Is it potential to simplify the US-India DTAA guidelines? Also, please assist me with the next queries? Which rule of DTAA is relevant for wage earned within the US underneath the F1 visa? How a lot tax paid within the US shall be exempt in India if I’m a resident right here? Will the revenue get exempted? Also, do I have to pay tax on Indian revenue within the US too (I’m a non-resident alien there)?
—Name withheld on request
Assuming you qualify as a ‘resident and ordinarily resident’ of India and ‘non-resident’ of the US, you’d qualify as ‘resident’ of India underneath the double taxation avoidance settlement (DTAA) between India and the US.
Under this, the whole wage revenue together with wage earned and obtained within the US shall be taxable in India. However, as per Article 25(2) of the DTAA between India and the US, you could declare international tax credit score in India for taxes paid within the US. To declare international tax credit score in India, additionally, you will have to file Form 67 electronically earlier than the due date to file revenue tax return. Form 67 must be supported by a certificates or assertion specifying the character of revenue and the quantity of tax deducted or paid within the US.
Alternatively, underneath the Income Tax Act, 1961, scholarship granted for price of assembly schooling is exempt from revenue tax. Judicial precedents additionally help that stipend obtained in the midst of pursuing an academic course or analysis challenge is exempt from revenue tax. Hence, in case you earn wage revenue from the US, which is in nature of stipend earned throughout internship or enterprise trainee and such coaching is important to qualify to pursue a occupation, you could discover claiming such exemption underneath the Income Tax Act. If US scholarship revenue is claimed exempt from revenue tax in India, no international tax credit score might be claimed for taxes paid within the US on such revenue.
Under Article 21(2) of the India-US DTAA, an Indian pupil or enterprise apprentice is entitled to the identical exemptions, reliefs or reductions from US tax which are out there to US residents on comparable funds for the interval required to finish the schooling/coaching. Hence, you could discover the advantage of exemption from US tax if comparable exemption is obtainable to US residents, through which case since no tax is payable in US, query of claiming international tax credit score in India is not going to come up.
Sonu Iyer is tax companion and folks advisory companies chief, EY India.
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