🇺🇸💸Earned in US? Here's How to Save Big on Indian Taxes with One Simple Form!📄🇮🇳
- MediaFx
- 5 hours ago
- 2 min read
TL;DR: If you're an Indian resident earning income from the US, you can avoid double taxation by claiming a Foreign Tax Credit (FTC) in India. This involves filing Form 67 and providing proof of taxes paid in the US. The credit is limited to the lesser of the actual US tax paid or the Indian tax payable on the same income. Consulting a tax professional is advisable to navigate this process smoothly.
Understanding Your Tax Residency Status
First things first, let's determine your tax residency:
Resident and Ordinarily Resident (ROR): If you've spent 182 days or more in India during a financial year, you're considered an ROR. This means your global income is taxable in India.
Non-Resident Indian (NRI): If you've spent less than 182 days in India, only your Indian-sourced income is taxable in India.
The Double Taxation Dilemma
Earning income from the US? You might face taxation in both countries—a classic case of double taxation. But don't worry, India's got your back with mechanisms to prevent this unfair scenario.
Claiming Foreign Tax Credit (FTC)
India allows residents to claim a credit for foreign taxes paid, ensuring you're not taxed twice on the same income. Here's how it works:
Eligibility: You're eligible if you're an Indian resident who has paid taxes in the US on income that's also taxable in India.
Credit Limit: The FTC you can claim is limited to the lesser of:
The actual US tax paid.
The Indian tax payable on the same income.
Required Documentation:
Form 67: File this form electronically before the due date of your Indian Income Tax Return (ITR).
Proof of Tax Paid: Provide a certificate or statement detailing the nature of income and the amount of tax deducted or paid in the US.
Steps to Claim FTC
Report Global Income: Declare all your income, including that from the US, in your Indian ITR.
File Form 67: This form must be submitted online before filing your ITR. It's essential for claiming FTC.
Maintain Records: Keep all documents related to your US income and taxes paid, as they may be required for verification.
Special Considerations
Dividend Income: The US typically withholds 25% on dividends. You can claim this as FTC in India.
Capital Gains: The US may not tax capital gains, but India does. Ensure you understand the tax implications and claim FTC accordingly.
Tax Treaties: India and the US have a Double Taxation Avoidance Agreement (DTAA). Familiarize yourself with its provisions to maximize your benefits.
Why It Matters
Claiming FTC not only prevents double taxation but also optimizes your tax liability, ensuring you don't pay more than necessary.
MediaFx Opinion
In the spirit of promoting fairness and equality, it's crucial that tax systems do not disproportionately burden the working class. Mechanisms like the FTC are essential in ensuring that individuals are not unfairly taxed on their hard-earned income from multiple jurisdictions. However, the complexity of these processes often necessitates professional assistance, which may not be accessible to everyone. Simplifying tax procedures and providing accessible resources can empower all individuals to navigate their tax obligations effectively.
