• DTAA global income from US company salary - deductions, expenses

I relocated to India in Dec 2017 from US after 4 years. For 2017-18 financial year, my status is "Resident" as i stayed more than 183 days in India (As i visited India in 2017 couple of time as a part of my relocation). I have only US salary income, no Indian income. 
And filed 2017 US as "Resident" in US and i ahve to file as "Resident" in India.

I am surprised to know, that as per DTAA with USA, State taxes are not considered for Tax credit, and also no HRA (as i paid 10% my US income to Rent) and no other deductions. DTAA, in reality is not avoiding the double taxation and in many ways it is penalizing the tax payer.

Any kind of moving expenses/benefits i am eligible/apply other than 80C,80DD etc.
Asked 6 months ago in Income Tax from Hyderabad, Telangana
Dear Sir,

It is a well settled law under DTAA that you can claim FTC on the income earned in other country. You can claim the credit of foreign tax paid in USA from the total tax liability in India. You are not eligible for any deduction/expenses including HRA except deduction u/s 80C/80D/80DD. Deduction of HRA is available only in the context of Indian Income tax law and not for other foreign country tax laws. Salary earned by you is US income which is taxable in India because of your residential status in India against which you can claim FTC from the total tax liability in India.

Thanks 
Vivek Kumar Arora
CA, Delhi
1421 Answers
31 Consultations

5.0 on 5.0

Article 2 covers only Federal taxes which are union taxes only. You can not claim state taxes as there is no law or system to set-off state taxes with central taxes. I don't think there will be any outcome of  your grievance as it is clearly mentioned in Article 2.
Vivek Kumar Arora
CA, Delhi
1421 Answers
31 Consultations

5.0 on 5.0

Sorry to say that you are not eligible for any moving expenses etc. However, you can take a position that the Salary is taxable in USA and not in India. You have paid the respective taxes in USA and their is no need to pay taxes in India.

please obtain tax residency certificate from USA.
Abhishek Dugar
CA, Mumbai
3456 Answers
156 Consultations

5.0 on 5.0

Hi,

The basic concepts of DTAA are that a sovereign state enters into an agreement with a sovereign state. US States (as US is a federation) are not part of the DTAA as they are not sovereign states.

Hence, it is logical that taxes paid to other than sovereign state (unless specifically included) shall not be part of the total benefit allowed to a taxpayer.

It may seem unfair to you, but, that is the best way a DTAA can be executed and implemented. Else, it will create huge problems for implementing agencies.

I don't see any benefit of raising any query regarding this, unless such taxes are specifically included under reliefs within DTAA.

Regards,
Sunny Thakral
CA, Delhi
224 Answers
5 Consultations

5.0 on 5.0

Hi

No such expenses shall be allowed.
 
Only the credit of income tax paid shall be provided. However, nothing can be done in this regard.
Lakshita Bhandari
CA, Mumbai
2017 Answers
63 Consultations

5.0 on 5.0

Hi,

Unfortunately, you cannot claim any benefits that are applicable to Indian residents in this context. You will get credit for the taxes that you have paid in US and nothing more. In my opinion, there would be no point in raising this issue with the Indian IT department since this is how the Income tax laws with regards to DTAA works.

Regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
1188 Answers
9 Consultations

5.0 on 5.0

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