India U.S. Tax Treaty

This article will tell you whether the tax treaty between the United States and India offers a reduced rate of, or possibly a complete exemption from, U.S. income tax for residents of India. This also applies to residents of the U.S. who earn income in India.

ARTICLE 15. Independent Personal Services
Income that residents of India receive for performing personal services in the United States during the tax year as independent contractors or self-employed individuals (independent personal services) is exempt from U.S. income tax if the residents:
  • Are present in the United States for no more than 89 days during the tax year, and
  • Do not have a fixed base regularly available to them in the United States for performing the services.
If they have a fixed base available, they are taxed only on income attributable to the fixed base.

ARTICLE 16. Dependent Personal Services
Income that residents of India receive for personal services performed in the United States as employees (dependent personal services) is exempt from U.S. income tax if the residents meet three requirements.
   • They are present in the United States for no more than 183 days during the tax year.
   • The income is paid by, or on behalf of, an employer who is not a resident of the United States.
   • The income is not borne by a permanent establishment, fixed base, or trade or business the employer has in the United States.

The exemption does not apply to pay received by a resident of India for services performed as an employee aboard a ship or aircraft operated in international traffic by a U.S. enterprise.

ARTICLE 17. Director Fess
Directors' fees and similar payments received by an Indian resident as a member of the board of directors of a company that is a U.S. resident may be taxed in the U.S.

ARTICLE 18. Income Earned by Entertainers and Athletes
Nothwithstanding the provisions of Articles 15 and 16, income residents of India receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes if their net income is more than $1,500 during the tax year for their entertainment activities in the United States. Regardless of this limit, the income of Indian entertainers and athletes is exempt from U.S. tax if their visit to the United States is wholly or substantially supported from the public funds of the Indian Government, its political subdivisions, or local authorities.

ARTICLE 22. Professors, Teachers, and Researchers
An individual is exempt from U.S. tax on income received for teaching or research if he or she:
• Is a resident of India immediately before visiting the United States, and
• Is in the United States to teach or engage in research at an accredited university or other recognized educational institution the United States for a period not longer than 2 years.
If the individual’s visit to the United States exceeds 2 years, the exemption is lost for the entire visit.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

Students and Apprentices
An individual who is a resident of India immediately before visiting the United States and who is temporarily in the United States primarily for studying or training is exempt from U.S. income tax on payments from abroad for maintenance, study, or training. The exemption does not apply to payments borne by a permanent establishment in the United States or paid by a U.S. citizen or resident, the U.S. Government, or any of its agencies, instrumentalities, political subdivisions, or local authorities.
Under the treaty, if the payments are not exempt under the rule described above, an individual described in the previous paragraph may be eligible to deduct exemptions for his or her spouse and dependents and the standard deduction. The individual must file Form 1040NR or Form 1040NR-EZ to claim these amounts. For information on how to claim these amounts, see chapter 5 in Publication 519.
The individual is entitled to these benefits only for a period of time considered reasonable or customarily required to complete studying or training.

Wages and Pensions Paid by a Foreign Government
Income, other than a pension, paid by India, its political subdivisions, or local authorities to an individual for services performed for the paying governmental body is exempt from the U.S. income tax. However, the exemption does not apply if the services are performed in the United States by a U.S. resident who either: citizen of the United States.
• Is a U.S. citizen, or
• Did not become a U.S. resident only to perform the services.
Pensions paid by India for services performed for India are exempt from U.S. tax unless the individual is both a resident and citizen of the United States.

These exemptions do not apply to income or pensions for services performed in connection with a business carried on by India, its subdivisions, or local authorities.

If you need professional help to do your tax return, contact ustaxfiling@mytaxes.in