Hi,
I have few queries with regards to DTAA between India and USA and
corresponding tax implications for below scenario -
Scenario - A is a citizen of India who had been living in US for about 4
years since Nov, 2019, working for a US headquartered/ based employer.
Based on the Indian residency test, A became NRI starting
Indian FY 2020 Apr - 2021 Mar
Fast forward to 2024, A travels to India in Mid of Feb, 2024, so A is still
considered NRI for Indian FY 2023 Apr - 2024 Mar
A is retrenched/ laid off/ let go in Apr 2024 and A is unable to travel
back to US considering the visa situation.
So A becomes Resident of India for Indian FY Apr 2024 - Mar 2025.
At the same time, A is also a US Resident for Tax purposes for
US FY 2024 because of the substantial presence test.
A has following income for Indian FY Apr 2024 - Mar 2025 and
US FY 2024 -
a) Balance Leave Encashed ------ US Federal and State Tax deducted
at source/ withheld by US Employer
b) Severance Package ------ US Federal and State Tax deducted at source/ withheld by US Employer
c) A did a partial withdrawal of 401K ----- US Federal and State Tax deducted at source/ withheld by 401k broker
d) Interest from CD (FD's)
To claim DTAA benefit A has submitted Form 8802 with US IRS to get US
Tax Residency Certificate, it might take time to get the TRC.
A will also be filing taxes in US for FY 2024.
Queries -
1) If TRC doesn't arrive on time before the Indian filing season starts
for FY Apr 2024 - Mar 2025, then can A submit salary slips/ pay
stubs and bank statements showing the income and tax deducted
at source and tax deducted deposit in bank account by the employer?
2) Can A claim Foreign Tax Credit on the Tax deducted at source/
witheld by US Employer on the salary/ wages/ remuneration paid by
the US Employer by filing Form 67 and providing the above
mentioned documents?
3) Can A claim Leave Encashment Tax exemption Section 10(10AA) for
the leave encashed during retrenchment/ lay off by US employer?
4) Can A claim Section 10(10B) exemption of 5,00,000/- on Serverance
pay ?
5) Can A claim Foreign Tax Credit on the Tax deducted at source/
witheld by US 401K Broker on the partial withdrawal?
Please kindly provide your valuable inputs on above queries.
Thanking you.
Regards.
CAclubindia
