How can NRIs avoid double taxation?

—Name withheld on request

Assuming you qualify as a “resident and ordinarily resident” of India and a “non-resident” of the US, you would qualify as a “resident of India” under the DTAA between India and the US.

As per Section 5 of the Income Tax Act, 1961, you are taxable in India on the following income:

(a) income which accrues or arises or is deemed to accrue or arise in India

(b) income received or deemed to be received in India

(c) income which accrues or arises outside India

A person who qualifies as ROR is also required to report assets held outside India as foreign income in the Indian tax return.

Accordingly, your salary income and other personal income in the US will also be taxable in India as per the above provisions. However, as per Article 25(2) of the DTAA, you can claim foreign tax credit in India against the taxes payable in the US payable on your US-sourced income in order to avoid double taxation.

To claim foreign tax credit in India, you also need to file Form 67 electronically before the due date for filing ITR. Form 67 should be supported by a certificate/statement specifying the nature of income and the amount deducted or paid in the US.

You may wish to seek professional advice from a US tax expert on tax implications in the US.

Sonu Iyer is the Tax Partner and People Advisory Services Leader at EY India.

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