The DTAA India USA would apply to any individual or estate, trust, partnership, other entity of persons or any other taxable entity generating income in India and the United States. The DTAA agreement between India and the United States includes the following taxes levied by both countries: This article is not legal or tax advice. If you need legal or tax advice, you should immediately consult a licensed lawyer. The Indian government has entered into double tax evasion agreements (DBAS) with various countries in order to avoid a double impact of income taxation and to mitigate the inappropriate imposition of hardship on taxpayers. India and the United States have a DBAA that comprehensively addresses and eliminates double taxation of the income of people who have income in both countries. Taxpayers should note that only income tax falls under the DTA India USA. There is no DTAA agreement for India, the United States for GST or other types of indirect taxes. The purpose of this article is to discuss the DTAA for India USA to the extent that it is applicable to individual taxpayers. The entire DTAA agreement between India and the United States is reproduced below for reference: the main purpose of a tax treaty is to mitigate double taxation through tax reductions or exemptions for certain types of income from residents of one contracting country from sources in the other contracting country. Since tax treaties often significantly alter the tax consequences in the United States and abroad, the relevant agreement must be considered in order to fully analyze the tax consequences of an outbound or inbound transaction.
The United States currently has tax treaties with about 58 countries. This article discusses the implications of the U.S.-India tax treaty. There are several basic provisions of the conventions, such as permanent establishment provisions and reduced withholding tax rates, which are common to most income tax treaties to which the United States is a party. In many cases, these provisions are aligned with the model of the U.S. Income Tax Convention, which reflects the original traditional or similar negotiating position. However, each tax treaty is negotiated separately and is therefore unique. Therefore, in order to determine the effects of contractual provisions in a given situation, it is necessary to analyse the applicable contract at issue. The U.S.-India tax treaty is no different. The treaty has its own unique definitions. We will now look at the main provisions of the U.S.-India Income Tax Convention and the impact on people who try to use the agreement. Definition of residentThe tax exemptions and reductions provided for in the Treaties are only available to a resident of one of the contracting countries.
Income received by a partnership or other intermediate enterprise shall be deemed to arise from a resident of a Contracting Country to the extent that the income is considered taxable under the national law of that country for a person considered to be a resident of that Contracting State. According to Article 4 of the United States-India Income Tax Convention, a resident is any person who, under the domestic law of a country, is subject to tax by reason of his or her residence, residence, nationality, place of management, place of incorporation, or any other similar criteria. Since each country has its own unique definition of residence, a person can be considered a resident in more than one country. Whether a person is a resident of the United States of India for contractual purposes is determined by reference to the domestic laws of each country. Since the United States and India have their own clear definition of residency, a person can be considered a resident of both countries. For example, a foreigner who qualifies as a U.S. citizen under the essential presence test under U.S. tax law may simultaneously be considered a resident of India according to his definition of resident. To address this issue, the U.S.
has included equality-breaking provisions in the U.S.-India tax treaty. The first test is where the person has a permanent home. If this test is inconclusive because the individual has permanent residence in both States, he is considered to be a resident of the Contracting State in which his personal and economic relations are closest, that is, the place of his “centre of vital interests”. If this examination is also inconclusive, or if he does not have permanent residence in either State, he shall be considered a resident of the Contracting State in which he has his habitual residence. If he has his habitual residence in other States or in any of those States, he shall be deemed to be a resident of his Contracting State of which he is a national. If he is a citizen of both or both States, the competent authorities will examine the matter, which will attempt by mutual agreement to designate a single State of residence. Article 4(3) of the United States-India Income Tax Convention is intended to regulate dual residence issues for corporations. A corporation is treated as a resident of the United States if it is incorporated or organized under the laws of the United States or a political subdivision. A company is treated as a resident of India if it is managed and controlled there. A dual residence can therefore occur if a US company is managed in India.
There is no breach of contractual equality for companies. Below, please see Figure 1, which provides an example of how a breach of contractual equality for an individual can be analyzed and resolved under the U.S.-India tax treaty. . Figure 1. Preyanka Chopra is a citizen and resident of India. Chopra owns Zoomtube, an India-based company that is expanding into the much more lucrative U.S. market by opening an office in the United States. Chopra is divorced and maintains an apartment in India, where she spends every other weekend visiting her children. Chorpa`s first husband, who kept his home in his divorce, never left India. Chopra becomes a U.S.-based foreigner under the substantial presence test while operating Zoomtube`s U.S. office. In the United States, Chopra owns a luxury condominium in San Francisco, where she lives with her second husband.
Since Chopra is based in both the United States and India, the treaty`s equality-breaking procedures must be analyzed to determine which country has primary fiscal sovereignty. With an apartment in India and a condominium in the United States, Chopra has a permanent home in both countries. With Chopra`s children and their home office in India as opposed to the lucrative part of her business and her new husband in the US, Chopra has no vital interests in either country. Since Chopra regularly spends time in both countries, she arguably has a habitual residence in both. .