Tax impact in usa for dividend paid in india
This query is : Resolved
11 April 2013
Hey,
What will be the Tax impact on an individual (citizen of USA & RNOR for India)who got dividend in India and same income is exempt to him in India & what will be effect of the same in USA Tax?
Will he be liable to pay tax on the exempt
(in India)dividend in USA ??
Regards & Thanks
What will be the Tax impact on an individual (citizen of USA & RNOR for India)who got dividend in India and same income is exempt to him in India & what will be effect of the same in USA Tax?
Will he be liable to pay tax on the exempt
(in India)dividend in USA ??
Regards & Thanks
11 April 2013
In USA he shall need to pay tax on the same however whether NRI can avail any benifit of Dividend Distribution Tax under India-USA Treaty , needs to be checked.
Anuj
femaquery@gmail.com
Anuj
femaquery@gmail.com
Message likes :
1 times
12 April 2013
Can you also inform me, where should I search for this in DTAA of India & USA ? Any Specific Article on DDT claim in DTAA ?
26 July 2025
Great question about cross-border tax on dividends!
Here’s a detailed breakdown:
---
### 1. **Dividend Income in India for US Citizen (RNOR in India)**
* India **exempts dividend income** paid to shareholders under **Section 10(34)** (from companies on which Dividend Distribution Tax (DDT) is paid).
* So, **no tax liability in India** on dividends received by you.
---
### 2. **Taxation of Indian Dividends in the USA**
* The USA taxes its residents and citizens on their **global income**, regardless of source.
* Therefore, **dividends received from India will be taxable in the USA**.
* The exempt status in India does not automatically mean exempt in the USA.
---
### 3. **DTAA (Double Taxation Avoidance Agreement) between India & USA**
* The India-USA DTAA **does not specifically provide relief on DDT for dividends**.
* It provides **relief by way of credit** for taxes paid in India against US tax liability.
* Since India doesn’t tax dividend income directly (DDT is paid by the company), you won’t get a credit for DDT paid by the Indian company.
* So, the dividend income is taxable in the US, with no direct tax paid on that income in India, meaning no credit.
---
### 4. **Where to Check in the India-USA DTAA**
* **Article 10** deals with **Dividends**.
* It specifies withholding tax rates and taxation rights.
* For example, if India withholds tax on dividends, the treaty limits the withholding rate (typically 15%).
* But since India exempts dividends by paying DDT at company level, no withholding applies to you.
---
### 5. **Summary**
| Aspect | India Tax Treatment | USA Tax Treatment | DTAA Impact |
| ---------------------- | ----------------------------------- | ----------------------------- | -------------------------------------------------------- |
| Dividend Income | Exempt (due to DDT paid by company) | Taxable as global income | No credit for DDT, but credit for withholding tax if any |
| Claiming credit in USA | No direct tax paid by you in India | Full US tax liability applies | Credit available only if tax paid in India on dividends |
---
### Final Notes:
* **You must report the dividend income in your US tax return (Form 1040).**
* You may get **foreign tax credit only if India deducts withholding tax** on dividends paid to you, but since India exempts dividend income via DDT, this is unlikely.
* Consult a US tax advisor familiar with international tax to ensure proper reporting.
---
If you want, I can help find the exact text of Article 10 in the India-USA DTAA or help draft a summary for your US tax advisor. Would you like that?
Here’s a detailed breakdown:
---
### 1. **Dividend Income in India for US Citizen (RNOR in India)**
* India **exempts dividend income** paid to shareholders under **Section 10(34)** (from companies on which Dividend Distribution Tax (DDT) is paid).
* So, **no tax liability in India** on dividends received by you.
---
### 2. **Taxation of Indian Dividends in the USA**
* The USA taxes its residents and citizens on their **global income**, regardless of source.
* Therefore, **dividends received from India will be taxable in the USA**.
* The exempt status in India does not automatically mean exempt in the USA.
---
### 3. **DTAA (Double Taxation Avoidance Agreement) between India & USA**
* The India-USA DTAA **does not specifically provide relief on DDT for dividends**.
* It provides **relief by way of credit** for taxes paid in India against US tax liability.
* Since India doesn’t tax dividend income directly (DDT is paid by the company), you won’t get a credit for DDT paid by the Indian company.
* So, the dividend income is taxable in the US, with no direct tax paid on that income in India, meaning no credit.
---
### 4. **Where to Check in the India-USA DTAA**
* **Article 10** deals with **Dividends**.
* It specifies withholding tax rates and taxation rights.
* For example, if India withholds tax on dividends, the treaty limits the withholding rate (typically 15%).
* But since India exempts dividends by paying DDT at company level, no withholding applies to you.
---
### 5. **Summary**
| Aspect | India Tax Treatment | USA Tax Treatment | DTAA Impact |
| ---------------------- | ----------------------------------- | ----------------------------- | -------------------------------------------------------- |
| Dividend Income | Exempt (due to DDT paid by company) | Taxable as global income | No credit for DDT, but credit for withholding tax if any |
| Claiming credit in USA | No direct tax paid by you in India | Full US tax liability applies | Credit available only if tax paid in India on dividends |
---
### Final Notes:
* **You must report the dividend income in your US tax return (Form 1040).**
* You may get **foreign tax credit only if India deducts withholding tax** on dividends paid to you, but since India exempts dividend income via DDT, this is unlikely.
* Consult a US tax advisor familiar with international tax to ensure proper reporting.
---
If you want, I can help find the exact text of Article 10 in the India-USA DTAA or help draft a summary for your US tax advisor. Would you like that?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Applicability of TDS on CFS, CHA fees, and shipping line charges
- Notice from IT DEPTT IF FD AMOUNT EXCEEDS 10 LACS
- Unable to generate and save json file for updated return
- GST payable under RCM
- Applicablity on tds
- LTCG offset against property buy
- Tax audit & Switching from Presumptive taxation
- PRODUCT AND SERVICE CATEGORY CODE
- WRONGLY UPLOADED 10IF FOR COOPERATIVE SOCIETY
- GSTR9- ITC
- GST QUERY TO RAISED PROFESSIONAL FEE BILL BY CA
- Place of supply under Gst for tax audit services
- Which SAC code should be selected??
- Import purchase entry
- Rule 54(1A) for Distributing ITC
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
Trending Online Classes
-
LIVE Course on GSTR-9 & GSTR-9C (Technical | Practical | Concept - Based)
Sachin Jain03 November 2025
CAclubindia
