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I am in USA for last 5 months of 2015 and was there for 4.5 months in 2014, so I am a resident alien in USA for year 2015.

I have below questions for the IT return for year 2015 in USA:

  1. Do I need to club India income in USA tax computation which was earned before entering USA? There was already a TDS [Tax Deducted at Source] on all such incomes in India
  2. Which all taxes I need to pay in US for India income out of various US taxes i.e. Federal, Social security, Medicare, State?
  3. I had few India income (Salary, Interest, Dividends, interest on PPF [Voluntary Pension Account], interest on tax free bonds) which was earned when I was in USA. Would it be treated differently than income earned before coming to USA?
  4. As India Financial Year ended on Mar'15, how should income be added for USA because I filed the ITR [Income Tax Returns] for full year Apr'14 to Mar'15 in India. How should I separate out the income of from Jan-Mar'15 out of the final tax return in India for Financial Year 2014-15?
  5. Do I need to club Indian income on PPF, tax free bonds, EPF [Mandatory Pension Plan], medical benefits, ELSS [Equity Linked Tax Saving Scheme] etc as these are tax free in India?
  6. If we club India income of 2015 in US tax return then how do we file it with Indian ITR [Tax Returns] for Financial Year 2015-16

Please clarify on above points to provide me more insights on US tax computation

There are few questions already existing on the site for same topic, but I had few specific questions to be answered, hence created a new question.

Thank you.

PS:
PPF - Public Provident Fund. A voluntary tax saving scheme that an individual can subscribe. There is a lock-in period and contributions are exempt from income. Interest and withdrawals are tax free.
EPF - Employee Provident Fund. Run by Govt or approved private trusts. There is an Employer's contribution as well has Employee's contribution. Employer's contribution is not included as income for Employee. Employee's contribution is tax exempt.
ELSS - Equity Linked Savings Scheme. A Voluntary scheme. Contributions are tax free and withdrawal after maturity are tax free.

  • Could you suggest which form should be used to get claim exemption under the treaty. – IG16 Jan 30 at 19:01
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Since you're a US tax resident, you'll include your worldwide income on your US tax return. That includes any income in India during that tax year, regardless of whether you actually were in the US or not. That is because you're a US tax resident for the whole year (due to the 4-months presence in the prior year).

You can use the form 1116 to calculate foreign tax credit for the tax already paid in India.

Which all taxes I need to pay in US for India income out of various US taxes i.e. Federal, Social security, Medicare, State?

You didn't provide enough information to consider other taxes, so I'll limit my answer to the US Federal Income tax. You may or may not be liable for the other taxes you mentioned, but I can't tell based on the information in your question.

There is a mismatch between the Indian tax year and the US tax year (which is probably calendar), so you'll have to do some math. It is your responsibility to do that separation. You can, if you never filed a tax return in the US before, elect to file using the same fiscal year as in India, but once elected - you are stuck with that. So if you plan on staying in the US for a while, you should probably not do that.

The Indian taxes for the 2015-2016 FY will only be finalized after the FY ends in March, and the US Federal taxes are due on April 15th (18th this year). But if these two weeks are not enough, you'll probably need to file an extension for your US Federal taxes using form 4836.

You should include all the employer's contributions to the pension accounts that are in your name in your income, unless Indo-US treaty says otherwise. You should also include these pension accounts on your FBAR.

  • Thanks for your response. I found a rule by which we can exclude the foreign income from our return as per below link: irs.gov/Individuals/International-Taxpayers/… Can you please suggest if I'm eligible to use this exclusion as per my residence dates mentioned above. If I need to file ITIN for my wife as well, then also, can I use this exemption? – Deepak Feb 11 '16 at 5:43
  • @Deepak I can't see how you would qualify for that rule – littleadv Feb 11 '16 at 17:40
  • Please advise what reason you see I am not eligible to claim this exemption if I'm a resident alien in year 2015. I checked my eligibility in below link: irs.gov/Individuals/International-Taxpayers/… – Deepak Feb 14 '16 at 6:02
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Indian PF is a social security scheme, and as per the US India DTAA Article 20, is not taxable by the US. The exact text says as under -

Notwithstanding paragraph 1, and subject to the provisions of Article 19 (Remuneration and Pensions in Respect of Government Service), social security benefits and other public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

This clearly states that any social security benefit paid by any of the two contracting states to a resident of the other contracting state is taxable only in the first mentioned state. In other words, US cannot tax Indian social security benefits (and vice versa). Therefore, you are liable for taxes only in India even though you have to declare to the US that you were given the social security (PF) benefit by India.

The DTAA (Double Taxation Avoidance Agreement) Article 20 will apply to the Provident Fund money received while you were a resident in the US.

Yes, you will add the Interest received on PF (Interest only for the year/s when you were a resident of US, and not when you were a Resident in India) in your 1040 and claim exemption under the treaty.

Do not add all of your PF contribution for last 10 years or 10 years of interest to 1040, as this was not contributed/earned when you were a US Resident. Consider, just the Interest Earned in the year when you become a Resident of US and then claim exemption under the treaty.

protected by Chris W. Rea Jan 30 at 20:00

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