India-USA DTAA: Overview
The Double Taxation Avoidance Agreement between India and the United States was signed in 1989. It is one of the most complex bilateral tax treaties India has, partly because the USA taxes its citizens on worldwide income regardless of residency — a unique feature among major economies.
Key Challenge: US Citizens Are Always Taxable in the USA
Unlike most countries, the USA taxes its citizens and Green Card holders on global income even if they live abroad. This means US-based NRIs face a dual obligation: Indian tax on Indian-source income AND US tax on the same income. The DTAA and the US Foreign Tax Credit (FTC) mechanism together provide relief.
Key DTAA Benefits for USA NRIs
- Rental income from Indian property: Taxable in India; US FTC offsets US tax liability
- Capital gains on Indian property: Taxable in India; FTC available in USA
- Interest from NRO accounts: TDS in India at 15% under DTAA (vs 30% without)
- Dividends from Indian companies: TDS capped at 15% under DTAA
- NRE account interest: Tax-free in India; must be declared in US tax return
FBAR & FATCA Obligations for USA NRIs
US-based NRIs with Indian bank accounts (NRE, NRO, FCNR) must comply with: FBAR (FinCEN 114) if aggregate foreign account balances exceed USD 10,000 at any point in the year, and FATCA (Form 8938) if foreign assets exceed USD 50,000. Non-compliance carries severe penalties.
How to Claim India-USA DTAA Relief
- Obtain IRS confirmation of US tax residency (Form 6166)
- Submit as TRC to Indian income payers along with Form 10F and PAN
- File ITR-2 in India claiming DTAA relief under Section 90
- Claim Foreign Tax Credit on US Form 1116 for Indian taxes paid
NRI Home Loans for USA-Based NRIs
US-based NRIs are eligible for NRI home loans in Kerala. USD income is considered for eligibility. Blueberry FM facilitates NRI home loans up to ₹10 Crores for USA NRIs purchasing property in Kerala.
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