You may have heard about IRS foreign income rules if you are an Indian living or working in the US, or if you make money there. Dealing with two countries’ tax systems can be perplexing, but knowing the fundamentals will help you stay out of legal hotbed and prevent double taxation.
IRS Foreign Income: What Is It?
The American tax department is known as the Internal Revenue Service, or IRS. Though you are not a US citizen, the IRS wants you to disclose your foreign income if you are an Indian citizen making money in the US or from US sources.
This includes:
- Salary paid while employed in the US
- Income from rentals on US land
- US stock dividends
- US client freelance income
- US-based consumers help businesses
Whether you pay US taxes (citizen, green card holder, or resident), you have to report your IRS foreign income even if you make it outside of the US.
Who Should Concern Himself About IRS Foreign Income?
If you have a green card or a long-term US visa, you might have to report this income.
You have spent more than 183 days in the US over a year.
You get paid from an American client or company.
You invest in the US.
You might fit the IRS foreign income rules even if you live in India but have business or financial ties to the US.
What to Document Regarding IRS Foreign Income
Here are some typical income sources you might have to report:
- Salary and pay
- Interest originating from US bank accounts
- United States real estate rental income
- Payments from American businesses
- Gains from the US stock market
- Royalties or independent work for US-based businesses
Tax Treaties Between US and India
Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA). This implies:
- You won’t have to pay tax twice on the same income.
- One nation can grant tax credits for the tax paid in another.
- It lessens the whole tax load.
Even so, you have to report all foreign income to the IRS regardless of deductions or exemptions claimed.
Results of Not Declaring IRS Foreign Income
Not reporting your foreign income to the IRS can result in:
- Strong fines
- Interest costs
- Legal action or prohibition against US entry
- Problems updating green cards or renewing visas
Your tax application should always be honest and clear.
Conclusions
Should you be an Indian working for the US or making money there, you should be aware of IRS foreign income policies. Always keep records, correctly file your taxes, and, if necessary, consult a tax professional. Knowing now will help you avoid future difficulties.
