Income tax for American citizen with OCI and residence in India

Scope of total income and incidence of tax depends on the residential status of an individual in a previous year

1. Yes

2. Global income

3. Yes 

Citizen of USA are also treated as resident of USA for tax purposes therefore tie breaker rule will be applicable to determine the residential status of a person. In India, tax period is financial year (i.e. from April to March) whereas in USA it is calendar year due to which there would be a difference in the reporting of income subject to withholding taxes, foreign tax credit etc. 

Providing independent professional services from India to USA clients would also attract GST registration and filing of GST returns. Assuming your gross receipts from the services would exceed Rs.20 lacs in a financial year

Also you would be liable to pay Professional tax in Maharashtra

For detailed discussion you may opt for phone consultation

You will be a Resident in India, irrespective of citizenship. Hence, you'll have to offer your income earned in India as well as globally. You'll get Double Taxation Relief as per DTAA. 

1) Do I have to pay income tax in India as an American citizen with OCI living in India for ~10 months/year?
Yes. You’ll be considered a resident in India and must pay tax there.

2) Is it on global income or just Indian income?
Global income. That includes your U.S. work-from-home earnings.

3) Can I avoid double taxation?
Yes. India and the U.S. have a DTAA, so you can claim credit in India for taxes paid in the U.S.

Hi,

Please refer to our replies point wise:

1) Yes, you will likely be considered a tax resident of India, and your residential status determines your tax liability, not your citizenship or your OCI card.

• Under Indian tax law, you become a "Resident" if:

  • You spend 182 days or more in India during a financial year (April to March), or

  • You spend 60 days or more in India during the year and 365 days or more in the preceding 4 years.

Spending 10 months (~300 days) in India will certainly make you a Resident and Ordinarily Resident (ROR). As a ROR, you are liable to pay Indian income tax on your global income.

2)  If you're classified as Resident and Ordinarily Resident (ROR) in India:

• Yes, you will be taxed on your global income, which includes:

  • Income from remote work done for a U.S.-based company

  • Any income earned or accrued outside India

  • Indian source income (if any)

So, your US salary received while living in India will be taxable in India, even if it's credited to a U.S. bank account.

3)  Yes — India and the U.S. have a Double Taxation Avoidance Agreement (DTAA).

Here’s how you can benefit:

Under Indian law:

You can claim foreign tax credit for taxes paid in the U.S. on the same income that is being taxed in India.

• This means: if you pay federal taxes in the U.S. on your income, you can deduct that amount from your Indian tax liability on the same income, avoiding double taxation.

Requirements to claim DTAA benefit:

1. File your tax return in both countries.

2. In India, submit Form 67 before filing your return to claim the credit.

3. Maintain tax residency certificates and proof of taxes paid abroad (like Form 1040, W-2 or IRS tax transcripts).

Additionally, just few suggestions to manage compliance well :)

• Continue filing U.S. tax returns as a U.S. citizen (worldwide income is taxable).

• File Indian income tax returns as a resident if you qualify, even for foreign income.

• Plan tax residency year-on-year — if in a future year you spend <182 days in India, you may escape global taxation in India.

• Keep track of where services are performed (India vs. U.S.) in case of audit scrutiny.

• Set up professional accounting in both countries for smooth DTAA compliance.

Feel free to connect for any assistance.

Thanks
Damini

Yes Income tax in India is based on your stay hence if you are working by staying in India you will have to pay tax in India.
If you become an ordinary resident in India which normally takes 2 years of being a normal resident then you will have to pay tax on global income but you will get credit of foreign tax paid.

Hope you find the above answer helpful if yes please provide 5 star and we can have a consultation if required.

Thanks