Usa tax relief + hra for usa house rent
This query is : Resolved
09 August 2014
Hello Experts,
I returned from USA last year and I'm filing my income tax in India as a resident. This forum has a few topics on these 2 questions with not so concrete answers. It would be great if you can share your experience.
1) Can any or all of state tax, social security tax & medicare tax in USA be claimed as relief in Indian tax return?
My CA says only state tax can be claimed under sec 91 and social security tax cannot be claimed as relief; but, has asked me to take other opinions too.
2) Is the house rent paid in USA eligible for HRA? If yes, is it possible to do it now (after July 31) as this is not declared in Form 16 and what would be the salary taken for calculating HRA? My US salary is a single base component and has no HRA component.
Regards,
Arun
-----------
Added the below statements based on further investigation:
The DTAA part is clear and it doesn't include US state tax.
STATE TAX:
With respect to US State tax, the ITAT had ruled that section 91 can be used if DTAA provides less benefit to the assessee. It had allowed US state tax to be claimed as relief (ITAT No: 4978/Mum/04).
SOCIAL-SECURITY & MEDICARE TAXES (SSMT):
Also, can the US social security & medicare taxes be deducted from Income based on the below rulings which mention that an obligatory payment should not be considered as income but, should be deducted from income as prior charge from overriding title?
1. CIT v Sitaldas Tirathdas [41 ITR 367]
2. Gallotti Raoul (61 ITD 453), ITAT Mumbai (French Social-security Taxes Deducted)
The US Income Tax Dept clearly mentions that the social security & medicare taxes have to be deducted by the employer from each wage payment and that it is mandatory to be paid irrespective of whether an employee is eligible for social-security.
It will be great if you could provide your valuable opinion based on the above contexts in deducting the SS & Medicare tax from the income and to use the state tax as relief on Indian tax.
I returned from USA last year and I'm filing my income tax in India as a resident. This forum has a few topics on these 2 questions with not so concrete answers. It would be great if you can share your experience.
1) Can any or all of state tax, social security tax & medicare tax in USA be claimed as relief in Indian tax return?
My CA says only state tax can be claimed under sec 91 and social security tax cannot be claimed as relief; but, has asked me to take other opinions too.
2) Is the house rent paid in USA eligible for HRA? If yes, is it possible to do it now (after July 31) as this is not declared in Form 16 and what would be the salary taken for calculating HRA? My US salary is a single base component and has no HRA component.
Regards,
Arun
-----------
Added the below statements based on further investigation:
The DTAA part is clear and it doesn't include US state tax.
STATE TAX:
With respect to US State tax, the ITAT had ruled that section 91 can be used if DTAA provides less benefit to the assessee. It had allowed US state tax to be claimed as relief (ITAT No: 4978/Mum/04).
SOCIAL-SECURITY & MEDICARE TAXES (SSMT):
Also, can the US social security & medicare taxes be deducted from Income based on the below rulings which mention that an obligatory payment should not be considered as income but, should be deducted from income as prior charge from overriding title?
1. CIT v Sitaldas Tirathdas [41 ITR 367]
2. Gallotti Raoul (61 ITD 453), ITAT Mumbai (French Social-security Taxes Deducted)
The US Income Tax Dept clearly mentions that the social security & medicare taxes have to be deducted by the employer from each wage payment and that it is mandatory to be paid irrespective of whether an employee is eligible for social-security.
It will be great if you could provide your valuable opinion based on the above contexts in deducting the SS & Medicare tax from the income and to use the state tax as relief on Indian tax.
09 August 2014
if you are resident in india for the last year then you have to file the return of income tax in india.
if you are non resident in india in last year then you have to file the return of income tax in USA if it is required in USA. there is no need in india for filing of ITR.
and also any tax paid by you and lavied by any other act out of india to be claim by you under particular country or particular act applicable in area covered by that act.
if act of USA then in India there is no use.
if you have Driving license of USA then U can not use this for drive the vehicle in india.
if you are non resident in india in last year then you have to file the return of income tax in USA if it is required in USA. there is no need in india for filing of ITR.
and also any tax paid by you and lavied by any other act out of india to be claim by you under particular country or particular act applicable in area covered by that act.
if act of USA then in India there is no use.
if you have Driving license of USA then U can not use this for drive the vehicle in india.
09 August 2014
Question 1:
You need to refer Article 2 of India - USA DTAA. Accumulated earnings tax, the personal holding company tax, and social security taxes are excluded from the taxes covered. Therefore, you wont get benefit of social security tax.
Question 2:
Any allowance/deduction provided in USA has to be provided for in Indian tax computation. Thus, net income is to be included in the tax return. However, given that your US salary has no HRA component, it is but natural that you cannot claim any credit for something that doesn't exist!
If your CA is not clear, then better find a better one!
You need to refer Article 2 of India - USA DTAA. Accumulated earnings tax, the personal holding company tax, and social security taxes are excluded from the taxes covered. Therefore, you wont get benefit of social security tax.
Question 2:
Any allowance/deduction provided in USA has to be provided for in Indian tax computation. Thus, net income is to be included in the tax return. However, given that your US salary has no HRA component, it is but natural that you cannot claim any credit for something that doesn't exist!
If your CA is not clear, then better find a better one!
Message likes :
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11 August 2014
The DTAA part is clear and it doesn't include US state tax as well.
STATE TAX:
With respect to US State tax, the ITAT had ruled that section 91 can be used if DTAA provides less benefit to the assessee. It had allowed US state tax to be claimed as relief (ITAT No: 4978/Mum/04).
SOCIAL-SECURITY & MEDICARE TAXES (SSMT):
Also, can the US social security & medicare taxes be deducted from Income based on the below rulings which mention that an obligatory payment should not be considered as income but, should be deducted from income as prior charge from overriding title?
1. CIT v Sitaldas Tirathdas [41 ITR 367]
2. Gallotti Raoul (61 ITD 453), ITAT Mumbai (French Social-security Taxes Deducted)
The US Income Tax Dept clearly mentions that the social security & medicare taxes have to be deducted by the employer from each wage payment and that it is mandatory to be paid irrespective of whether an employee is eligible for social-security.
It will be great if you could provide your valuable opinion based on the above contexts in deducting the SS & Medicare tax from the income and to use the state tax as relief on Indian tax.
STATE TAX:
With respect to US State tax, the ITAT had ruled that section 91 can be used if DTAA provides less benefit to the assessee. It had allowed US state tax to be claimed as relief (ITAT No: 4978/Mum/04).
SOCIAL-SECURITY & MEDICARE TAXES (SSMT):
Also, can the US social security & medicare taxes be deducted from Income based on the below rulings which mention that an obligatory payment should not be considered as income but, should be deducted from income as prior charge from overriding title?
1. CIT v Sitaldas Tirathdas [41 ITR 367]
2. Gallotti Raoul (61 ITD 453), ITAT Mumbai (French Social-security Taxes Deducted)
The US Income Tax Dept clearly mentions that the social security & medicare taxes have to be deducted by the employer from each wage payment and that it is mandatory to be paid irrespective of whether an employee is eligible for social-security.
It will be great if you could provide your valuable opinion based on the above contexts in deducting the SS & Medicare tax from the income and to use the state tax as relief on Indian tax.
11 August 2014
With regards to social security. To apply ruling in the French DTAA case, you need to establish 1) that US social security system also works in the same manner as to create over-riding title; and 2) that an indian national working in US is on the same footing as of a US national.
The case you are referring to is of a French national working in India whereas in your case, it is an Indian national who has worked in US. So it is important that you demonstrate how the french case applies to facts of your case.
The case you are referring to is of a French national working in India whereas in your case, it is an Indian national who has worked in US. So it is important that you demonstrate how the french case applies to facts of your case.
11 August 2014
Thanks for the quick response.
The ruling in CIT v Sitaldas Tirathdas [41 ITR 367] allows obligatory payments to be excluded from income and hasn't mentioned any specific obligation (like Social security or medicare). It just mentions that the obligation has to be met before the income reaches the assessee (which is true in my case).
Can the US SSC be deducted just based on the above ruling [41 ITR 367]? (That way the 2 valid points mentioned in the previous post can be avoided. The French SSC was also discounted based on the same ruling).
The ruling in CIT v Sitaldas Tirathdas [41 ITR 367] allows obligatory payments to be excluded from income and hasn't mentioned any specific obligation (like Social security or medicare). It just mentions that the obligation has to be met before the income reaches the assessee (which is true in my case).
Can the US SSC be deducted just based on the above ruling [41 ITR 367]? (That way the 2 valid points mentioned in the previous post can be avoided. The French SSC was also discounted based on the same ruling).
11 August 2014
I believe the french ruling and the ruling of Supreme Court in case of NHK Corporation ((2010) 322 ITR 628 (SC)) are more relevant, though not squarely applicable to your case.
Sitaldas judgment can also have only a persuasive value and not as a determinant in your case. But don't forget that the final judgment in Sitaldas was against the assessee.
So, I would advice you to make your case on the basis of french case or NHK case if possible.
with regards to the state tax, the judgment you referred to is by ITAT in a case where the assessee didn't press the ground and no benefit was derived by him on the basis of observations of the tribunal. The opinion that section 91 is available to cases even where the DTAA exist is somewhat untested, though definitely possible.
So where you decide to follow Tata Sons case, you better take the whole of the case to section 91 instead of trying to mix-match between DTAAs. This could resolve both the problems you are facing.
Sitaldas judgment can also have only a persuasive value and not as a determinant in your case. But don't forget that the final judgment in Sitaldas was against the assessee.
So, I would advice you to make your case on the basis of french case or NHK case if possible.
with regards to the state tax, the judgment you referred to is by ITAT in a case where the assessee didn't press the ground and no benefit was derived by him on the basis of observations of the tribunal. The opinion that section 91 is available to cases even where the DTAA exist is somewhat untested, though definitely possible.
So where you decide to follow Tata Sons case, you better take the whole of the case to section 91 instead of trying to mix-match between DTAAs. This could resolve both the problems you are facing.
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