Claiming back Social Security and Medicare taxes when working outside of USA

[nrvcs]

Here is my situation:

I am going to work in India but still get paid by the US employer. Employer has no presence in India. I am US Citizen. I am going to stay in India for more than 182 days so will be considered as resident for tax purposes.

Now, for the salary I get paid in US, social security taxes and medicare taxes will be deducted. Will I have to claim them back when I file my US Income tax return? If so, how can I claim it on tax return?

Also, there will be state tax dedcuted as well. So, I need to claim that back through state tax return? Will I be able to recover back the entire state, social security and medicare taxes or there may be some issue?

Thanks,

[MyTaxes_Expert]

1. A U.S. citizen must report worldwide income on your tax return.

2. When you work in India, it is India source income even when you work for a U.S. employer. This income is taxable in India irrespective of your resident status in India.

3. Yes, when the salary is paid by the U.S. employer, then the employer will deduct FICA taxes. For income earned while in India you will claim Foreign Tax Credit by filing Form 1116.

4. About State taxes: Your income while in India may not be taxable by the state if you left state for good (and you may have to prove it to the state). State must not consider your leaving as temporary or transitory. If you have not left any connection with the state, then ask your employer not to report income earned during your stay in India as state income on your W-2.

[nrvcs]

Thanks for clear reply.

I gathered from another forums that when employer is paying in US$, according to India's FEMA regulation, they still need to pay 25% of the salary in INR. If they have to do so, can they wire money into my Indian Account and satisfy that requirement. If so, they cannot deduct and pay Income tax to Indian Govt at the time of wire. So, can I make appropriate payments to Indian Govt by my own?

Thanks again,

[MyTaxes_Expert]

When you are working in India, your U.S. employer is foreign employer for India taxes. Foreign employer is not required to deduct any tax at source.