Is it potential to simplify the US-India DTAA guidelines? Additionally, please assist me with the next queries? Which rule of DTAA is relevant for wage earned within the US beneath the F1 visa? How a lot tax paid within the US will likely be exempt in India if I’m a resident right here? Will the revenue get exempted? Additionally, do I must pay tax on Indian revenue within the US too (I’m a non-resident alien there)?
—Title 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 beneath the double taxation avoidance settlement (DTAA) between India and the US.
Below this, the whole wage revenue together with wage earned and acquired within the US will likely be taxable in India. Nevertheless, as per Article 25(2) of the DTAA between India and the US, it’s possible you’ll declare international tax credit score in India for taxes paid within the US. To assert international tax credit score in India, additionally, you will must file Type 67 electronically earlier than the due date to file revenue tax return. Type 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, beneath the Revenue Tax Act, 1961, scholarship granted for price of assembly training is exempt from revenue tax. Judicial precedents additionally assist that stipend acquired in the midst of pursuing an academic course or analysis venture is exempt from revenue tax. Therefore, should 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 career, it’s possible you’ll discover claiming such exemption beneath the Revenue Tax Act. If US scholarship revenue is claimed exempt from revenue tax in India, no international tax credit score could be claimed for taxes paid within the US on such revenue.
Below Article 21(2) of the India-US DTAA, an Indian scholar or enterprise apprentice is entitled to the identical exemptions, reliefs or reductions from US tax which might be accessible to US residents on related funds for the interval required to finish the training/coaching. Therefore, it’s possible you’ll discover the advantage of exemption from US tax if related exemption is offered to US residents, during 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 accomplice and other people advisory companies chief, EY India.
Supply: Live Mint