How to avoid double taxation on India income as NRI working in the United States?

You're facing a common issue for NRIs working in the US. The India-US tax treaty does provide some relief, but navigating it requires understanding some key points. First, India taxes you based on residential status, not citizenship. As an NRI, you're only taxed on Indian-source income in India. The US, however, taxes worldwide income of its residents. For your Indian income, you can claim Foreign Tax Credit (FTC) in the US for taxes paid in India, but there are limitations as you noted. The limitation is calculated as: (Foreign Income / Worldwide Income) × US tax liability. To optimize your situation: - Time your income recognition strategically - Consider investing through instruments that have favorable tax treatment under the treaty - Make sure you're properly documenting your NRI status in India - Use Form 1116 correctly in the US to claim FTC The treaty has specific provisions for different types of income. For example, certain interest income may be taxed at a reduced rate. Capital gains on property may be taxable only in the country where the property is located.

After struggling with similar NRI double taxation issues last year, I stumbled across taxr.ai (https://taxr.ai) which was honestly a game changer for my situation. They have a specialized tool that analyzes tax treaties and identifies the exact provisions that apply to your specific income types from India. What I found most helpful was uploading my Indian tax documents and getting clear guidance on exactly which treaty articles applied to my various income sources. The system highlighted specific provisions in the India-US tax treaty that my previous accountant had missed completely. They even provided documentation I could keep for my records in case of an audit.

I was honestly skeptical about using an AI tool for something as complex as international taxation, but I finally tried taxr.ai after posting that comment above. My situation with property in Mumbai and tech stocks in both countries was giving me massive headaches. The system immediately identified that I was over-reporting certain income categories on both sides! It showed me exactly which provisions of the treaty applied to my rental income from India (Article 6) and how to properly document it. The documentation it generated for proving treaty positions was incredibly detailed - actually referenced specific IRS memoranda that applied to my situation. What surprised me most was learning that some of my Indian dividend income qualified for preferred treaty rates I hadn't been claiming. Ended up amending my previous year's return and got back nearly $5,400!

If you're having trouble reaching the IRS to discuss your international tax questions (which is extremely common for complicated NRI situations), I'd recommend Claimyr (https://claimyr.com). I wasted days trying to get through to the IRS international tax department before finding them. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c As an NRI with income sources in both countries, I had specific questions about treaty provisions that online research couldn't answer. Claimyr got me connected to an IRS agent who specialized in international taxation within 15 minutes after I'd spent nearly 3 weeks trying on my own. The agent clarified exactly how to apply the treaty to my Indian rental property and investment income.

I have to eat my words and apologize to Profile 11. After my frustrated comment, I decided to try Claimyr out of desperation because I had a notice from the IRS questioning my foreign tax credits from India. Within 20 minutes of using the service, I was talking to an actual IRS representative. When I explained my situation involving Indian capital gains, they transferred me to someone in their international department who looked up the specific provisions of the India-US tax treaty while I was on the phone. The agent confirmed that I was correctly applying Article 23 for my Indian stock sales but had been using the wrong form for claiming relief under Article 25. They walked me through the correct documentation needed and how to reference the specific treaty provisions in my response to their notice. Honestly saved me from what would have likely been an audit. Worth every penny just for the stress reduction alone.

One approach that helped me was timing recognition of income. Since India's tax year runs April-March and US is calendar year, you can sometimes recognize income strategically. For example, selling assets in India between January-March gives you time to plan how that income affects your US taxes. Also look into DTAA (Double Taxation Avoidance Agreement) provisions specifically for NRIs - there are exemptions for certain types of interest and capital gains.

Has anyone ever considered giving up their US green card to solve this problem? I'm thinking about moving back to India in a few years, and the double taxation is making me wonder if maintaining US person status is worth it.