Global income calculation for Resident Indian
For the purpose of Calculating global income in India for Residents, does State tax, Medicare tax paid in USA exempted from it?
DTAA although only allow relief for Federal Tax paid in US as credit as per U/S 90.
Can the state tax, Social Security tax and Medicare tax be exempted from calculating the Net Income in USA
Asked 3 years ago in Income Tax from Hyderabad, Telangana
As we understand that this is the case of Individual who is a resident in India and has income from some sources in USA. The first step should be to test your residential status both under the Indian Income Tax Act and under the India USA DTAA . After making sure that you are a resident , then your computation should start .
In computing the income from the sources in USA , in my opinion the social security tax paid there are allowed as deduction , however the state tax is not allowed .
Yes , under the DTAA , the relief is for the federal tax paid in USA .
CA, New Delhi Area, India
Depending upon the head of income under which the income earned in USA is taken in the computation of income under Indian Income Tax Act, you can claim deductions as applicable under the relevant head of income. For instance, if your income is business income, then you can claim expenditure incurred for earning such income, as allowed under Indian Income Tax Act.
You can then claim credit for the Federal Tax paid in US. You cannot claim state tax, social security tax and medicare tax as part of credit u/s 90.
You cannot claim state tax, Medicare Tax paid in USA other than federal Tax paid in USA for the purpose of calculating global income in India for residents.
If it is tax on Income in USA, it may be considered. Therefore it may not be available.