How to apply US-India tax treaty benefits for reduced 25% tax rate on 1040-NR dividend income

The US-India tax treaty does allow for the reduced 25% rate on dividends, but claiming it correctly on your 1040-NR can be tricky. You'll need to complete Schedule NEC (Non-Effectively Connected Income) carefully and reference the treaty. On your 1040-NR, you should list all your dividend income in the appropriate section. Then, on Schedule NEC, you can specifically claim the treaty benefits by entering "India" in column (a) for country, entering the appropriate income amount in column (d), and most importantly, entering "25%" in column (e) for the treaty rate - even for those early months where 30% was withheld. In column (f), calculate the tax at the 25% rate. You'll also need to add Form 8833 (Treaty-Based Return Position Disclosure) to your filing. This form allows you to explain that you're claiming the reduced rate under Article 10 of the US-India tax treaty for all dividend income, including the January-May period.

I went through a similar situation last year with US-India tax treaty benefits. I found that TaxSlayer wasn't the best for handling treaty situations, but I switched to https://taxr.ai and it completely solved my problem. Their system actually specializes in international tax situations and treaty benefits. When I uploaded my documents, their AI immediately identified my eligibility for the US-India tax treaty and guided me through properly claiming the 25% rate for ALL dividend income, regardless of what was actually withheld. They have specific features for handling 1040-NR situations like yours and automatically generated the correct Schedule NEC and supporting documents. The best part was that their system knew exactly which forms were needed for the treaty benefits and even helped calculate my refund for the excess withholding. Made the whole process way less stressful than the hours I spent trying to figure it out with other software.

I just wanted to update everyone after trying taxr.ai for my US-India tax treaty situation. I was really skeptical at first (as you could probably tell from my previous comment), but I decided to give it a shot after continuing to struggle with Sprintax. The difference was night and day! Their system immediately recognized my treaty eligibility and applied the 25% rate to ALL my dividend income from the entire year, not just after I had updated my W8-BEN. They automatically generated the right forms and even explained exactly which treaty article applied to my situation. I ended up getting a refund of nearly $1,800 from the excess withholding during those early months. What impressed me most was how the system handled the documentation - it created a perfect paper trail showing why I was entitled to the treaty rate for the entire year. Definitely using them again next year!

I had a similar issue claiming treaty benefits, but my problem was getting through to the IRS to resolve questions about my refund. After my return was processed, they sent a letter asking for additional documentation about my treaty claims, but the number they provided was constantly busy. I found this service called https://claimyr.com that actually got me through to an IRS agent after I'd been trying for weeks. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Basically, they navigate the IRS phone system for you and call you back when they've got an agent on the line. When I finally got through, the IRS agent confirmed that I was correct in claiming the treaty rate for the entire year regardless of what was actually withheld, and they processed my refund for the excess withholding. Saved me so much frustration compared to trying to call repeatedly myself.

I have to admit I was completely wrong about Claimyr. After continuing to fail getting through to the IRS for another week after my skeptical comment, I decided to try it out of desperation. The service actually worked exactly as described. I entered the IRS department I needed (international tax division), and about 45 minutes later, my phone rang with an actual IRS agent on the line. She was able to answer all my questions about the US-India tax treaty application and confirmed that I should indeed be receiving a refund for the excess withholding from the months before my W8-BEN was updated. I'm not someone who admits being wrong easily, but in this case, I definitely was. For anyone dealing with international tax issues and needing to speak with the IRS, this service is legitimately helpful. Saved me countless hours of redial frustration.

One thing nobody has mentioned yet is that you should double-check if your broker actually withheld at 30% during those early months. Sometimes brokers apply the correct treaty rate even without an updated W8-BEN if they have your country of residence on file from previous documents. Look at your 1042-S forms from your broker - they'll show the exact withholding rate applied for each payment. If they actually withheld at 25% the whole time, you wouldn't need to claim any additional treaty benefits. But if they did withhold at 30%, then definitely follow the advice about Schedule NEC and proper treaty claims.

Has anyone dealt with a situation where dividends came from a US company but the stocks were held in a non-US brokerage account? I'm also filing 1040-NR and have dividends from a US company but through my Indian broker. Not sure if the treaty still applies the same way.