Hello,

I am married, and I have started working in U.S. on H1B visa from July 3rd 2012. I have completed 182 days in US, so I cannot file my taxes as Resident Alien.

I read over the IRS website and got some information. I have two options right now to file the taxes, I need to know which one is best
1) file as non-resident alien. (Downside is I cannot file jointly with my wife and cannot apply for her ITIN (W7). Note: She doesn't work here)

2) file as dual status: For this I will have to wait until I pass substantial presence test in 2013 before filing the taxes.
If I file under dual status
1) Do I have to report my income from India for the months Jan-June?
2) As I will be filing my return as individual, can I still apply for my wife's ITIN (W7)

Which is the best option? Appreciate any input in this regard.

Your are mis-interpreting some of the rules.

Yes, you CAN file jointly with your wife; you just have to wait until early May to meet the Substantial Presence Test.

If you file jointly, then, yes, you do have to report your Indian income from 1 January to 31 December 2012, but you can also claim the Foreign Tax Credit (Form 1116) for taxes paid on that income.

When you submit the joint return, you also submit your wife's W-7 for the ITIN.

If you believe that you will need professional help filing this year, this IS what I do. Please double-click on my name (Atlanta Tax Expert) above to access my profile. You will find my email address in the signature portion of the profile (scroll down to the BOTTOM of the page).

Thank you Atlanta expert. I will sure reach out to you when I need professional help.

Does my stay in US on Business visa (B1) counts towards substantial presence test. Even though I did not earn anything during that period? I was in U.S for 30 days in 2011 on B1 visa. This is just to make sure if I can file now or I will have to wait until May.

Yes, the B-1 visa time DOES count on the SPT.