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I am an Indian citizen living in the US since 2008 with an F1 Visa. I am a resident for tax purposes. Can I claim exemption under the India US Tax Treaty (21) "Students and Business Apprentices From India"? So Do I have to file the 1040NR in spite for being a resident alien for tax purposes?

Could anyone site me IRS publications which clarifies this? I am looking through p519 and am lost :-/

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    Why are you resident for tax purposes if you're on F1? Five years passed? – littleadv Feb 14 '14 at 23:07
  • Yes. I have been in the US since 2008 – Lord Loh. Feb 15 '14 at 5:49
  • As a resident, you get a standard deduction of $6300. My feeling is that the treaty allows students from India to avail the same benefits. Claiming the treaty exemptions as a resident would amount to claiming the benefits twice. I think. – elexhobby Mar 20 '16 at 0:11
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I was able to find several references that claim that the Indo-US treaty provision is limited to five years:

Here it says this (on page 20):

Generally the treaty exemption for students is limited to the first five calendar years that the international student is in the U.S. However there is no set time limit for students from Belgium, Bulgaria, China, The Netherlands, and Pakistan.

However, I couldn't find any specific time limit neither in the treaty nor in the technical explanation. The explanation says:

Thus, for example, an Indian resident who visits the United States as a student and becomes a U.S. resident according to the Code, other than by virtue of acquiring a green card, would continue to be exempt from U.S. tax in accordance with this Article so long as he is not a U.S. citizen and does not acquire immigrant status in the United States. The saving clause does apply to U.S. citizens and immigrants.

However, the treaty explicitly says this:

The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken.

The reason for this last paragraph is to ensure that you don't artificially prolong your student status, and the 5 year limit may come out of the interpretation of this specific paragraph.

Similar paragraph exists in the US-China treaty, and the explanation for that treaty says this:

These exemptions may be claimed only for the period reasonably necessary to complete the education or training. In some cases, the course of study or training may last less than year. For most undergraduate college or university degrees the appropriate period will be four years. For some advanced degrees, such as in medicine, the required period may be longer, e.g., seven years.

Based on this, it is my personal impression that if you're an undergraduate student and studying the same degree (and not, for example, finished your BA, and started your MS) - you are no longer eligible for the treaty benefit.

But I suggest you ask a professional (EA/CPA licensed in your State) for a more reliable tax advice on the matter. I'm not a tax professional and this is not a tax advice.

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