For Indians living and working in the United States, tax season often comes with double the anxiety. You’re not only navigating IRS rules, but also keeping tabs on your financial obligations in India. The fear of being taxed twice on the same income is real—but avoidable.
Thanks to the India–US Double Taxation Avoidance Agreement (DTAA), NRIs can mitigate or eliminate double taxation. However, leveraging it correctly requires a clear understanding of tax residency rules, applicable forms, and smart tax planning.
Understanding Dual Taxation for NRIs
What is double taxation?
Double taxation occurs when the same income—say, interest from an Indian bank account or capital gains from Indian property—is taxed by both India and the United States.
Common income types impacted:
Salary from Indian employment while in the US
Rental income from Indian property
Interest on Indian deposits or NRO accounts
Capital gains from Indian mutual funds or equity
Dividends from Indian companies
Without proper filings or relief claims, you could end up paying tax twice—once to India and again to the US.
The India-US DTAA: A Lifeline for NRIs
The Double Taxation Avoidance Agreement (DTAA) between India and the US ensures that individuals aren’t unfairly taxed twice on the same income.
✅ What the DTAA Covers:
Salaries
Business income
Capital gains
Interest
Dividends
Royalties
✅ Key Provisions:
Tax credit method: If tax is paid in one country, the same amount can be deducted from the tax payable in the other.
Exclusive taxation rights: Certain types of income are taxed in only one country, depending on residency and source.
Relief forms: To claim DTAA relief, NRIs must submit a Tax Residency Certificate (TRC), Form 10F, and a self-declaration in India.
Tax Residency: The Deciding Factor
Your tax residency status determines whether you’re considered a resident or non-resident for tax purposes in India and the US.
🇮🇳 India’s Tax Residency Rules (FY2025 onwards):
NRI: Less than 120 days in India if total Indian income is over ₹15 lakh
RNOR (Resident but Not Ordinarily Resident): Stay between 120–181 days + Indian income over ₹15 lakh
Resident: Stay ≥182 days in India
Note: If your Indian income exceeds ₹15 lakh and you’re not liable to tax in any other country, you may be deemed an Indian resident even if your physical stay is <182 days.
🇺🇸 US Rules:
The US taxes its citizens and tax residents on worldwide income regardless of where they live. You must file an IRS return even if you’re an NRI in India.
Smart Strategies to Avoid Double Taxation
1. Claim Tax Relief under DTAA
Use the India-US DTAA to reduce or eliminate tax liability in one country by showing taxes paid in the other.
How to do it:
Obtain a TRC (Tax Residency Certificate) from the IRS
File Form 10F + self-declaration in India
Declare foreign income in both returns
Claim relief via tax credit method
2. Use the Foreign Tax Credit (FTC)
In the US, file Form 1116 to claim FTC for taxes paid in India.
In India, file Form 67 to claim credit for taxes paid in the US.
3. Plan Offshore Income Smartly
Keep funds in NRE/NRO accounts
Declare overseas accounts (FBAR & FATCA) in US filings
Time repatriation of funds to match lower tax years
4. File Tax Returns in Both Countries
Even if no tax is due, accurate filing in both countries ensures compliance and helps establish eligibility for relief.
Common Pitfalls to Avoid
❌ Not claiming DTAA relief due to lack of awareness
❌ Staying in India for >120 days without tax planning
❌ Missing disclosures for foreign accounts in US filings
❌ Assuming NRI status without verifying updated rules
Step-by-Step Guide to Stay Tax Compliant
✅ For US NRIs with Indian Income:
Check your tax residency in India
Apply for a TRC from the US IRS
Submit Form 10F + self-declaration in India to claim DTAA relief
File Form 67 (India) or Form 1116 (US) for Foreign Tax Credit
Declare global income in both countries
Disclose offshore accounts in FBAR/FATCA (US only)
Keep documentation of taxes paid, TRC, and income proofs
Conclusion
Navigating tax obligations in two countries is complex—but not impossible. The DTAA between India and the US is designed to protect NRIs from double taxation, but it’s your responsibility to use it effectively. From understanding residency rules to filing the right forms, smart tax planning and timely filings can save you thousands of dollars annually.
Stay informed. Stay compliant. And when in doubt, talk to a tax professional who understands cross-border taxation.
FAQs
1. What is double taxation for NRIs?
It’s when income is taxed both in India and the US, reducing net earnings unless relief is claimed under DTAA.
2. How does the India-US DTAA help NRIs?
It prevents double taxation by allowing tax credits or granting exclusive taxation rights to one country.
3. Am I eligible for DTAA relief?
Yes, if you’re a tax resident of the US and earn income in India. You’ll need to file supporting documents like TRC and Form 10F.
4. What is Form 10F and why is it needed?
It’s a declaration form to claim DTAA benefits in India. Mandatory if claiming treaty-based relief.
5. What is the Foreign Tax Credit (FTC)?
FTC allows you to deduct taxes paid in one country from tax owed in the other. Claimed via Form 1116 (US) or Form 67 (India).
6. How do I determine my tax residency in India?
Check your stay duration and Indian income. Less than 120 days with income under ₹15 lakh? You’re likely NRI. Over 120 days or higher income? You may be RNOR or Resident.
