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Question 1: If I move money from a traditional to roth IRA (or pretax 401k to roth) account, what are the US tax brackets? Are there any standard deductions?
Will I have to pay any taxes in India for this?

Question 2: Is the income from another part of the world (India in this case) considered taxable in the US in the case of a roth conversion. For instance, if I earned $10,000 residing and working in India and then I convert $1000 from a traditional to a roth IRA account would $11,000 be the taxable income in the US or just $1000 (this is important if there are any standard deductions in the question above).

Assumption The person is an Indian citizen and was working in the US on F1/H1b (maybe even some combination of both). He them moved to India where he initiated this roth conversion.

Extra Credit The person, who is an Indian citizen, moves to India where he initiated this roth conversion. I presume this case would be handled differently and am curious to know how it differs from the above case for informational purposes.

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  • possible duplicate of Are distributions from Roth 401k or Roth IRA accounts taxed in India?
    – littleadv
    Commented Apr 11, 2014 at 4:43
  • Not only a possible duplicate but posted by the same person too.
    – Dilip Sarwate
    Commented Apr 11, 2014 at 13:42
  • Actually this is a duplicate of money.stackexchange.com/questions/29747/…. That question was deleted because it was apparently unclear. I reworded it to make it clearer.
    – Aayush Kumar
    Commented Apr 12, 2014 at 2:46
  • @littleadv Also note that the question you pointed to is NOT a duplicate of this. The other question asks is Roth distributions are taxed in India. This one asks the tax implications of moving money from a traditional to roth IRA account (or pre-tax to roth 401k).
    – Aayush Kumar
    Commented Apr 12, 2014 at 2:49
  • @Ayaush I told you then and I'll tell you again: this is not a good place to ask hypothetical questions. Especially on taxes. There are tons of variables that affect the answer, and no-one is going to write you a book here.
    – littleadv
    Commented Apr 12, 2014 at 3:01

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I can only answer about the U.S.

For question 2, I believe the answer is no. If you are a non-resident alien for tax purposes, then only income connected to the U.S. is reported as income on the tax return.

Unless there were any non-deductible contributions to your pre-tax IRAs, when you convert to Roth IRA, the entire amount of the conversion is added to your income. So the tax consequence is the same as if you had that much additional U.S. income.

If you are a non-resident alien with no other income in the U.S., then the income you have to report on your U.S. tax return will basically consist of the conversion. Non-resident aliens do not have a standard deduction. However, all people have a personal exemption. If we take 2013 as an example, the exemption is $3900 per person. We will assume that you will file as single or married filing separately (non-resident aliens cannot file as married filing jointly).

The first $3900 of income is covered by the exemption, and is not counted in taxable income. For single and MFS, the next $8925 of income is taxed at 10%, then next $27325 of income is taxed at 15%, and so on.

So if you convert less than the personal exemption amount every year ($3900 in 2013), then in theory you do not pay any taxes. If you convert a little bit more, then some of the conversion will be taxed at 10%, etc.

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