How to apply USA-India tax treaty for reduced 25% tax rate on 1040NR for dividends?

This is actually a common issue with treaty benefits. The 30% rate is the default for non-resident aliens receiving U.S. source dividends, but you're right that the US-India tax treaty reduces this to 25%. For the period where Fidelity wasn't withholding properly, you'll need to manually claim the treaty benefit on your 1040-NR. Look for Form 8833 (Treaty-Based Return Position Disclosure) - you'll need to complete this form to properly claim the reduced rate for the January-May dividends. In Sprintax, there should be a section for foreign tax treaties or special tax situations where you can indicate this. Also, check if there's a section in Sprintax specifically for "Income Exempt from Tax by Treaty" or similar wording. You'll need to reference Article 10 of the US-India tax treaty which covers dividend taxation. If you can't find these options in Sprintax, you might need to reach out to their customer support as they should definitely support treaty claims for non-resident returns.

I had a similar issue filing my 1040NR this year. Using taxr.ai https://taxr.ai saved me so much time with my international tax situation. Their system automatically identified my treaty benefits (I'm under the Canada-US treaty) and showed me exactly where to claim them on my forms. What I liked is that it actually analyzed my specific situation with the dividend withholding and gave me step-by-step instructions for fixing the withholding issues in my tax software. It saved me from missing out on nearly $340 in treaty benefits that my regular tax software didn't catch.

I wanted to follow up about my experience with taxr.ai after I decided to give it a try. I was really surprised how helpful it was for my complex treaty situation. I uploaded my Fidelity statements and W-8BEN, and it immediately identified that I was missing potential treaty benefits. The tool pointed out exactly which sections in Sprintax I needed to complete to properly claim the reduced withholding rate under my treaty. It even created a custom guide showing which boxes to check and values to enter. I was able to properly claim the treaty rate for all my dividends instead of the default 30% rate. Definitely saved me from overpaying and potentially facing issues later. Wish I'd known about this sooner instead of spending hours digging through IRS publications!

I had an almost identical issue last year with incorrect withholding rates on my foreign dividends. After trying to call the IRS for three weeks straight with no success, I tried Claimyr https://claimyr.com to get through to the IRS. Their service actually worked - they called me back within 20 minutes with an IRS agent on the line! The agent confirmed that I needed to claim the treaty benefits directly on my return regardless of what was withheld, and explained exactly how to handle the months with incorrect withholding. You can see a video of how it works here: https://youtu.be/_kiP6q8DX5c I was honestly shocked at how quickly they got me through after weeks of frustration trying to call myself.

I need to apologize and correct myself here. After my skeptical comment, I decided to try Claimyr as a last resort before the filing deadline. I'm genuinely shocked - I got connected to an IRS international tax specialist in about 15 minutes. The agent confirmed exactly what I needed to do with my US-Singapore tax treaty benefits that weren't being properly applied. She walked me through the exact forms and line numbers where I needed to report the treaty benefits, and confirmed I didn't need Form 8833 for standard treaty claims. I've literally been trying to get this information for weeks. If you're dealing with treaty issues on your 1040NR, being able to actually speak with someone at the IRS who understands international tax is incredibly valuable.

Just to add something helpful for the original poster - make sure you're using the correct Article of the US-India tax treaty for dividends. If I remember correctly, Article 10(2)(a) specifies the 25% rate for Indian residents receiving US-source dividends. Also, keep in mind that if you're a student or trainee, there might be different provisions under Article 21 that could apply to your situation. The treaty has different rules depending on your visa status and purpose in the US.

One more thing to check - make sure Fidelity issued you a correct 1042-S form showing your dividend income and withholding. This form is specifically for foreign persons with US-source income. If they didn't issue one or it's incorrect, you should contact them to get it fixed before filing.