Seeking Guidance on Claiming Foreign Tax Credit in India with US FEIE

You cannot normally declare yourself as a dual resident. What is the reason behind filing resident return in USA?

Due date for USA return has already passed for 2022. Have you filed the return?

Our team can assist you with USA tax filing also.

As far as my knowledge you can claim FTC in resident country and hence you need to first select for which country are you resident.

You should first consult and finalize your residential status in both the country.

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Thank you.

Hello Sir,

Normally an individual cannot declare themselves as a dual resident. It is essential to determine your residential status in both India and the United States. Since due date for the US return for the tax year 2022 has already passed, it is crucial that you consult with a qualified CPA to address your specific situation and determine the appropriate course of action.

In India, the concept of FTC allows taxpayers to claim a credit for taxes paid in a foreign country on income that is also taxable in India. This provision prevents double taxation on the same income.

When you claim the Foreign Earned Income Exclusion (FEIE) in the United States, you are excluding a certain amount of your income earned abroad from US taxation. The FEIE is designed to reduce your US tax liability.

1. FEIE may impact FTC in India, potentially resulting in a partial benefit or limitation.
2. Proper documentation and compliance with Indian tax requirements are crucial.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

If you are claiming FEIE, I assume you are US Citizen or a resident as well as only US Citizen or resident can claim that. 

Since you are resident of both the countries, the FTC is only granted for the taxes paid in the country where the source of income is i.e. the other country should not be a resident country. So to the extent US taxes your salary in US as it would have taxed NR, you can claim the FTC only to that extent. 

Also, first you may check for tie-breaker rules if that results in non-residency in India. We can help you with determining the residency as well as filing the tax return in India and US. 

Tax incidence depends on the residential status of a person. If you are a resident of both the countries then determine residential status as per the tie-breaker rule and file ITR accordingly

For detailed discussion you may opt for phone consultation

Hi please find below answers

1. FTC will be allowed irrespective of fact whether you are claiming FEIE or not since tax credit you are claiming on USA income which is double taxed in india as well as USA and therefore treaty benefit will be available for you

2. Based on facts and figures can work out best possible optimal tax structure like 

   - In which state of USA you are filing your return

   - Are filing return individually or filing with any family member

   - Amount of income in USA

   - Amount of income in India

   Above information will help in better optimise this working in USA as well as India

Sir no matter whether you showed or excluded the Indian income in your tax return of US, 

DEFINITELY you can clain the tax credit of the tax paid in the us on your us salary when you will show it in your Indian itr.

In US, you have to file return of income as non-resident

For detailed discussion you may opt for phone consultation

If the green card application is pending, have you stayed in US for 31 days in current year and 183 days in past 3 years. If not then you would be non-resident in US. You would not be able to claim FIEE in US. 

Which visa are you on? Provisional green card visa?

Prima facie as per DTAA between India USA a resident can claim FTC of income earned in other country so as per tie breaker you can claim credit in India but if the AO sees that you are a resident in USA also then that could create an issue in FTC and you can claim FTC only on doubly taxed income.