Is it possible to simplify US-India DTAA rules? Also, please help me with the following questions? Which DTAA rule applies for salary earned in US under F1 visa? If I am a resident here then how much tax will be paid in America, will I get exemption in India? Will there be income exemption? Also, do I need to pay tax on Indian income in the US as well (I am a non-resident foreigner there)?
—Name withheld on request
Assuming you qualify as a ‘resident and ordinarily resident’ of India and a ‘non-resident’ of the US, you will qualify as a ‘resident’ of India under the Double Taxation Avoidance Agreement (DTAA) between India and the US. I will qualify.
Under this, total salary income including salary earned and received in the US will be taxable in India. However, as per Article 25(2) of the DTAA between India and the US, you can claim foreign tax credit in India for taxes paid in the US. To claim foreign tax credit in India, you also need to file Form 67 electronically before the due date for filing income tax return. Form 67 must be supported by a certificate or statement that specifies the nature of income and the amount deducted or paid in the US.
Alternatively, under the Income Tax Act, 1961, scholarships awarded to meet the cost of education are exempt from income tax. Judicial precedents also support that stipend received while pursuing an academic course or research project is exempt from income tax. Therefore, if you earn salary income from the US, which is in the nature of a stipend earned during an internship or business apprenticeship and such training is necessary to qualify to pursue a profession, you may qualify for such training under the Income Tax Act. Can claim exemption. If US scholarship income is claimed exemption from income tax in India, no foreign tax credit can be claimed for taxes paid in the US on such income.
Under Article 21(2) of the Indo-US DTAA, an Indian student or vocational trainee is entitled to the same exemption, relief or deduction from US tax as available to US residents on equal payments for the period required to complete the education. Training. Therefore, you can find out the benefit of US tax exemption if the same exemption is available to US residents, in this case since there is no tax payable in the US, the question of claiming foreign tax credit in India Won’t get up
Sonu Iyer is EY India’s Tax Partner and People Advisory Services Leader.
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