How to report Indian Income

P

p_card

Registered Users (C)
Recently my friend got his GC. He gets both my indian salary and US salary. Till now he was not reporting his indian salay in US IRS tax return as indian tax is deducted on source.
1. Do he has to report indian income while filing US tax return?
2. The indian FY is from April to March, how to show the income and tax deducted in Jan to Dec for IRS purpose?
3. was it s mistake not reporting the indian salary before getting teh GC?

thanks a lot
 
p_card said:
1. Do he has to report indian income while filing US tax return?
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Yes.


p_card said:
2. The indian FY is from April to March, how to show the income and tax deducted in Jan to Dec for IRS purpose?
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Indian FY does not matter here. He has to report whatever he earned from Jan to Dec. India and US has tax treaty. Based on that he can claim tax credits.
I would recommand him to read following links, especially publication 514.
http://www.irs.gov/faqs/faq13-3.html


p_card said:
3. was it s mistake not reporting the indian salary before getting teh GC?
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He is required to report worldwide income, if he passed substantial presence test. Reporting worldwide come does not mean he has to pay double tax. As India-US has tax treaty he can get the tex credit based on the amount of tax he paid in India.
 
Thanks pralay for the quick response.
1. what will happen to the past tax filing as he never reported indian salary?
2. To get the income from Jan to Dec is simple but how much indian tax is paid on that is not that simple as indian company deduct the major tax in the month of jan/feb and march.
3. Is it ok to keep on filing and not reporting the Indian income as any case the tax is already paid on that income?

thanks
 
p_card said:
2. To get the income from Jan to Dec is simple but how much indian tax is paid on that is not that simple as indian company deduct the major tax in the month of jan/feb and march.
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Then he should get the tax credit for Jan+Feb+March in next years tax return. For example, if he paid most of the taxes in 2006 Jan-March, then can get that credit on 2006 tax return (filing on 2007).


p_card said:
3. Is it ok to keep on filing and not reporting the Indian income as any case the tax is already paid on that income?
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Talk to a good tax consultant and immigration attorney.
 
Hi p_card:

I don't think your friend needs to disclose Indian salary in US tax return
as long as the Indian salary is deducted for Income Tax (TDS - Tax deduction on source).

All he needs to have is the copies of the pay slips (or attested balance
sheets if he is doing business) with the deduction
entires so he doesn't have to face any problems with Indian Tax Department.
As far IRS, he doesn't have too worry much; even then, he can show copis
of pay slips with TDS entries.

The tax treaty works in both ways and that's why most of the Indians
don't file tax returns in India while working in the US & file their returns
in the US & this is applicable vice verso.

Just think of hundreds and thousands of Indians working in the US and
saving their money in Indian banks and getting interest for their deposits; they get the immunity just by the fact that their interest is deducted for
tax (TDS) & file their IT returns in the US which is suffice as part of
the treaty.


Good luck
//
 
howdy_howdy said:
The tax treaty works in both ways and that's why most of the Indians
don't file tax returns in India while working in the US & file their returns
in the US & this is applicable vice verso.
Click to expand...

Not true. If someone passes "substantial presence test" (SPT) he must report worldwide income. Tax treaty helps to avoid double taxation, but that does not mean that he can avoid filing tax return or report income. Regarding filing tax return, Indian rules are different. But US rule is that if you pass SPT you must report worldwide income. Now, your "tax home" could be different from USA. If someone earns most of the income in India (and insignificant amount in USA) India will be his "tax home" and he can pay tax in India. However, he still needs to report worldwide income to IRS and probably paying zero tax (if he passes SPT).


howdy_howdy said:
Just think of hundreds and thousands of Indians working in the US and
saving their money in Indian banks and getting interest for their deposits; they get the immunity just by the fact that their interest is deducted for
tax (TDS) & file their IT returns in the US which is suffice as part of
the treaty.
Click to expand...

He needs to file his IT (reporting worldwide income). Reporting worldwide income does not mean that he has to pay taxes.
 
Thanks everyone.

Now it is pain to amend all the tax return for last 5 years. It was my impression that worldwide income has to be shown only after getting parmenent status. The only indain income is indian salary where teh tax is deducted at source and the Indian Income tax return is also filed.
1. Now if the last years tax return are to be amended, this is a big problem.
2. and now if the indian salary is reported starting this year(after getting teh GC), will it attract IRS attentetion, how all of a sudden teh person start getting indian salary.
The main point here is not to save tax but to put the records proper.

What do you feel, if just start reporting teh indian income from this year?

thanks
 
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