Indo-US Taxation & DTAA
DTAA stands for Double Taxation Avoidance Agreement. India and the US are parties to a Double Taxation Avoidance Agreement. Under the rules of this agreement any Indian/US citizen working in the other country (Indian citizen in USA or US Citizen in India) may not be taxed in both countries on the same income. To explain further, a taxpayer cannot be taxed on his salary both in India and the US since he is citizen of one country and working in the other. DTAA rules therefore provide that a taxpayer can claim a credit in the country where he files as resident for any tax paid to a country where he files as non-resident. (Country here refers to only India and USA).
DTAA seeks to provide relief against double taxation. The Provisions of DTAA override the general provisions of taxing statute of a particular country.
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FAQs - Tax
For my USA salary, I am already paying taxes in USA, why would I need to pay double tax both in India and USA?
As per Income Tax Act 1961, an assesse who is a resident of India is required to report his global income in India. To avoid the double taxation of Income, the Government of India has entered into a bilateral agreement with USA. As per the bilateral agreement an assesse is eligible to claim Foreign Tax Relief u/s 90 in India for the federal taxes paid in USA.
- The interest will be payable at 1% per month u/s 234A on the tax unpaid as on the due date( Non-filing of tax return) & 1% per month u/s 234B (Non-payment of advance tax).
- The interest u/s 234B is applicable only if the tax payable is more than 10,000/- or if the advance tax payment is less than 90% of the total tax payable.
- Also interest u/s 234B is not applicable for senior citizens.
- If there is no tax liability then there shall be no late filing interest.
I checked the status of my IT Return and it is displayed as ‘Refund Returned’. How can I apply for it again?
In this scenario, you can file a refund re-issue request:
- Log on to www.incometaxindiaefiling.gov.in with your user ID and Password.
- Navigate to ‘My Account’ -> Click ‘Service Request’ -> Select the ‘Request Type’ as ‘New Request’ and select the ‘Request Category’ as ‘Refund Reissue’->Click ‘Submit’.
The tax return for a financial year can be filed within 2 years. i.e tax return for FY 2015-16 can be filed on or before 31st March 2018. Beginning from the FY 2016-17 the time period has been reduced to 1 year i.e it can also be filed on or before 31st March 2018.
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- Using OTP (EMail & Mobile PINs)
- Using Aadhaar OTP
If the Original e-Filed Income Tax Return is invalid because of non-receipt of ITR-V, can I file Original return once again?
You can file a revised return – the original return once filed cannot be refiled.
Is Aadhaar mandatory on the IT return? What is the due date we need to file the India tax return by?
Aadhaar is mandatory for the Resident tax filers in India. July 31st 2017 is the due date for filing the tax return for the A.Y 2017-18.
You can find your local jurisdiction officer details by logging into your account on income tax website (incometaxindiaefiling.gov.in) under Profile Settings -> My Profile -> PAN details
The taxes paid in India can be claimed as Foreign tax Credit in US federal tax return but only to the extent of tax payable on such income in USA. For example: If tax rate in USA is 10% whereas tax paid in India is 15% you will be eligible to claim foreign tax credit only to the extent of 10% in the current year. The remaining unused credit of 5% can be carried forward to 10 years or can be carried back to 1 year.
Allowances received are exempted to the extent which is spent. Any saving on the same will be taxable in India.
Foreign tax credit is non-refundable credit. This can be used against tax adjustment and it’s not refundable.