DTAA India-USA: How NRIs Can Avoid Double Taxation
For Non-Resident Indians (NRIs) earning income in both India and the USA, taxation can be a complex issue. Many NRIs worry about being taxed twice on the same income—once in India and again in the USA. Thankfully, the DTAA India USA (Double Taxation Avoidance Agreement) helps NRIs manage their tax obligations efficiently. Understanding how DTAA India USA works can help reduce tax liability and ensure compliance with international tax laws.
This guide explains how DTAA India USA benefits NRIs, the taxation process, and how to claim tax relief on NRI foreign income tax.
What is DTAA Between India and USA?
The DTAA India USA is a treaty between both countries designed to prevent NRIs from being taxed twice on the same income. It ensures that an NRI does not pay NRI foreign income tax in both countries, either by offering tax exemptions or allowing tax credits.
Under this agreement, NRIs can:
Avoid double taxation on income such as salaries, rental income, dividends, and capital gains.
Claim tax credits in one country for taxes paid in the other.
Reduce tax deduction at source (TDS) on Indian income.
Which Types of Income are Covered Under DTAA India USA?
NRIs earning income in India and the USA can benefit from DTAA India USA for the following sources:
Salary Income – If an NRI is employed in the USA but receives part of their salary from India, DTAA India USA ensures that they are taxed only in one country.
Rental Income – NRIs earning rent from property in India can reduce their NRI foreign income tax liability using DTAA provisions.
Capital Gains – Gains from selling assets like stocks or real estate in India can be taxed under DTAA guidelines to prevent double taxation.
Interest Income – Interest earned from fixed deposits or savings accounts in India is taxable, but NRIs can claim relief under DTAA.
Dividend Income – Any dividends earned from Indian investments can be taxed at reduced rates due to the DTAA India USA treaty.
Methods to Avoid Double Taxation Under DTAA India USA
The DTAA India USA agreement offers two ways to avoid double taxation:
1. Tax Exemption Method
NRIs can claim a full exemption from tax in one country while paying tax in the other. For example, if an NRI is already taxed in the USA on their foreign income, they may not be taxed again in India on the same income.
2. Tax Credit Method
If an NRI pays tax in one country, they can claim a credit in the other country. For example, if an NRI has already paid tax on rental income in India, they can claim a tax credit while filing NRI foreign income tax in the USA.
TDS Implications Under DTAA India USA
When an NRI earns income in India, tax is deducted at source (TDS) before payment. However, the DTAA India USA treaty allows NRIs to request a lower TDS rate by submitting a Tax Residency Certificate (TRC).
THow to Claim DTAA Benefits for NRI Foreign Income Tax?
To avail benefits under DTAA India USA, NRIs must follow these steps:
Obtain a Tax Residency Certificate (TRC) – This document proves tax residency in the USA and is required to claim DTAA benefits in India.
Fill and Submit Form 10F – This form is submitted to Indian authorities to claim reduced TDS rates.
Submit a Self-Declaration Form – A declaration confirming that the income is not taxable in both countries.
File Tax Returns in Both Countries – Even if an NRI claims DTAA benefits, tax filing in both India and the USA may still be necessary.
Common Mistakes NRIs Should Avoid
Not obtaining a TRC – Without a Tax Residency Certificate, NRIs cannot claim DTAA benefits.
Assuming automatic tax relief – DTAA benefits must be manually claimed by filing the necessary forms.
Ignoring TDS deductions – NRIs must apply for lower TDS rates before income is credited to their accounts.
Not filing tax returns – Filing in both India and the USA ensures compliance and maximizes tax benefits.
How India for NRI Can Help
Understanding and applying DTAA India USA benefits can be overwhelming, but India for NRI simplifies the process. Their experts help NRIs navigate tax laws, obtain a Tax Residency Certificate, and file necessary forms to reduce NRI foreign income tax. Whether you need assistance in claiming tax credits, reducing TDS deductions, or ensuring tax compliance in both countries, India for NRI provides tailored solutions to make tax management seamless and hassle-free.
Our Blogs
Foreign Earned Income Exclusion (FEIE) for U.S.-Based NRIs – Step-by-Step Guide
Read MoreDTAA Analysis between India & USA
Read MoreA simple step wise guide for filing US tax returns for NRIs
Read MoreDTAA India-USA: How NRIs Can Avoid Double Taxation
Read MoreIndia FBAR, 8938, 8621 & other income and Assets Foreign Reporting and IRS Compliance
Read More1040 (NR) or 1040 (Resident) - Which return should a US Green card Holder residing abroad file?
Read MoreHow can US NRI Comply with PFIC and FBAR Rules on Indian Investments?
Read MoreHow can NRI file Taxes for Income earned in US & India in both countries with help of India for NRI?
Read MoreWhat is DTAA between India and the US?
Read MoreWho is a non-resident for US tax purposes?
Read MoreDo I need to pay tax on Indian income in the USA?
Read MoreWhat is FBAR Filing for US NRI? What needs to be kept in mind?
Read MoreDTAA India-USA: How NRIs Can Avoid Double Taxation
For Non-Resident Indians (NRIs) earning income in both India and the USA, taxation can be a complex issue. Many NRIs worry about being taxed twice on the same income—once in India and again in the USA. Thankfully, the DTAA India USA (Double Taxation Avoidance Agreement) helps NRIs manage their tax obligations efficiently. Understanding how DTAA India USA works can help reduce tax liability and ensure compliance with international tax laws.
This guide explains how DTAA India USA benefits NRIs, the taxation process, and how to claim tax relief on NRI foreign income tax.
What is DTAA Between India and USA?
The DTAA India USA is a treaty between both countries designed to prevent NRIs from being taxed twice on the same income. It ensures that an NRI does not pay NRI foreign income tax in both countries, either by offering tax exemptions or allowing tax credits.
Under this agreement, NRIs can:
Avoid double taxation on income such as salaries, rental income, dividends, and capital gains.
Claim tax credits in one country for taxes paid in the other.
Reduce tax deduction at source (TDS) on Indian income.
Which Types of Income are Covered Under DTAA India USA?
NRIs earning income in India and the USA can benefit from DTAA India USA for the following sources:
Salary Income – If an NRI is employed in the USA but receives part of their salary from India, DTAA India USA ensures that they are taxed only in one country.
Rental Income – NRIs earning rent from property in India can reduce their NRI foreign income tax liability using DTAA provisions.
Capital Gains – Gains from selling assets like stocks or real estate in India can be taxed under DTAA guidelines to prevent double taxation.
Interest Income – Interest earned from fixed deposits or savings accounts in India is taxable, but NRIs can claim relief under DTAA.
Dividend Income – Any dividends earned from Indian investments can be taxed at reduced rates due to the DTAA India USA treaty.
Methods to Avoid Double Taxation Under DTAA India USA
The DTAA India USA agreement offers two ways to avoid double taxation:
1. Tax Exemption Method
NRIs can claim a full exemption from tax in one country while paying tax in the other. For example, if an NRI is already taxed in the USA on their foreign income, they may not be taxed again in India on the same income.
2. Tax Credit Method
If an NRI pays tax in one country, they can claim a credit in the other country. For example, if an NRI has already paid tax on rental income in India, they can claim a tax credit while filing NRI foreign income tax in the USA.
TDS Implications Under DTAA India USA
When an NRI earns income in India, tax is deducted at source (TDS) before payment. However, the DTAA India USA treaty allows NRIs to request a lower TDS rate by submitting a Tax Residency Certificate (TRC).
THow to Claim DTAA Benefits for NRI Foreign Income Tax?
To avail benefits under DTAA India USA, NRIs must follow these steps:
Obtain a Tax Residency Certificate (TRC) – This document proves tax residency in the USA and is required to claim DTAA benefits in India.
Fill and Submit Form 10F – This form is submitted to Indian authorities to claim reduced TDS rates.
Submit a Self-Declaration Form – A declaration confirming that the income is not taxable in both countries.
File Tax Returns in Both Countries – Even if an NRI claims DTAA benefits, tax filing in both India and the USA may still be necessary.
Common Mistakes NRIs Should Avoid
Not obtaining a TRC – Without a Tax Residency Certificate, NRIs cannot claim DTAA benefits.
Assuming automatic tax relief – DTAA benefits must be manually claimed by filing the necessary forms.
Ignoring TDS deductions – NRIs must apply for lower TDS rates before income is credited to their accounts.
Not filing tax returns – Filing in both India and the USA ensures compliance and maximizes tax benefits.
How India for NRI Can Help
Understanding and applying DTAA India USA benefits can be overwhelming, but India for NRI simplifies the process. Their experts help NRIs navigate tax laws, obtain a Tax Residency Certificate, and file necessary forms to reduce NRI foreign income tax. Whether you need assistance in claiming tax credits, reducing TDS deductions, or ensuring tax compliance in both countries, India for NRI provides tailored solutions to make tax management seamless and hassle-free.
Also Read: India FBAR, 8938, 8621 & other income and Assets Foreign Reporting and IRS Compliance