Information for Indian Students about the U.S. - India Tax Treaty
These instructions are an adapted
version of "Self-Help Tax Program: Information for Indian Students
about the U.S.-India Tax Treaty," courtesy of James Fine, Office of
International Programs, University of Pennsylvania. Students are
encouraged to attend IA Tax
Workshops.
For more information, please refer to IRS
Publication 901: U.S. Tax Treaties and Publication 519: U.S. Tax Guide
for Aliens
If you are an Indian student who is a
non-resident for federal income tax purposes (usually someone in the
U.S. on an F-1 or J-1 student visa for five years or less), here's what
you should do to take advantage of the U.S.-India tax treaty:
1) Use Form 1040NR-EZ, "U.S.
Income Tax Return for Certain Nonresident Aliens With No Dependents,"
or Form 1040NR, "U.S. Nonresident Alien Income Tax Return." (If you are
single, or if you are married but your spouse works and files a
separate tax return, in most cases you may use Form 1040NR-EZ.) The
treaty does not allow you to file Form 1040, 1040A or 1040EZ.
2) If you took the standard deduction
last year, do not put anything on Line 4 of 1040NR-EZ or Line 11 of
1040NR even if you received a refund of state taxes.
3) If you are single, claim one
personal exemption for yourself (you may use Form 1040NR-EZ in most
cases). If you are married, claim one personal exemption for yourself
and--if your spouse (1) had no income, and (2) is not the dependent of
another taxpayer-- claim an additional personal exemption for your
spouse (you must use Form 1040NR in this case). (Each personal
exemption is worth $3,400 in 2007.)
To claim a personal exemption for your
spouse write his or her name in column (1) of box 7c on page 1 of Form
1040NR. Write "spouse" in column (3) of box 7c and place the number 1
on the line to the right of box 7c. To claim this personal exemption,
your spouse must obtain an Individual Taxpayer Identification Number
(ITIN) by submitting IRS Form W-7 (available for the IRS website).
4) In a few cases you may also claim
a personal exemption for a dependent child in box 7c of Form
1040NR, but only if your child is a U.S., Canadian, or Mexican citizen
or tax resident. If your child is also a non-resident for federal
income tax purposes, which is usually true of a child in F-2 or J-2
status for example, you may not claim a personal exemption for the
child.
5) In addition to your personal
exemption(s), claim the standard deduction appropriate to your
filing status. For 2007 this amount is $5,350 if your filing status on
page 1 of Form 1040NR-EZ or From 1040NR is single ("Other single
nonresident alien") and if your filing status is married ("Other
married nonresident alien"). (You can not claim the "married filing
jointly" standard deduction even if you are married, or the "head of
household" deduction if you are a single parent.)
To claim the standard deduction on Form
1040NR-EZ place the appropriate amount for your filing status on page
1, line 11. On page 2, item J, write "India" as your tax treaty country
and on the line below write "standard deduction [or "standard deduction
and personal exemption..."] claimed under Article 21(2)."
To claim the standard deduction on Form
1040NR write "Standard Deduction Allowed Under U.S.-India Tax Treaty"
on line 3 of Schedule A (page 3) of Form 1040NR; place the appropriate
amount for your filing status in the column to the right of line 3 and
repeat on line 17. Place the same amount on page 2, line 35, "itemized
deductions," of Form 1040NR. On page 5 of Form 1040NR, write "India" on
the country line of item M and write "standard deduction [or "standard
deduction and personal exemption..."] claimed under Article 21(2)" on
the lines beneath question M.
If you claim the standard deduction you
can not also itemize deductions such as state and local income taxes,
charitable contributions or employee business expenses. Obviously, if
your itemized deductions exceed the amount of your standard deduction
you should itemize rather than use the standard deduction.
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