Nri Taxation In The Usa

I have no property in india but I have NRI/NRO account and 2 lacs. I havent declared that so far nor my tax guy told me to declare. Not sure about huge assets. You can call H&R block and verify

 

This is a complex subject. You can get pointed answers if you described the specific situation of a Tax Return Filer (resident of country/city/state, where incomes were made, etc.) and asked a question.

The USA does not require her Tax-filers to hold any specific kind of foreign bank account. No need to convert the type of foreign bank account. US tax filers (see additional proviso on tax-residency below) are merely required to report the income earned in those (whatever type) accounts and pay US Taxes on them.

It is not mandatory to declare income that is sourced in India, unless the tax filer is a USA tax-resident.

• A tax-resident need not be a Greencard holder or a Citizen of USA.
• There are US tax return filers who may be tax-residents in India, not have greencard or USC, but earn part of their incomes in USA; these folks file tax returns in India, and a Non-resident tax returns in the USA if there had been a TDS-situation for their incomes in USA.
• If the Tax Filer is a tax-resident of USA, then all incomes from world-wide sources need to be declared in the US Tax Returns, and taxes assessed.
• Double taxation is avoided in claiming Tax-Credits in USA for foreign taxes (such as TDS in India) paid.

Tax filers may use a tax software to see whether or not they need to file FBAR. Combined foreign financial assets that are less than the stipulated amount (< US$10,000) may not have to be reported to the US-Treasury in the form FinCEN (financial crimes enforcement) 114, or FBAR. However, all incomes from foreign financial assets, should be reported in the US tax returns, if the taxfiler is also a tax-resident, to avoid future issues with tax-audits, and consequences.

 

If you can pass the "substantial presence test", you are a tax-resident of USA. In USA, we have 2 categories of tax-residency.

• GC and USC are always tax-residents, and subject to taxation of their worldwide incomes, no matter where they physically reside. Good examples of these physical non-residents, but total tax-residents, are USC retired in India, and GC holding parents who live in India during US winters. And then there are the non-GC, non-USC who pass the substantial presence test. All these are Tax-Residents of USA.
• The Tax-Non-Residents of USA: People who had worked in USA ( L visa, H1b visa) and have financial assets in USA (and earning incomes from them), but now live in India, and therefore US TAX-non-residents, would file non-resident US tax returns to claim refunds of any taxes that had been withheld on their US investment accounts. These folks do not have any FBAR requirements to USA, but they do have similar requirements in their India Tax Returns to report their US financial accounts. And the India-version-of-FBAR does not have any limits under which there is no reporting requirement. Everything in a foreign account must be reported to India Tax authorities.

In India we have 3 categories of Tax-residency that are called OR, NOR, RNOR - ordinary resident, not-OR, and Resident-but-Not-Ordinary-Resident. The NOR, and RNOR categories apply to people who are phoren-returned. There is an indian version of "substantial presence test" (India's IT website has info on this) that can place people in one or the other of these categories. Very critical to those who come back from Taxation-free countries of Gulf region.

A USC (with OCI visa) long retired in India, would be an ordinary tax resident of India (vide supra), and would be reporting all of the world-wide income (including the US Income), as well as US financial assets in the India-FBAR within the India tax returns. This india-retired USC is also a US Tax-Resident. Therefore, this India-retired USC will also be reporting her+her-hubby's worldwide income in a US joint-tax return for the same year, and claim tax credits for the India taxes paid on that income, and do USA FBAR to report (if necessary) any India bank accounts in her & husband's name. Being a tax-resident is two tax jurisdictions is a pain that only foreign retired US citizens enjoy.

The title of this thread mentions "non resident indians" -- and makes one think about tax-residency or non-residency of the Indian who needs to file tax-returns in USA or some other country. Every country in the world that has the tax-returns filing requirement has some scheme of tax-residency in their rules.

 

Thanks Amulet for the detailed coverage on the subject.
jayasala 42

 

Madras Music Academy, or Mylapore Fine Arts or any other venue during the music season are great sources of information on Tax matters of NRI. All of the retired desi US Tax filers gather there for concerts. You can buy a plate of idly-vadai, or dosai, sit down, and keep your ears open in the canteen. Everybody is talking about son, daughter, grandchildren, etc... and about paying-taxes-to-the-USA. The tax topic comes up in the stage where one-up(wo)manship enters the conversation. It is such fun to listen to auntiji's complaining about taxation by the USA (even though they don't live there all year) just to show off that they are Americans or anointed with GC, while other mere-phoren-returned have only a multiple entry visa .

 

#8 ideas & views of @Amulet - Most nicest part of this thread which I could relish in one go. I had a vicarious visit to music academy here & inhaled the aroma of ahrohanam & avarohanam of TAX Laws and definitions of the two Great Nations. Thanks to madam sister.
Other parts of thread - OMG - mind boggling yet I believe would be useful for others trotting around globe.
Thanks to OP and all those who participated here.
GOD EVERYWHERE loves foreign currency in His Kitty too!
(HUNDIS in temples in India & USA overflowing during Season)

 

Quite interesting comment about God.
I heard that Aadhar is going to be mingled with PAN card...
And for any large transaction people need that number.
Hanuman is the first god to acquire a transaction number; other gods have to take note of that too...