I looked around Ask Me Help Desk and didn't find my specific question answered - so I figure I'll post it.

I am a US citizen that accepted employment with an Indian company. My total stay in India is under 183 days and I was paid in Indian Rupees (not a ton of money - under $10K) . My tax was withheld at source by my company for Indian income tax purposes. I'll have to file both a US and Indian income tax return.

According to the double-taxation avoidance treaty between the US and India (if I read it right), I only owe the US money, not the Indian government. However, the accountants at my company (Indian) seem to think I'm not going to get any cash back from the Indian government. Any advice as to how I should I handle the US tax side of things?

MukatA

The income is taxable in India as it is paid by an Indian employer. You will not get the refund of the taxes withheld when you file your tax return. This is a reciprocal arrangement. In the U.S. you can't pay wages to a non-resident without "backup withholding".

For this read IRS Publication 901: Tax Treaties --Personal Services Income, India
Internal Revenue Service

So you should have full account of your income and taxes paid in India including the dates. May be you can get Form 16 (equivalent of W2) or if the company does not want to give you Form 16 now, then get a statement of income and tax deducted from the employer. When you file your tax return in the U.S., you will get credit for taxes paid in India.

KJS2

Thanks MukatA! I thought that's how things worked out, but I wasn't sure. I will be getting a Form 16 from my company on March 31, per the Indian financial/tax year calendar. I'll probably have to file an extension on my US taxes, but that's not a big deal.

AtlantaTaxExpert

The form you will need to file with your U.S. return is Form 1116. You will get a dollar-for-dollar credit for the Indian taxes paid if the Indian job was your only source of income.

MukatA

It is not required that you have Form 16 in your hands to file the U.S. tax return as you don't file Form 16. You just need to know wages, date, tax deducted for all the payments made to you.

AtlantaTaxExpert

Agreed, but keep the Form 16 with your tax records, as the IRS may ask for proof of the wages paid.