Visa Tax Filing for Indian Transferees

The residency rules are identical — neither is an exempt individual, both count days from arrival, and both become residents taxed on worldwide income on meeting the substantial presence test. What differs in practice is the compensation structure. L-1 transferees frequently keep an Indian employment relationship, an Indian payroll component and Indian benefit contributions, and often sit under a company tax-equalisation policy. Those produce a materially different return from a straightforward US hire, which is why this needs handling as a transfer rather than as a new job.

If you are a US tax resident, yes. Residents are taxed on worldwide income regardless of where it is paid, in what currency, or into which bank account. Salary credited to your Indian account during a US assignment is within scope, and it will not appear on your US W-2 — which is exactly why returns built only from the W-2 understate income for transferees. Indian tax withheld on that component is generally creditable on Form 1116, so reporting it properly is usually not the same as paying twice.

Tax equalisation and gross-up arrangements mean your employer bears some or all of your US tax, but the amount they pay on your behalf is itself compensation to you and has to be included in income — and then grossed up, because the tax on that additional income is also borne by the employer. It is circular by design and it is easy to understate. Your employer's mobility provider may supply a calculation; we reconcile it rather than assume it, because an error here changes the reported income rather than just the tax.

It can, but the conditions are strict and all of them must hold. Broadly, the article covering dependent personal services can leave employment income taxable only in India where your presence in the US is under 183 days in the relevant period, your remuneration is paid by an employer who is not a US resident, and the cost is not borne by a US permanent establishment. A typical L-1 assignment fails at least one of those, most often because it exceeds 183 days or because a US entity effectively bears the cost. It is worth testing properly rather than assumed either way, and if it applies the position has to be claimed on the return.

If contributions continue during your US assignment, two separate questions arise and only one has a clear answer. The reporting question is relatively settled: a provident fund balance will generally need to be considered for FBAR and Form 8938 purposes. The taxation question — whether employer and employee contributions and accrued interest are currently taxable on a US return — is genuinely unsettled, because the India-US treaty contains no clear provision equating Indian provident funds with US-qualified plans. We will set out the positions and where the uncertainty lies rather than assert one as settled.

Plan it before you go, because a departure year is usually a dual-status year and some of the useful steps are only available while you are still present. There are residency-termination rules that determine your last day as a resident, the timing of income and equity events around your departure can change which country taxes them, and any final Indian filing needs to be consistent with the US position. Handled in advance this is routine; handled the following April from Bengaluru it is considerably harder.