The India-US Double Taxation Avoidance Agreement (DTAA) was signed in 1989 and allows US residents of Indian origin (or US citizens living in India) to avoid paying full tax in both countries on the same income. Understanding which article applies to your income is the key to optimising your tax position.
Who Does the US-India DTAA Apply To?
- Indian citizens / PIO / OCI card holders who are US residents or US citizens
- US citizens living in India with India-source income
- Indian residents receiving income from the US
- Must be a tax resident of one (or both) countries — determined by residency rules in each country
Key Articles and Their Tax Treatment
| Income Type | DTAA Article | Tax Treatment |
|---|---|---|
| Salary / Employment | Article 15 | Taxed only in country of work. If working remotely in India for US employer, India can tax. |
| Interest (FD, NRE/NRO account) | Article 11 | Max 15% tax in India. US gives credit for Indian tax paid. |
| Dividends | Article 10 | Max 25% (or 15% for substantial holdings) withholding tax in India. US gives credit. |
| Capital gains on Indian property/shares | Article 13 | India has taxing rights. US gives foreign tax credit. |
| Business profits | Article 7 | Taxed only in country of residence UNLESS there's a Permanent Establishment in the other country. |
| Pension / Government payments | Article 20 | Taxed in country of residence only (with exceptions for government pensions). |
How to Claim DTAA Relief in India
- Obtain Tax Residency Certificate (TRC) from the US IRS — Form 6166
- File Form 10F with the Indian Income Tax Department (online from 2022)
- Report foreign income in Schedule FSI and Schedule TR of ITR-2 or ITR-3
- Claim DTAA relief by citing the relevant article number and treaty
- Keep proof of taxes paid in the US (US Tax Return + W-2 / 1099)
Note: The US taxes its citizens on worldwide income regardless of where they live. This makes US-India tax planning more complex — US citizens in India must file both Indian ITR and US 1040, and claim Foreign Tax Credits (Form 1116) or Foreign Earned Income Exclusion (Form 2555) to minimize double taxation.