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    c_mouly's Avatar
    c_mouly Posts: 9, Reputation: 1
    New Member
    		  
    #1

    Mar 15, 2007, 03:49 PM
    Foreign Tax credit
    Hi, Have a question on my eligibility to claim foreign tax credit -
    My situation is given below -

    Am a Indian National came to the USA (first time) on Sep20/2006 -Visa -H1B; filing status - Single
    I receive part of the Salary income in India for the period of stay in the US; this income is being taxed in the US and also in India

    So being a Non-resident for the Year 2006

    1. Am I eligible to claim the foreign tax credit on income tax paid in India?
    2. If yes, How do I claim the income tax paid on the US income received in India?
    3. If no, is there another way by which I am eligible to claim the tax credit.

    Regards
    Chandra
    taxsearcher's Avatar
    taxsearcher Posts: 222, Reputation: 8
    Full Member
    		  
    #2

    Mar 15, 2007, 06:47 PM
    Quote Originally Posted by c_mouly
    Hi, Have a question on my eligibility to claim foreign tax credit -
    My situation is given below -

    Am a Indian National came to the USA (first time) on Sep20/2006 -Visa -H1B; filing status - Single
    I receive part of the Salary income in India for the period of stay in the US; this income is being taxed in the US and also in India

    So being a Non-resident for the Year 2006

    1. Am I eligible to claim the foreign tax credit on income tax paid in India?
    2. If yes, How do I claim the income tax paid on the US income received in India?
    3. If no, is there another way by which I am eligible to claim the tax credit.

    Regards
    Chandra
    I think you need to clarify your situation some more. As a non-resident you would only be subject to tax in the US on US source income/effectively connected income.

    Are you being paid in India for work you are doing in the US? Are you here just temporarily? You need to look first to the treaty because this might resolve your question.

    By all means clarify for us so that we can make a more informed comment.
    c_mouly's Avatar
    c_mouly Posts: 9, Reputation: 1
    New Member
    		  
    #3

    Mar 15, 2007, 08:34 PM
    Quote Originally Posted by taxsearcher
    I think you need to clarify your situation some more. As a non-resident you would only be subject to tax in the US on US source income/effectively connected income.

    Are you being paid in India for work you are doing in the US? Are you here just temporarily? You need to look first to the treaty because this might resolve your question.

    By all means clarify for us so that we can make a more informed comment.
    Yes, the salary that is being paid in India is for the work being done in the US. Am not here temporarily, I will be here this year and probably sometime next year.

    Regards
    Chandra
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Mar 18, 2007, 09:44 PM
    I would contend that, for 2006, you need not pay U.S. taxes on your income, as it would be considered temporary.

    Now, for 2007, you probably would be liable for U.S. income taxes.

    Is your employer withholding U.S. income taxes?
    c_mouly's Avatar
    c_mouly Posts: 9, Reputation: 1
    New Member
    		  
    #5

    Mar 19, 2007, 08:37 AM
    Quote Originally Posted by AtlantaTaxExpert
    I would contend that, for 2006, you need not pay U.S. taxes on your income, as it would be considered temporary.

    Now, for 2007, you probably would be liable for U.S. income taxes.

    Is your employer withholding U.S. income taxes??
    Thanks; Yes, Tax has been withheld here in the US (for the Wages that is being paid in India) - hence the question how to claim tax credit now.

    I am not very sure if the income that is being in India is not subject to US taxes! When you say 'temporary' what does it mean? Meaning my stay in the US? I doubt because am here on a H1B visa and will be working here in the US (with same arrangement - partly paid in the US and partly in India) for some more time till expiry of my H1B visa. Don't know if that can be construed as temporary for tax purposes.

    Yes for 2007, I would be subject to US tax and will be eligible for foreign tax credit as I would become a resident by then and can claim credit by filling 1116;
    Can I do the same thing for 2006? Being a non resident can I claim tax credit by filing 1116?

    Also one more doubt - being a non resident can am I eligible for std deduction for 2006 - am an Indian, not a student? Plain reading of Pub 519 for 2005 say its eligible;..
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #6

    Mar 21, 2007, 11:48 AM
    Temporary usually accounts for any time under ONE year. However, given your clarification and your H-1B visa, I agree that all the income earned while under H-1B is subject to U.S. income taxes. Further, if you are paying Indian taxes on the same income, you can file Form 1116 for the 2006 return as well.

    You are NOT eligible for the standard deduction. You must be under the F-1 or J-1 visa to claim the stanadard deduction.
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