Dual Resident Status, how to apply tie breaker rules of US-India Tax treaty

Dear All:

I entered USA as a visitor in late 2019 (sept 2019). I applied for a family based green card in Jan 2020. I was in the USA entire year 2020 . I received Green card in July 2021. However, due to certain family circumstances, I had to move back to India. I moved to India on July 31st, 2021. I have returned my green card after returning to India.

1) For the US tax purposes, am I a resident or non-resident or part year resident?

I can be a US tax resident because I had green card and I resided in US for more than 183 days in USA.

I can be a Indian resident because during tax year 2021-22, I stayed in India for more than 183 days.

2) Can I use tie breaker rules:

Text from Technical Explanation of US_India Tax Treaty

If, under the laws of the two Contracting States, and, thus, under paragraph 1, an
individual is deemed to be a resident of both Contracting States, a series of tie-breaker rules are
provided in paragraph 2 to determine a single State of residence for that individual. The first test
is where the individual has a permanent home. If that test is inconclusive because the individual
has a permanent home available to him in both States, he will be considered to be a resident of
the Contracting State where his personal and economic relations are closest, i.e., the location of
his "center of vital interests". If that test is also inconclusive, or if he does not have a permanent
home available to him in either State, he will be treated as a resident of the Contracting State
where he maintains an habitual abode. If he has an habitual abode in both States or in neither of
them, he will be treated as a resident of his Contracting State of citizenship. If he is a citizen of
both States or of neither, the matter will be considered by the competent authorities, who will
attempt by mutual agreement to assign a single State of residence.

For tie breaking:

I have a permanent home in India. Financially also, India is my center of vital interest. Also since, I have returned green card and staying in India, when I used to stay before temporarily moving to USA, India is my "habitual abode"

3) For the Indian tax purposes, am I a resident or non-resident or part resident?

Please let me know.

Kulkash

Hi Shirish,

Thanks for sharing detailed facts. Here’s a clear analysis on your dual residency and application of tie-breaker rules under the US-India DTAA along with your Indian & US tax residency status for the year 2021:

1. US Tax Residency Status for 2021

You were physically present in the US for all of 2020 (resident due to Green Card and Substantial Presence Test).
For 2021, you had Green Card until July, and were in the US for at least 6 months.
You returned Green Card after leaving US on July 31, 2021, so for 2021, you are a part-year resident of the US.
For the US, you are considered:
- Resident Alien until Green Card was surrendered (July 31, 2021).
- Non-resident Alien after surrendering the Green Card (from Aug 1, 2021).
So, US tax resident for part of 2021.

2. Indian Tax Residency Status for FY 2021-22

You stayed in India for more than 183 days in FY 2021-22 (from Aug 1 onwards).
Under Indian Income Tax Act, you would be a Resident Indian for FY 2021-22.
Given you left US mid-year and returned to India, Indian residency for FY 2021-22 is applicable.

3. Dual Residency & Tie-Breaker under India-US DTAA

You are a dual resident for 2021 (resident in US for part year, resident in India as well).

Article 4(2) of the DTAA provides tie-breaker rules to determine residency for treaty purposes:

Permanent Home: You have a permanent home in India (your family home).
Center of Vital Interests: Your personal & economic relations appear closer to India (family, social, economic ties).
Habitual Abode: India is your habitual abode.
Citizenship: You are presumably an Indian citizen.

Since you have permanent home and center of vital interests in India, India will be considered your tax residency under the tie-breaker rule for 2021.

4. Tax Implications

India can tax your worldwide income for FY 2021-22 as you are resident under DTAA.
US can tax income earned while you were a US resident (part-year).
Under DTAA, relief from double taxation can be claimed.
You should file returns in both countries, claiming relief via Form 67 (India) and IRS forms (US).

Summary Table:

Country	Residency Status for 2021	Basis
USA	Part-year Resident (till surrender of Green Card)	Green Card & Physical presence
India	Resident	Stayed >183 days, permanent home, vital interests
DTAA Tie-breaker	Resident of India	Permanent home & center of vital interests