8

I moved to USA during the financial year Apr 2014 - Mar 2015, in which I was resident in India for more than 182 days due to which my status is "resident" in India for the tax year concerned. I understand, according to income tax law in India, my global income will be taxable in India, which means I will need to pay tax in India on my salary income in USA.

I know that federal income tax paid in USA will be considered towards tax paid and I get credit for that when computing tax amount for India. I have doubts for following two items:

  1. Social Security Tax
  2. U.S. State Income Tax

Are above two items exempt when computing taxable income in India for the year?

3

As per the DTAA the Social Security Tax is not considered. There is no mention of State Tax. As per the definition, only Federal Tax is considered.

  • can we consider State Tax also then? – vikiiii Jun 25 '17 at 21:53
  • If taxes apart from Federal is not considered, shouldn't we reduce these amount from the total income while filing tax in India? – vikiiii Jun 25 '17 at 21:54
  • Yes. However it is best consult a professional CA. – Dheer Jun 26 '17 at 6:16
3

The Section 91 gives out the permissible deduction for countries where DTAA is not present. As per section 91 of Indian income tax act you can claim the benefits of state tax even though the DTAA does not have any provision of this. This was the ruling in the case of DCIT Vs Tata Sons as listed here.

There is no reference of such relief available for social security tax & medicare tax

2

As per some of the blogs on this topic

6) While the title of section 91 of Indian Income Tax suggests that it is applicable only in cases where India has not entered into a double taxation avoidance agreement with the respective jurisdiction, but the scheme of section 91, read along with section 90, does not reflect any such limitation. Section 91 is, thus, required to be treated as general in application.

7) The fact that a taxpayer is entitled to make a particular claim, in accordance with a tax treaty provisions, does not disentitle him to make the claim in accordance with the provisions of the Act if it is more beneficial to him.

Conclusion
"The Mumbai bench of Income-tax Appellate Tribunal (the Tribunal) in this case held that US federal tax and state tax paid in respect of income earned overseas are not deductible as expenditure incurred for earning income under section 37 of the Income-tax Act, 1961 (the Act). Further, the Tribunal observed that, though relief is not available for state income taxes paid under the India- US tax treaty (tax treaty), the relief is available under Section 91 read with Section 90 of the Act."

This means we should able to claim State tax, and few other places it is also written that we can claim "medial" and "social" taxes as well.

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