I am an Asst Professor working in a central university.

I was selected for an Indo-US fellowship of $3000/month for doing a research project in the U.S.

They have paid in INR to my university. In turn they released the above amount on a monthly basis and credited it to my State Bank of India account, in India.

During the research period absence has been treated as duty leave and paid full salary in addition to the above fellowship.

It is clarified by the funding body, that it is exempted u/s.10(16).

However my employer says it is taxable as there exists an employee & employer relationship and salary is being paid in addition to fellowship (but no where it is mentioned that the fellowships is sanctioned to meet the living expenses.)

  • 5
    Next time, before asking a question, please take some time to put it in an objective manner, so people can understand and reply to your query. People shouldn't be put off by how you ask a question. You are an Asst Professor, would you answer any of your student's question if he asks without any due diligence ???
    – DumbCoder
    Mar 11 '13 at 9:07
  • @DumbCoder: Even some tenured professors don't know how to write markup properly. I am not trying to defend the OP, but don't hold his haste against him. I fixed it for him. Mar 12 '13 at 14:03
  • @f1StudentInUS - I am not accusing or anything of the sorts of it. I assume when you want an answer, you should frame your question properly. His 1st iteration was pathetic, hence I modified it to my best understanding and then posted the comment. Just because many cannot do it, nobody should make it an excuse. After all it is his money which is being screwed, not mine or yours and anybody else'.
    – DumbCoder
    Mar 12 '13 at 16:02

Do you ask your plumber for tax advice? Is your employer a tax professional? I guess both are negative.

Why do you care what your employer (aka a clerk in HR) says? You should go to a tax professional and get a proper tax advice. The tax professional will gather and understand all the facts and circumstances, analyze the US-India tax treaty, and will provide you with an answer that you can rely on when dealing with the US tax authorities. That is something neither the HR clerk in your school nor us here can do.

Tax treatment of your income depends on what it is for, how and where it is paid, what is your legal status in the US and how long have you been here. Obviously, we know nothing right now, so couldn't answer your question even if we wanted to. If you do provide this information, however, the question will be deemed too localized and closed.

  • I would like to keep this open as for every OP, there are hundreds of others who accept the status quo and gift the IRS monies that they personally could have made better use of. Mar 12 '13 at 13:54
  • But why the downvote without a comment?
    – littleadv
    Mar 3 '14 at 7:52

This same thing happened to me, and it's extremely sad how this keeps on happening. People in the administration you (and I) are part of have a chronic disorder of not being able to read documentation they are supposed to read to make your life easier.

Hence, instead of this being "their problem", it has now become "your problem".

The solution to this is not easy, and unless you want to read up on Indo-US Tax Treaty laws and IRS publications, you want to hire a professional corporation to sort this mess for you.

In my case, which is similar to yours, contrary to what anyone has said before, my fellowship was not taxable since it did not cover living expenses (I cannot provide you guaranteed tax advice as I don't know your specific circumstance and fellowship contract).

I have had good experiences with "British American Tax". They have knowledgeable people on their rosters who are willing to read up on Indo-US Tax Treaty laws and IRS publications for you.

Unless you can find out someone/some tax firm who understand Indo-US Tax Treaty law, you can give them a try.

I do not receive any kind of benefits from this company but it was the only one in my 3 months of "limited" search that knew what it was doing.

  • In the last part of my answer I assumed by your "employer" you meant someone in the accounting department. No one else should be giving you advice on how to structure your taxable income (and frankly, a competent accountant will refuse to give you specific advice at the risk of being sued by you). Mar 12 '13 at 14:08
  • You cannot provide a guaranteed tax advice period. You cannot provide tax advice at all. You cannot tell the OP that his fellowship is taxable or not taxable. At all. You're not a tax professional. You can write "I think", you can write "In my opinion", or you can write "it is my understanding that". From your answer it looks like you're telling him "forget what you've been told, its 100% non-taxable". This may not be true, and you don't know that. The payroll made no mistake (other, maybe, than saying stupid stuff). Taxes is the OP business, not theirs. Nothing to hold them to.
    – littleadv
    Mar 12 '13 at 17:16
  • @littleadv: you are correct. I will reframe my answer. I see I had got carried away. Thanks for the comment. Mar 13 '13 at 17:44
  • @littleadv: Updated following your recommendation Apr 9 '13 at 22:40

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