Severance, buyouts and moving the money home to India.

Severance pay is taxed as ordinary wages. It is subject to federal income tax, Social Security and Medicare tax, and usually state income tax, exactly like a salary. It is not a gift, not a capital gain and not tax-free compensation for losing your job, whatever the agreement calls it.

The IRS treats severance as a supplemental wage: pay that is not your regular salary. Bonuses, commissions, payouts for unused vacation and the value of vesting stock awards sit in the same category. All of it appears on the Form W-2 your employer issues for the year, and all of it counts toward your income for that year's return.

What changes is not the tax but the withholding. Because supplemental wages are often paid as one large amount, employers are allowed to withhold on them differently from your regular paycheck, and that difference is why a severance check usually looks smaller than people expect.

Your state matters too. Most states with an income tax treat severance as wages and withhold on it, and a few withhold at their own flat supplemental rate. If you worked in one state and live in another, both can appear on the paperwork. This page is general information, not tax advice.

Employers can withhold federal income tax on supplemental wages at a flat 22 percent, rising to 37 percent on supplemental wages above $1 million in a year, instead of using your regular withholding. Add Social Security, Medicare and state tax, and a third or more of a severance payment can be withheld before it reaches you.

The flat rate is a withholding method, not your tax rate. Your real federal tax is worked out on your return, across the whole year's income, using the ordinary brackets. Someone laid off in the spring who earns little for the rest of the year can end up in a lower bracket than the withholding assumed.

Some employers use the aggregate method instead, adding the severance to a regular paycheck and withholding as if that inflated amount were your normal pay every period. That can withhold even more. Either way, the figure on your final pay stub is an estimate the IRS settles later.

Often, yes. If more was withheld than you owe for the year, you get the difference as a refund when you file. For someone who leaves the US the same year, that return is filed the following spring, so the refund usually arrives months after you have moved, in whichever account you name.

The year you leave is often a dual-status year: a resident alien for part of it and a nonresident for the rest, under US rules and US dates. A dual-status return is filed differently from an ordinary one, and some deductions and filing statuses are not available, so the refund may be smaller than a calculator for US residents suggests.

It still has to be filed. Leaving the country does not end your obligation to file for the year you earned US wages, and a refund you never claim is simply kept. Many returnees file with a cross-border preparer who handles dual-status returns every season.

Keep your final pay stubs, the severance agreement and your W-2 somewhere you can reach from India. Your employer will mail the W-2 at the end of January, so make sure it has an address that will still find you, or that you can download it from the payroll portal.

No. The IRS direct-deposits refunds only to accounts at US financial institutions. Otherwise it mails a paper check, which is slow to reach India and awkward to deposit there. The practical answer is to keep one US checking account open in your own name, receive the refund into it, then send it on.

This is the single most common reason returnees regret closing every US account on their way out. The refund, a final expense reimbursement, a security deposit and a late severance instalment all want a US account to land in, sometimes a year after you leave.

Once the refund is in that account, sending it to India is one more transfer from the same linked account you used before you left. ComplyRemit transfers are funded from a US checking account in your own name, so the account you keep open for refunds is also the account that funds the transfer.

Tell your bank you are moving abroad and ask what it needs to keep the account in good standing with a foreign address. Some banks restrict accounts for customers who live outside the US, and it is far easier to find that out while you still live here.

Do not assume it does. The grace period generally runs from the day your employment ends, for up to 60 days or until your authorised stay expires if that is sooner. Whether a notice period or salary continuation moves that date is an immigration question, so ask an immigration attorney with your agreement in hand.

Severance agreements describe dates in different ways: a last day worked, a separation date, a period of garden leave or paid notice, a date benefits end. Those are not always the same day, and the day that matters for immigration status is not necessarily the one payroll uses.

Plan your money as if the earlier date is the real one. If it turns out you have more time, you lose nothing. If you plan on the later date and are wrong, you find yourself selling a car and closing a lease in a hurry. Our post on moving your money after an H-1B layoff walks through the first week in detail.

Usually your employer decides, but where you have a choice, the trade-off is timing. A lump sum lands while you are still in the US and can be moved before you leave. Instalments continue after you go, so they need a US account that stays open and a plan to forward each payment to India.

Tax follows the calendar year in which you are paid. A lump sum paid in the year you leave is taxed in that year's return. Instalments that cross into the next calendar year are taxed partly in a year in which you may be a nonresident of the US, which changes how that slice is reported.

Instalments paid through payroll keep arriving on the employer's schedule, often with the same withholding as before. If you will be in India, set a reminder for each payment date and check the deposit arrives before you send it on.

Some agreements pay severance only after you sign a release and a revocation period passes. Read the agreement for that waiting period before you plan transfers around the money: it is common for the first payment to arrive weeks after your last day.

Generally not. A voluntary separation payment, buyout or early-exit package is taxed as wages in the same way as severance, and withheld on as a supplemental wage. What differs is planning: you usually know the date in advance, so you can line up your money and your move before the payment arrives.

A buyout is the best version of a bad situation for the money side, because nothing is rushed. You know roughly how much will arrive, when, and what will be withheld. That makes it the right moment to verify a transfer account, raise its limit and send a small test while your regular salary is still coming in.

Read the package for the parts that are not cash. Accelerated stock vesting is a supplemental wage too, taxed at vesting, and shares you hold afterwards are an investment you may want to keep, sell or move. Continued health cover and outplacement support have value but do not need to be moved anywhere.

Usually not if it is paid while you are a non-resident of India, because it is income from employment outside India. Once you are resident, it depends on your status: RNOR status generally keeps foreign income out of Indian tax, while ordinarily resident status makes worldwide income taxable, with relief under the India–US tax treaty.

Sending your own money to your own Indian account is not income in India. The question is only whether the severance itself is taxable there, and that turns on your residential status in the Indian tax year it is received, which runs from 1 April to 31 March.

Instalments paid after you move are the case to check. If you are RNOR when they arrive, foreign-source employment income is generally outside Indian tax. If you are ordinarily resident, it is reportable in India, and the treaty and foreign tax credits usually stop the same income being taxed twice.

Our guide to RNOR status explains how the day counts work. Have a chartered accountant who handles cross-border returns confirm your own position. This is general information, not tax advice.

Possibly. IRS rules ask most departing non-citizens to obtain a certificate of compliance, often called a sailing permit, before leaving, showing they have met their US tax obligations so far. Several categories are exempt. Check the IRS page on departing alien clearance and ask a preparer whether it applies to you.

The certificate is requested in person at an IRS office, usually within the month before you leave, with documents showing your income and tax paid for the year. It does not replace the return you file the following year; it only confirms you are not leaving with tax unpaid.

In practice, many people leaving on a work visa are not asked for it at the border, which is why it surprises them later. A preparer can tell you quickly whether your situation calls for one, and the conversation is worth having anyway because it is the same preparer who will file your dual-status return.

Once it has cleared in your US account, and in planned instalments rather than all at once. Keep enough in the US for the bills that follow you: the final rent, a car loan payoff, card balances, and a cushion for anything withheld or owed. Send the rest to India on a schedule you set.

Plan on a few business days per transfer. Collecting from your US bank account takes one to three business days, and funds are typically delivered in India within 48 hours of that debit clearing. Banks settle on business days only, so a transfer started on a Friday afternoon waits out the weekend.

Start with a small test transfer to your own Indian account. It proves the account accepts the credit, shows you the real timeline on your own bank, and starts the transaction history that larger transfers build on.

Planned instalments also take the pressure off the exchange rate. Nobody times the rupee reliably, and spreading the money over a few weeks means you are not betting the whole severance on one day's rate.

That depends on how far you have verified, and your own limit is shown under the amount field before you send. Adding your Social Security number raises it in about two minutes. An enhanced review can raise it further, up to $50,000 per transfer, and a person usually decides within about two business days.

The enhanced review asks for a recent pay stub and a bank statement from the last ten days. Your final pay stub, the one showing the severance, is exactly the kind of document it wants, so ask for the review while that stub is recent.

Approval is not guaranteed, and larger requests can also ask where your wealth comes from. A severance agreement is a clean answer to that question. If a review is not approved, your account keeps working at the limit you already have.

Daily and weekly limits apply too, and they are checked before you send. If a transfer would take you over one, the amount screen tells you how much is left and when it resets, before anything is collected from your bank. Do not split an amount into small pieces to stay under a limit; ask for the limit to be raised.

Send at the mid-market rate and compare providers on the rupees that arrive, not on the fee. ComplyRemit converts at the mid-market exchange rate, the one Google shows, with any fee disclosed on the review screen before you confirm. Funding from your bank account also keeps the transfer outside the 1% US remittance tax.

On a severance-sized amount the exchange rate is the biggest cost of the whole transfer. With a hypothetical provider that charges no fee but quotes one percent below the mid-market rate, $60,000 leaves $600 behind in the conversion, on a transfer advertised as free.

The 1% US remittance tax applies to transfers funded with cash, money orders and similar instruments, not to transfers paid from a US bank account. Every ComplyRemit transfer is funded from your linked US checking account, so it is outside that tax.

For a large sum, pay an Indian bank account with its IFSC code rather than a UPI ID: UPI payouts have a lower per-transfer ceiling. The bank account is checked when you add it, which catches a wrong IFSC or a dormant account before any money moves.

While you are still a non-resident under India's foreign exchange rules, an NRE account is the usual choice for money earned abroad: it is repatriable and its interest is exempt from Indian tax. Once you return to India to stay, your bank must redesignate NRE and NRO accounts as resident accounts.

Many returnees send their savings in while still non-resident, then tell the bank when they move. Under Reserve Bank of India rules the NRE balance is then held in a resident account, or moved to a Resident Foreign Currency account if you want to keep it in foreign currency.

An NRO account is for income that arises in India, such as rent or interest, and is the wrong place for US earnings you may want to move out again. Our guide to NRE and NRO accounts explains the difference in more detail.

Sending to your own account in your own name keeps the record simple. A bank or tax office that later asks where a large credit came from is answered by a confirmation showing your US account, your Indian account, the date and the amount, and by the severance agreement behind it.

One open US checking account, enough money in it for bills still to come, and an address the IRS and your former employer can use. Your 401(k) can usually stay where it is. Write down every payment you are still owed, from the tax refund to a deposit, and where each will land.

A 401(k) is a separate decision from severance, with its own tax rules and early-withdrawal penalties, and cashing it out in a hurry is one of the most expensive mistakes returnees make. Our post on what happens to a 401(k) when you move to India covers the options.

Keep a list: the severance instalments, the refund, a final expense claim, a deposit, an insurance reimbursement. As each lands in your US account, send it on. A verified transfer account with a raised limit makes each of those a few minutes' work from India.