Need to file Taxes in India ??? (not immigration related question)

W

wonderfulboy

Registered Users (C)
Hi,

This question is to all the members who are indians currently working on H1 in USA who are not working for a company with
no salary in India. I have a general question regarding tax filing in India. Every year we are filing taxes for what ever we are earning in US. What about taxes in India? Do we need to file taxes in India though we are not earning any income through job or business? What if we have a bank account in India and we get small amount of bank interest in India? Every one will be issued a PAN number. Can any one give me feedback on this issue?
 
Pay Taxes

I file my tax return in India every year for bank accounts that generate interest.

I am not sure if this is a statuatory requirement. Anyway when you compare the taxes we pay here, what you will pay in India is nothing. Probably the cost of two dinners in Indian restaurant??
 
I may be wrong but I was under the impression that India and US had a dual-taxation agreement which took care of double taxation issues by exempting NRIs from being obligated to pay Income tax in India.

I got a clearance certificate from the Income Tax department in India before I came here (which only serves the purpose to establish the fact that I did not owe back-taxes until my date of departure).
 
Indian Income Tax

Some income that is earned or deemed to be earned in India is taxable in India whether your status in India is Resident/not-ordinarily resident or non-resident.
Rent/Interest/Dividend paid in indian companies and salary for work done in India is considered income earned in India and is fully taxable. Some exclusions are interest on Forex remittances in special accounts.
I believe that the amount of exempt income is about Rs.32,000 now and you need to file an IT return only if your income is more than that.
India and US do not have a double taxation treaty..
If you are India for more than 183 days (or more than 90 days in one year and a combined more than 270 days in 3years) between April of one year to March of next year, you will be taxed on all of your world income! You could end up paying taxes in the US and India on your US salary and, you do not get any credit for taxes paid in India so it will be taxed at Gross in India.
That is the law, but seriously, as long as you don't remit the amount or take it back with you immediately the chances are you getting scot free are really really really bright!.
 
Legally you may have to pay taxes in the US...

For the interest income earned on the money that is deposited in India, you need to pay taxes to the IRS, it would be foreign income earned. Only thing I am not sure is if the IRS can come to know about your CD or other deposits that you open in India as you don't give the Indian banks your SSN when opening a dollar deposit account or am I wrong?
 
I have always been confused about filing tax returns in India & US. This is how I do my filing.. I file tax returns in US for US income. In India (as per my Charted Accountant's advice) I file my tax returns for Indian income as NRI (you pay higher tax as NRI). However (I think) you can also file returns for your Indian income here in US as foriegn income. BUT you do not have to pay tax (dual tax) in both countries (I think).
 
Originally posted by ZeusChicago
I have always been confused about filing tax returns in India & US. This is how I do my filing.. I file tax returns in US for US income. In India (as per my Charted Accountant's advice) I file my tax returns for Indian income as NRI (you pay higher tax as NRI). However (I think) you can also file returns for your Indian income here in US as foriegn income. BUT you do not have to pay tax (dual tax) in both countries (I think).
Click to expand...

I cannot speak to Indian taxation. However, there are some US taxation issues that you should be aware of.

Most importantly, if you are filing a 1040 (which I imagine most of you are) you must declare ALL WORLDWIDE INCOME. All of it, no exceptions. If you have a CD in India, you need to declare the income you make in interest every year, and pay US taxes on it.

Now, to avoid double taxation I believe you can file a form 1116 and claim a credit against the foreign taxes. Let's pretend that you made $100 in interest last year. The Indians dinged you at 20% tax, so you paid them $20. The IRS gets you at your marginal rate, which is 28%. You owe them $28 in taxes, but you should be able to claim the $20 as a credit against the $28. You end up paying $8 extra, not $28.

I say this only because of my experiences with Canadian taxation on dividends and assets I had in Canada. There is a tax treaty in place there, which may not be the case with India.

However, no matter what, don't hide income from the IRS. They don't like that, and the IRS frightens me more than the Canadian Dept. of Revenue or the Indian Government.
 
What RealCanadian said is correct. When filing taxes in US, you have to report all worldwide income. Any taxes paid locally can be sought as an exemption in US, if US has a tax treaty with that country. (India has one for avoiding double taxation).

If you had an Indian NRE account with Citibank, they would give you the 1099 (as they are an US bank). The interest on the NRE account is taxable in US. But, Indian banks like ICICI, SBI, etc. even if present in US do not issue the 1099 for the NRE account and you have to report yourself in 1040. Which most taxfilers don't and IRS cannot pursue your global income. IRS does not pursue this income aggressively as in most cases the amounts are relatively small and it is not worth the effort for them. But, in a worst case scenario, if pulled up for an IRS audit, if you can't hide your global income, be prepared to pay the taxes on it.
 
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Taxes on NRE accounts in India

Interests earned on NRE accounts in India are tax free there. You need not pay any taxes in India if you maintain NRI status. But, you may pay taxes on those earning in US.
 
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