What are the different tax benefits available to US expats on India income such as salary, bank interest, dividends etc ?
As a US expat living outside USA, a taxpayer may have various sources of income such as salary, bank interest, dividend which are earned and received outside the United States. Being a US citizen, you will have to disclose your global income while filing Form 1040. There are several provisions in the US tax laws as well as the treaty signed between US and India which help the taxpayer to avoid double taxation. These benefits can be availed using the Foreign Earned Income Exclusion, Foreign Tax Credit and other tax credits.
There are several tax benefits available to US Expats on India based income and taxes. Foreign Earned Income Exclusion (From 2555) can help deduct the India salary from being taxed for US Tax return. Foreign Tax Credit (Form 1116) can help reduce the double taxation on other income such as sale of stock options/RSUs and bank interest. Knowing the laws can ensure that you are both compliant to the US Tax laws as well as don’t end up paying extra taxes on your income that has already been taxed in India.
We have discussed in detail the type of treatment that can be applied to each of these sources of income in separate articles on this website. Please refer to those articles if you need to refer that in detail. The following table will give you a snapshot of the various types of tax benefits available to US expats on India income.
