When does the tie-breaker apply?
When you're a tax resident of both India and the United States in the same period under each
country's domestic law. India counts you as resident if 182+ days OR (60+ days + 365 across
prior 4 years). US counts under SPT, citizenship, or Green Card.
Dual-residence is common during transition years, split families, and high-mobility executives.
What does Article 4 say?
Article 4(2) of the India-US DTAA provides a hierarchy:
Test 1 — Permanent home: Country where you have a permanent home available. If both/
neither, go to Test 2.
Test 2 — Centre of vital interests: Country where personal and economic relations are closer.
Factors: family, business, social/political/religious ties, where major assets held, where time is
spent.
Test 3 — Habitual abode: Country where you habitually live.
Test 4 — Nationality: Country whose citizenship you hold.
Test 5 — Mutual Agreement Procedure (MAP): Competent authorities settle.
How to claim treaty residence in US as Indian resident?
Form 8833 — Treaty-Based Return Position Disclosure. Attached to Form 1040 or 1040-NR.
Claims non-resident treatment under treaty despite US domestic-law residency.
Penalty for missing Form 8833 when required: $1,000 per failure ($10,000 for corporations).
Worked example — split family
Ravi works in US on H1B Jan-Dec 2025 (365 days). Wife and kids in Bangalore for the whole year.
House in Bangalore is family home; US rented studio. Family bank accounts in India.
US domestic law: SPT met. US resident. India's domestic law: 365 days absent. Non-resident.
But: If the wife is the primary asset holder and Indian assets are large, the centre-of-vital-interests could
place Ravi in India for treaty purposes.
If India wins: Ravi files 1040-NR + Form 8833. Indian's salary is not US-taxable. US-source income
still taxable.
This is high-stakes and case-specific. Most consultants miss this opportunity entirely.
When is the treaty claim risky?
IRS scrutinises treaty positions. Build a strong file: - Indian house ownership/lease documents -
Family residence proof — school records, utility bills - Indian voter ID, driver's licence - Indian
asset statements - Indian employment letter showing primary employment outside US
Without documentation, IRS will deny and assess back-tax + penalties + interest.
What about state tax?
States are NOT bound by federal treaties. CA, NY etc. will tax based on their own residency
rules (typically 183-day or domicile-based) regardless of federal treaty position. You may pay
state tax while federally non-resident under treaty.
Mutual Agreement Procedure
If India and US disagree, invoke MAP via Indian tax authorities. Slow (2-3 years) but final.
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.