I need to return 3 phones that were recently purchased from US, I will be travelling from India to US (SFO).
Is it okay to carry 3 Phones (packed-unused) with a valid UPS return package.
Will this cause any issues at India or US customs ?
Yes, you can. Do not seal the package as customs will definitely want to inspect the contents. It is not actually needed to have them in the return box, it is sufficient that they were purchased within the United States customs territory (i.e. duty has already been paid on them), within the past three years, and that they have not been advanced in value. You need to tell the CBP Officer that you have non-US origin goods being re-imported to the US within three years and are eligible for duty-free entry under HTS 9801.00.26 for return to the manufacturer.
For an informal entry, I'd imagine receipts with serial number showing purchase in US should be sufficient. If you have any documents showing entry from Indian customs I would bring those too. If the total value of the phones is over $2,500, this matter will become substantially more complicated and you will need a customs broker to assist you in preparing a formal entry document and appropriate documentation.
You can carry anything you want, but you will have to declare to US Customs whatever property you carry. The property will be subject to inspection (so it shouldn't be sealed) and to assessment of duty if Customs judges that its value exceeds whatever amount might be exempt. Exemption amounts vary depending on where you're coming from, and some items or amounts of value may be exempt as merchandise being returned.
That you're going to send them via UPS after you enter the US doesn't make the phones exempt from inspection or the imposition of customs duty — you're still bringing the phones into the US.
This non-governmental page says that the first US$1000. of property will generate Customs duty of 10%, and that further duty amounts (unspecified) will be assessed against values over US$1000.