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Double taxation avoidance agreement between usa and india

sachin (Employee) (43 Points)

27 July 2011

Hi Everyone,

Facts:

1) An assesee is salaried employee and he is resident during P.Y. 2010-2011.

2) He is in USA From April 1 2010 to July 25th 2010 and he earns foriegn salary on which TDS is deducted and Form W-2 is issued to Assesse.

3) From July 25th 2010 to 31st March He earns Indian salary for which form 16 is issued to assesee.

Queries

1) Which ITR form is to be used for filing income tax return?

2) Will salary earned in USA will form part of Salary Income?

3) if answer to second question is yes then salary earned and Tax deducted in USA is in Dollars so how will that be converted in INR?

4) How the assessee will claim tax credit for the witholding tax deducted in USA?

If possible please answer the query in numbers.

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8 Replies

vishnupriya (CA Final) (1418 Points)
Replied 27 July 2011

As per ARTICLE 25 (2)(a) of DTAA between India and USA.

2. (a) Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States, whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to the income which may be taxed in the United States.

First the tax as per Indian Income tax rates should be calculated and after the same credit of TDS deducted in US should be given.

The tax and income of US shall be converted using the exchange rate as on 31st March.

Please also refer with India-USA DTAA from the below link

https://www.allindiantaxes.com/usa%20.php

2 Like

vishnupriya (CA Final) (1418 Points)
Replied 27 July 2011

ITR-1 form should be used..

Answer to your second question is yes and see above post...

sachin (Employee) (43 Points)
Replied 27 July 2011

OK If we will use ITR 1 then where should we show the tax deducted in USA?

because in W-2 form we do not have TAN no of the employer with whom the assessee was working.

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7014 Points)
Replied 28 July 2011

That will shown in column D5 in ITR-1.

Anuj

+91-9810106211

femaquery @ gmail.com

2 Like

MEHUL SHAH (Auditing Taxation XBRL Training ) (440 Points)
Replied 28 July 2011

1. As the assessee is resident , his global incoe shall be taxable. So convert the salary into rupees and include it in total income of assessee.

2. Calculate the tax liability as we normally do on the gross total income

3. Also convert the tax paid in US into rupees ( Note: Only Federal taxes should be taken into account and not State tax or Social security contribution ) . Claim this amount as credit item under "Relief u/s 90" in ITR-1 column.

YASHASREE M BHAT (GGA and Associates) (25 Points)
Replied 21 June 2012

Hi. Thanks for ur above answer to the queries. But I hav a doubt... Salary earned in US is not at all brought in India. Hence as per Section 9 it is not an income deemed to accrue or arise in India.. In such a case, I think that salary income earned abroad is not taxable. Hence only Indian Income is taxable.

1) If this is right, then whether Tax paid abroad as TDS can be claimed as Relief u/s 90.

2) If no, then should the above steps be followed...

Please help.. urgent...