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LearnFAQImmigrant & NRI Finance

How does the US-India tax treaty help me avoid being taxed twice?

Answer

The US-India income tax treaty, together with the foreign tax credit, is what stops the same income from being fully taxed in both countries. The main mechanism for most NRIs is the foreign tax credit on Form 1116: when India taxes your rental income, NRO interest, or capital gains (often via TDS), you credit that Indian tax against your US tax on the same income, so you generally pay only the higher of the two rates rather than both stacked. The treaty also reduces withholding on certain payments like dividends. What the treaty does not do is exempt your worldwide income from US tax — as a US resident you still report everything. Keep proof of Indian taxes paid (TDS certificates, Indian return) so you can substantiate the credit. When Indian and US tax years differ, track which year each tax belongs to.

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