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April 5, 2021
Question

How much income is exempt for a resident of a foreign country (India) that has tax treaty with US?

  • April 5, 2021
  • 1 reply
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If a student is on F1 OPT, how much of salary/wages is exempt from tax under US India tax treaty? Qualifying student tab under Massachusetts state filing page asks us to report this.

1 reply

Employee
April 5, 2021

@anjana_kn , article 21 of the US-India tax treaty  allows the  treatment of  Indian students   just as the  US domestic students and exclude  any income  received from India  for maintenance.  In other words, there is no  income exclusion for students/trainees.  Below is the test of the  treaty article 21:

"ARTICLE 21
Payments Received by Students and Apprentices


1. A student or business apprentice who is or was a resident of one of the Contracting States
immediately before visiting the other Contracting State and who is present in that other State
principally for the purpose of his education or training shall be exempt from tax in that other
State, on payments which arise outside that other State for the purposes of his maintenance,
education or training.

2. In respect of grants, scholarships and remuneration from employment not covered by paragraph 1,
a student or business apprentice described in paragraph 1 shall, in addition, be entitled during
such education or training to the same exemptions, reliefs or reductions in respect of taxes
available to residents of the State which he is visiting.

3. The benefits of this Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken.

4. For the purposes of this Article, an individual shall be deemed to be a resident of a
Contracting State if he is resident in that Contracting State in the taxable year in which he visits the other
Contracting State or in the immediately proceeding taxable year.    "

Students from some countries do indeed  can exclude a fixed / maximum amount from US taxes   ( China  for example ) --- India is  not one them.

 

Is there more I can do for you ?

 

Namaste

 

pk