Home / Money / Personal Finance /  How can NRIs avoid double taxation?

Is it possible to simplify the US-India rules on Double Tax Avoidance Agreement (DTAA)? I need to merge four months of my US salary with the India salary. What rule of DTAA is applicable in such a case? How much tax paid in the US will be exempt in India? I have shifted to India and will be a resident here. I am a Non-Resident Alien in the US. Do I need to pay taxes on the India income in the US too?

—Name withheld on request


Assuming you qualify as “Resident and Ordinarily Resident" of India and “Non-Resident" of the US, you would qualify as “resident" of India under the DTAA between India and the US. 

As per Section 5 of the Income-tax Act, 1961, you are taxable in India on the following incomes:

(a) Income that accrues or arises or deemed to accrue or arise in India

(b) Income received or deemed to be received in India

(c) Income that accrues or arises outside India

 An individual qualifying as ROR is also required to report assets held outside India as foreign income in the Indian tax return. 

Accordingly, your salary income and other personal income in the US will also be taxable in India as per the above provisions. However, as per Article 25(2) of the DTAA, you may claim foreign tax credit in India against India income-tax payable on your US-sourced income for taxes paid in the US to avoid double taxation.

 To claim foreign tax credit in India, you will also need to file Form 67 electronically before the due date to file ITR. Form 67 needs to be supported by a certificate/statement specifying the nature of income and the amount of tax deducted or paid in the US.

You may wish to seek professional advice from a US tax expert for the tax implications in the US.

Sonu Iyer is tax partner and people advisory services leader, at EY India.

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