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I reside in India and work for a US-based multinational company. I am on India payroll. As part of my compensation package, I receive RSUs (Restricted Stock Units) that vest annually. When I opened my eTrade account, I didn't submit the W-8BEN form initially because I wasn't aware of its requirement.

Upon vesting, I had to pay taxes in India. eTrade offered two options:

  1. Deposit the tax amount into the company's account.
  2. Permit them to sell a portion of my vested stocks to cover the Indian tax liability.

I chose the second option, and eTrade sold approximately 37% of my vested stocks to cover the Indian taxes.

Since the stocks vested and were immediately sold, there was not much gain. However, because I didn't submit the W-8BEN form, additional taxes were withheld, and I received a 1099-B form detailing this.

The attached image shows:1099-B received $3,786.72 sold to cover the Indian tax liability against the total vested shares, which is reflected in my Form-16. Federal Income Tax Withheld: $908.81 (Box 4) and $282.12. Additionally, they sold an extra 44 shares. I would like to understand:

  1. What does the attached image indicate?
  2. How can I reclaim the withheld amount, and how much can I expect to receive?
  3. I do not have an SSN, so what are the steps I need to follow to proceed?

Now for next year, I have submitted the W-8BEN form by filling in the details, but below point 10 was blank: Special rates and conditions (if applicable—see instructions): The beneficial owner is claiming the provisions of Article __ and paragraph __ of the treaty identified on line 9 above to claim a ___ % rate of withholding on (specify type of income):

Do I need to mention 15% or 25% in the above point and resubmit the W-8BEN form, or does point 9 automatically take care of it since I mentioned I am a resident of India?

Please provide guidance on the detailed steps to recover. Expert guidance would be greatly appreciated. Thank you in advance for your assistance.

1 Answer 1

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Regarding how to claim back tax deducted for RSU -

You have 2 options as follows -

  1. Claim credit of US tax in the Indian tax return. You will only be able to claim a credit at a lower rate of India & US tax. You will have to file a Form 67 prior to filing tax return in India. Also dont miss to disclose this foreign income in Schedule FSI & any foreign assets in Schedule FA.

  2. Capital gains on US stocks is tax free for non-residents. You can file 1040-NR in US and claim a refund of the entire capital gains tax in US. In this option, you cant claim a credit of US tax in Indian return.

Regarding W8BEN filed by you, you need to file the below -

The beneficial owner is claiming the provisions of Article 10 and paragraph 2(b) of the treaty identified on line 9 above to claim a 25 % rate of withholding on dividend income:

This way, the brokerage shall withhold tax on dividend for you at 25% (rather than the standard rate of 30%). Regarding capital gains, since W8BEN signifies your tax residency of India, broker will take that into account & not deduct any tax on capital gain.

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  • Thanks for reply. @abhinavgulechha I have a follow-up question: If I choose Option 1, what documents do I need to submit along with Form 67? Can I furnish the 1099-B form and fill out Form 67, or must I file a tax return in the USA to claim the benefits of Form 67? Obtaining an ITIN in the US seems to be the challenging part here.
    – ypp174
    Commented Jul 4 at 16:15
  • You can attach 1) Form 1099 showing the income & tax deducted amount in USD & 2) attach a statement showing calculation of converting USD income to INR. That should suffice. You'll need to file it before filing India tax return. No need to file US tax return for filing Form 67. Commented Jul 6 at 6:13
  • Thank you @abhinavgulechha. "statement showing calculation of converting USD income to INR" We just got an excel sheet with these details. Do we need to have it on company letterhead or something ? This statement will get from etrade or company I am working for ?
    – ypp174
    Commented Jul 9 at 4:59
  • You can keep excel as a backup. The final computation can be converted to a PDF with heading "Computation of Income for purposes of Form 67" or something like that. Thats it. No need to sign or anything. Attach that PDF along with 1099 while filing Form 67. Commented Jul 10 at 8:11

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