Income from employment in us

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 December 2013 One of my friend is in US from 29-july -2013 - 31-Oct-2013 and then 11-Dec-2013 - 31-Dec-2013.
SoI want to know whether he has to pay the tax in India or not for that period since withholding tax has also been deducted from his income earned in US and he has not got any salary for that period in India.

Please reply soon.

Thanks.

Rupesh Jain

Rupesh Jain (Expert)
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21 December 2013 he will be resident in current year
and if no tax paid in USA then he will tax on all income

CA Hardik Bunha

CA Hardik Bunha (Expert)
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21 December 2013 he is a resident but not ordinary resident.

your case attract DTAA provisions.

india and usa has agreement so your freind will not be liable to tax in india.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 December 2013 Thanks Sir
but as per section 90(2), the provisions of agreement will apply if they are beneficail to the assessee.If the Income Tax Act is more beneficial to the assessee, then the income tax apply.

1st Question:
Whether any rate is specified in DTAA with US on the basis of which i can say that either income tax rate or DTAA rate is applied which ever is more benefical.

2nd Question:
Is the Income from US is required to be disclosed in Income tax return even though the tax is alredy paid by him in US.

Please clear my Confusion.

Thanks!

@VaibhavJ

@VaibhavJ (Expert)
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22 December 2013 Hi

Yes, he has to opt for beneficial rate to him.

Also he has to show both income in his ITR.

Thanks//VaibhavJ

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Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2013 Thanks sir
But from where may i get the rate specified in DTAA and
If both income is disclosed in ITR then where i can show the tax paid in US and while filing ITR tax is computed automatically so how i can submit the tax on the basis of more beneficial aspect(DTAA and Income Tax rate)

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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29 July 2024 ### Taxation of Income Earned Abroad (US) and Reporting in India

#### 1. **Tax Residency and Income Tax Liability**

- **Tax Residency:**
- In India, an individual is considered a **resident** if they meet any of the following criteria:
- They are in India for **182 days or more** in a financial year.
- They are in India for **60 days or more** in the current financial year and have been in India for **365 days or more** in the preceding four financial years.

- **Taxation of Global Income:**
- As an Indian resident, your friend is liable to pay tax on their **global income**, which includes income earned in the US.

#### 2. **Double Taxation Avoidance Agreement (DTAA) with the US**

- **DTAA Benefits:**
- The **DTAA** between India and the US helps avoid double taxation on the same income. The DTAA specifies how much tax can be levied in the country of residence versus the country of income source.
- The **DTAA** typically provides for a **tax credit** or **exemption** for taxes paid abroad.

#### 3. **Rates and Provisions under DTAA**

- **DTAA Rates:**
- Specific tax rates for various types of income (such as salary) are mentioned in the DTAA. You can obtain these rates from the official government website or the Income Tax Department's website.

- **DTAA Provisions:**
- For salary income, the US has a tax rate specified in the DTAA. Check the **Income Tax Department's website** or consult the **text of the DTAA** for detailed rates and provisions.

#### 4. **Filing Income Tax Return in India**

- **Disclosure of Foreign Income:**
- **Yes**, income earned from the US should be disclosed in the Indian Income Tax Return (ITR), even though taxes were paid in the US.
- You need to declare the **total income** earned abroad and claim a **tax credit** for the taxes paid in the US to avoid double taxation.

- **Where to Report:**
- **ITR Form:**
- Use **ITR-2** or **ITR-3** (if you are a business owner or professional) to report foreign income.
- Report the income under the **Income from Salary** or **Income from Foreign Sources** section.
- Use **Schedule FSI (Foreign Source Income)** to disclose the foreign income and the **taxes paid abroad**.

- **Tax Credit for Foreign Taxes:**
- **Claiming Credit:**
- Claim the **credit for taxes paid abroad** under **Section 91** of the Income Tax Act.
- This credit should be claimed in **Schedule TR** of the ITR, where you can specify the amount of foreign tax credit you wish to claim.

- **Documents:**
- Attach documents evidencing taxes paid in the US, such as a **Tax Return** or **Tax Payment Receipts**, to your Indian tax return if required.

#### 5. **Calculation and Submission**

- **Tax Computation:**
- Compute tax liability in India on the total income, including foreign income, as per Indian tax laws.
- If the tax computed as per Indian laws is more than what was paid in the US, you would need to pay the difference.

- **DTAA Provisions under Section 90:**
- As per **Section 90(2)**, if the provisions of the DTAA are more beneficial, they should be applied. Hence, if the DTAA provides for a lower tax rate or a better credit method, it should be used.

### **Summary**

1. **Income Declaration:**
- Yes, income earned in the US must be disclosed in the Indian ITR.

2. **DTAA Rates:**
- Refer to the **DTAA text** or the **Income Tax Department website** for specific rates.

3. **Tax Credit:**
- Claim a tax credit for taxes paid in the US to avoid double taxation under **Section 91**.

4. **Tax Computation:**
- Compute taxes as per Indian laws, and if required, pay any additional tax.

5. **ITR Form:**
- Use **ITR-2** or **ITR-3** to file your return and ensure all foreign income and taxes paid are reported accurately.

If you have further questions or need detailed assistance, consulting a tax professional with expertise in international taxation would be beneficial.