H1b - Resident Alien 2011 - Not full year - tax situation

[sunandoghosh]

H1b - Resident Alien 2011 - Not full year - tax situation

Hello friends
I am working in USA on H1B deputed on long term from my employer in India.
My understanding is that I m resident alien as i am in USA for almost 9 months in year 2011.
Rest 3 months I was working in India offices of my employer in 2011 beginning.

Pls clarify whether below understanding is correct -

- As I am resident alien in USA for tax purposes for tax year 2011 I need to file USA Income Tax Return now including not only my USA Income for 2011 but also the global income for 2011.

- This would mean that my Indian Salary for 3 months in 2011 roughly 2 lakhs rupees (including bonus) in India would need to be included in USA Tax return

- My employer has deducted only few thousand rupees as TDS as 2 lakhs is just above exemption limit per Indian income tax act

- But If I include 2 lakhs as income now in USA i can only claim to best of my understanding tds of few thousands rupees as foreign tax credit

- This essentially means I am not able to claim basic exemption limit of India and paying tax in USA at whatever highest rate applies to me which would be significant amount

Based on Above

Kindly correct my understanding / advise / suggest / guide

1. Is my understanding correct?

2. How can i legally and correctly come out of this undesirable situation? i have to unncessarily pay 700 -800 dollars for tax on indian income?

I am sure some one on might be facing same isssue.

Pls advise/ guide
thanks in advance

Watching the replies very closely as planning to file the return soon

 

[nkm-oct23]

Yes, your understanding is correct. You will have to report your Indian salary reeceived for the first 3 months of 2011 (converted into dollars) but I think there is an exemption upto $96000 of income earned outside US for US residents. Moreover, any income tax you paid in India can be deducted from your income.
You also don't have to pay Indian income tax on income earned in US as you are now considered an NRI.

 

[sunandoghosh]

Yes, your understanding is correct. You will have to report your Indian salary reeceived for the first 3 months of 2011 (converted into dollars) but I think there is an exemption upto $96000 of income earned outside US for US residents. Moreover, any income tax you paid in India can be deducted from your income.
You also don't have to pay Indian income tax on income earned in US as you are now considered an NRI.

exemption upto $96000 of income earned outside US for US residents

where can i find a reference?

Moreover, any income tax you paid in India can be deducted from your income.

Thats the problem. for three months the tds deucted by employer is verv less.

 

[nkm-oct23]

exemption upto $96000 of income earned outside US for US residents

where can i find a reference?

Moreover, any income tax you paid in India can be deducted from your income.

Thats the problem. for three months the tds deucted by employer is verv less.

Sorry, but the exemption is available for US citizens/residents who spend 330+ days outside US and earn income outside US. This does not apply to you.

Why is the less tax paid in India a problem?

You are considered a US resident for tax purposes. Residents have to declare all worldwide income on their US tax returns. You will have to include your indian income in your US tax return and claim a deduction for the tax paid in India.

 

[sunandoghosh]

Sorry, but the exemption is available for US citizens/residents who spend 330+ days outside US and earn income outside US. This does not apply to you.

Why is the less tax paid in India a problem?

You are considered a US resident for tax purposes. Residents have to declare all worldwide income on their US tax returns. You will have to include your indian income in your US tax return and claim a deduction for the tax paid in India.

thats the point...example...in india since i had for year 2011 jan to dec 3 months salary only of rs 200000 i was able to utilize benefit of basic exemption in india of rs 180000 and pay tax on rs 20000.

Now since i include my indian income in usa; i have to pay tax on 200000 at usa tax rate minus tax paid in indian on 20000 only....rs 180000 exemption in india is lost???

 

[nkm-oct23]

thats the point...example...in india since i had for year 2011 jan to dec 3 months salary only of rs 200000 i was able to utilize benefit of basic exemption in india of rs 180000 and pay tax on rs 20000.

Now since i include my indian income in usa; i have to pay tax on 200000 at usa tax rate minus tax paid in indian on 20000 only....rs 180000 exemption in india is lost???

Exemption in Indian income does not apply in the US. You will have to report and pay tax on the entire Rs 200,000 you received in India. You will be able to claim credit for any tax paid in India, however small that may be.