NRI filing return in USA and India for same year
I am US Citizen with OCI status (being person of indian origin). I am working and living in USA and visits India once a year for 4 or 5 weeks . I have 3 houses in India now and has only income from house property in India . I am planning to file Income Tax Return for 2017 in USA as well in India . Right now i am preparing USA Return because USA uses calendar year and will file India Return as NRI in June because India uses financial year . Please clarify the below in this regard :
(1) In USA return , we have to pay tax on global income (thus including income from house property in India) . Right now i will have to pay tax on indian rental income in US Return , but i will file India return after 4 months and again will pay tax on same rental income . I know about DTAA between USA and India , but how will i avoid double taxation in my situation when i am right now paying in USA and later in India for same year ?
(2) In India , flat 30% deduction is given for repair & maintenance in rental income , but in USA , only actual repair & maintenance expenses are deducted from rental income . Should i keep actual repair & maintenance expenses vouchers and bills for showing in USA return and can such expense be used to add in capital value of property whenever sold in future or we can either use for addition in capital value or for yearly repair and same thing can not be used for both benefits like for repair in current year and same expense for addition in value of house in future at time of sale ?
(3) Does India Income Tax Return has any space to mention the amount of tax i have already paid in USA for india rental income because i have to file USA Return first because of calendar year ?
Asked 10 months ago in Income Tax from Greater Noida, Uttar Pradesh
You can claim the benefit of taxes paid in USA and only expenses of capital nature are added into capital value.
1. You will need not pay in India. You will get the benefit under DTAA and while filing your return you can claim the benefit of tax paid in US.
2. The same expenses cannot be used for both the benefits. The cost that will increase the value of your property is considerable amounts spent on improvement of the property. They are more capital in nature and the normal repairs and maintenance will not be added.
3. Disclose under DTAA
The US tax return doesn't differentiate between the incomes from properties held in US or outside. So, the income from Indian rentals shall have to be shown in US tax returns according to US tax rules only. Although DTAA ensures that double taxes are avoided, it doesn't mean that the tax amounts would be same for a specific income under 2 laws. So, even if there is standard deduction in Indian tax law and tax liability would be less, you might have to pay higher taxes according to US tax laws.
For capital gain taxes in India, only expenses of capital nature shall be used for addition to costs as improvements.
1. As per India US DTAA, you are not required to pay taxes in USA for house property income for Indian house.
2. I think my first response makes your second question irrelevant. Please let me know if I m wrong.
3. Again, it's irrelevant because you don't need to pay tax in USA for Indian income.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
CA CS B.Com
As per Abhishek Dugar , I even don't need to disclose my india house property rental income in my USA Return when as per US Law , I need to show my global income in US Return . Can you please provide me some link or reference where DTAA says not to pay tax in USA by NRI for his/her india rental income ?
What about as per the reply by other CAs that I can claim taxes paid in USA for india house in my India Income tax return ? Is there any column in india tax return form for DTAA where I can mention my taxes paid in USA for india rental income ? How can I find out exact amount of tax paid in USA for india house rental to take benefit under DTAA ?
Asked 10 months ago
Tax will first be paid in India on rental income as per the your tax slab in India. Then the you must declare the rental income in the US and calculate tax on your total income based on your tax slab in the US. You can take credit in the US on taxes paid in India. What this really means is that even if your tax bracket in India is low, you will be paying tax in the US on your rental income at the tax bracket of the US.
My simple point is that I am filing my USA Return right now and thus I need to pay tax first in my USA Return , so how can I take credit of tax paid in India which I have not still paid in India because I will be allowed to file my India tax return in around June i.e., after 3 or 4 months from now and india return period will also be 1st April, 2017 to 31st March, 2018 wherea my USA return is being filed first for 1st Jan.,2017 to 31st Dec.,2017 ?
Asked 10 months ago
First you need to pay tax on rental income in USA as you are resident of USA in 2017 and not in India. After paying and filing tax in USA, when you file ITR in India there is a column (i.e. Relief u/s 90/91/91A) in Total Income and Tax liability tab where you can put the figure of tax paid in USA against the total liability in India.
It should be first paid in USA and then claim it in India ITR. There is a separate column in Indian ITR for DTAA.
Basic rule says that -Income tax should be paid at place where income is generated so house property income to be taxed in india and u can claim the benefit of tax paid ,in US.
Relief under sec 90 will be given in your case.
Please pay the taxes in US and when you file your return in India later this year, you can claim the same us 90. You will get the refund of the tax paid in US and there will be no taxation.
In the ITR , please look for the relief us 90, 91 and that is where you will need to disclose the taxes paid in US.
Hope that clarifies.
With DTAA, tax credit can only be claimed in the country of residence. So, it cannot be claimed in Indian income tax return as you are NRI.
Although I'm not fully aware about US tax laws, but as far as I know, you will have to fill Form 1116 for claiming tax credit which words as "tax paid or accrued". So, you can calculate Indian taxes and show tax accrued in India in US tax laws and claim credit.
Yes, you can very well claim of the benefit of the taxes paid in USA while filing Indian Return by entering the DTAA provision under which you are claiming a relief. There is a section/ provision in the form where you will have to mention the provision/ article number and if required you may have to substantiate the payment at a later point of time.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP