Question 1

Does the India-US DTAA eliminate double taxation for NRIs?

Accepted Answer

Yes — the India-US DTAA (Article 25) provides relief from double taxation through a tax credit mechanism. US residents (NRIs) can claim a Foreign Tax Credit (FTC) on their US tax return for Indian income taxes paid on India-sourced income. Similarly, India taxes NRIs only on India-sourced income and provides credit for taxes paid in the US on the same income. The DTAA does not exempt income — it prevents the same income from being taxed twice.

Question 2

What is FBAR and do NRIs with Indian bank accounts need to file it?

Accepted Answer

FBAR (FinCEN Form 114) must be filed by any US person — including NRIs with US green cards or citizenship — whose aggregate balance in foreign financial accounts exceeded USD 10,000 at any point during the calendar year. NRO, NRE, and fixed deposit accounts in India all count. The FBAR deadline is April 15 with an automatic extension to October 15. Failure to file carries penalties of up to USD 12,921 per violation (non-willful) or USD 129,210 or 50% of account balance (willful).

Question 3

What is FATCA and how does it affect NRIs' Indian investments?

Accepted Answer

FATCA (Foreign Account Tax Compliance Act) requires Indian banks and financial institutions to report accounts held by US Persons to the IRS. As an NRI with US citizenship or green card, your NRO/NRE accounts, mutual funds, and FDs in India are reportable to the IRS. Additionally, if your specified foreign financial assets exceed USD 50,000 (USD 100,000 for joint filers), you must file Form 8938 with your US tax return. Failing FATCA compliance can result in a 30% withholding tax on certain US-sourced payments.

Question 4

What TDS rate applies on NRO interest for US-based NRIs?

Accepted Answer

Standard TDS on NRO savings and FD interest is 30% plus applicable surcharge and cess. Under the India-US DTAA (Article 11), the maximum withholding rate on interest is 15%. To claim the DTAA rate, submit a valid Tax Residency Certificate from the IRS (Form 6166), along with Form 10F filed on the Indian income tax portal, to your Indian bank. Once submitted, TDS is deducted at 15% instead of 30%.

Question 5

Do I need to file an Indian ITR if I live in the USA?

Accepted Answer

Yes, if your India-sourced taxable income exceeds ₹2,50,000 in the financial year, you must file an Indian ITR. Common India-sourced income for US-based NRIs includes NRO interest, rental income from Indian property, capital gains from Indian stocks/mutual funds, and business income. Even if income is below the threshold, filing is advisable to claim TDS refunds. NRE account interest and foreign-earned income are not taxable in India for NRIs.

Question 6

What are the capital gains tax rates for NRIs selling Indian property?

Accepted Answer

For property held more than 24 months (long-term): capital gain is taxed at 12.5% (effective AY 2026-27, without indexation benefit). TDS at 12.5% applies on the sale consideration, not just the gain. For property held 24 months or less (short-term): gain is added to total income and taxed at slab rates. NRI sellers must obtain a lower TDS certificate from the AO if their actual gain is significantly less than the gross sale price, to avoid excess TDS.

Income Type	Standard TDS Rate	DTAA Rate (with TRC)
Interest (NRO FD/Savings)	30% standard	15% with DTAA + TRC + Form 10F
Dividends from Indian cos.	20% standard	15% (companies) / 25% (individuals) under DTAA
Royalties / Fees for Tech Services	20% standard	15% under DTAA Art. 12
Capital gains — listed shares (LTCG)	10% above ₹1.25L	10% (DTAA doesn't exempt)
Capital gains — property LTCG	12.5% (no indexation)	12.5% (DTAA doesn't exempt)
Rental income	Slab rates (TDS 30%)	Slab rates (credit in US return)

Obligation	Deadline	Notes
Indian ITR filing deadline	July 31 (AY)	October 31 if liable for tax audit
TDS on property sale	Within 30 days of deduction	Form 26QB / 27Q
FBAR (US)	April 15 (auto-ext. Oct 15)	FinCEN Form 114
FATCA Form 8938 (US)	With US tax return (Apr 15)	If foreign assets > USD 50K
Form 10F for DTAA benefit	Before first transaction	Filed on Indian e-filing portal
Tax Residency Certificate	Annually — IRS Form 6166	Required for DTAA claims

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