• Indian Resident earning Salary in USA from a USA company

I am a US Citizen working for a US company remotely from India (basically Indian Resident for tax purposes). I get paid in USD in my US bank account after deduction of Federal Taxes. 
Also I have Long Term capital gains in India and dividend Income in India.

My understanding is that basis India-US DTAA, I would not be required to pay any taxes in India for the salary income generated in USA. Also, what will be the tax treatment in India for LTCG, Dividend & Interest income? Pls advise.

Would I have to disclose my US Salary income in my Tax Return for India (even if it is exempt under DTAA)?
Many thanks
Asked 4 months ago in Income Tax

As you are a US citizen, you will be treated as a resident for tax filing in US. In case an individual is a resident of both the countries then tie breaker rule will be applicable as per Article 4 of DTAA.

Assuming you become resident in India as per tie breaker rule and your residential status is ROR then

1) US salary would be taxable in India. FTC (Foreign tax credit) is available proportionate to tax payable in india on salary income

2) LTCG is taxable at special rate. LTCG on sale of equity shares or equity oriented mutual funds is taxable at 10% after exemption of Rs. 1lac. No benefit of indexation is available. Other LTCG is taxable at 20%

3) Dividend and Interest income would be taxable at normal slab rates

4) You are also required to disclose foreign assets and foreign income in Schedule FA

5) If your income is more than Rs. 50 lacs, Schedule AL is also applicable

6) To claim FTC, you will be required to fill Schedule FSI and TR. Also file Form 67 before filing of ITR

 

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora
CA, Delhi
4871 Answers
1058 Consultations

5.0 on 5.0

If you are US resident staying in India then you will be a tax resident of both country and then based on tie breaker rule you need to decide for which country you wish to declare your citizenship.

Further, as per Income tax act salary is taxable in a country where you exercise employment. In your case it would be India hence as per income tax act your salary would be taxable in India.

 

As far as dividend and LTCG is concerned it will be taxable in India irrespective of your residentship.

 

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4285 Answers
98 Consultations

5.0 on 5.0

As you are a resident in India, the salary earned by you by working for a US company is taxable in India, even though you are working remotely and your salary income is credited with a bank in US. You can however claim credit for the withholding tax. 

However, there is a risk for the US Employer that needs to be addressed properly. 

It is the responsibility of the employer to compute the tax liability of an employee and deduct tax accordingly u/s 192 of the Income Tax Act. Hence, your employer will have to deduct tax on the salary paid to you though it is remitted in your bank account in USA.  Further, there is a possiblity of making an inference that your US company has a permanent establishment in India based upon your job responsibilities and activities. The US Company needs to address this risk. 

Long term capital gains and dividend income will be taxed in India.

You also need to disclose your foreign assets as you are a resident. 

In view of complexities and compliance related issues, it is advisable to take the help of  a professional in addressing your tax related issues. 

B Vijaya Kumar
CA, Hyderabad
1007 Answers
124 Consultations

5.0 on 5.0

Any income earned from resource in India is taxable in India.  So, LTCG, dividend and interest is taxable in India.  LTCG treatment is dependent on the nature of Asset - house , shares etc Saving interest is taxable subject to deduction under section 80.  Dividend income is fully taxable. 

 

You will be required to disclose exemption under DTAA in the tax return. 

Jasmina Jain Shah
CA, Greater Mumbai
454 Answers
4 Consultations

5.0 on 5.0

As you are a US citizen, you will be treated as a resident of US. Further you would also be resident of India as you are present in India for more than 182 days. There shall be problem of dual residency. One needs to check the tie breaker test under DTAA. 

 

Assuming you become resident in India as per tie breaker rule and your residential status is ROR then

 

1) Salary paid in US shall be taxable in India despite services provided to US company as for a ROR, global income is taxable. If you are RNOR, then it shall not be taxable. You can claim the Foreign tax credit for the taxes paid in US against the taxes paid in India. You will be required to fill Schedule FSI and TR in ITR and file Form 67.

2) LTCG on sale of equity shares or equity oriented mutual funds is taxable at 10% over Rs. 1 Lakh. For other assets, it shall be taxed at 20%.

3) Dividend and Interest income would be taxable at normal slab rates

4) If you are ROR, you are also required to disclose foreign assets and foreign income in Schedule FA

Prerna Peshori
CA, Pune
197 Answers
11 Consultations

5.0 on 5.0

As a US citizen working for a US company and residing in India, here's a concise overview of your tax situation:

  1. US Salary Taxability in India: Your US salary is taxable in India due to your resident status for tax purposes. You can claim a Foreign Tax Credit (FTC) for taxes paid in the US to avoid double taxation, as per the India-US DTAA.

  2. Tax Treatment for Other Incomes:


    • LTCG in India: Taxable at 10% for equity shares/equity mutual funds over Rs. 1 lakh, and 20% for other assets with indexation.

    • Dividend Income: Taxable at your income tax slab rate.

    • Interest Income: Taxable at your slab rate.

  3. Disclosure Requirements:

    • Your US salary, even if exempt under DTAA, must be disclosed in your Indian tax return along with any LTCG, dividend, and interest income.
    • Foreign assets, including US bank accounts, must be reported in Schedule FA of your tax return.

  4. Compliance for FTC: To claim FTC, fill out Schedule FSI and TR, and file Form 67 before filing your return.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Shubham Goyal
CA, Delhi
251 Answers
4 Consultations

5.0 on 5.0

Your incomes are taxable either in US or India, whichever laws are more beneficial to you. Depending upon the country you choose, you may take the credit for the TDS deducted elsewhere.

Siddharthh Jain
CA, Gurgaon
65 Answers
1 Consultation

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