Dual Taxation information - US citizens living in India . . .

Taxation of OCI holders living in India

OCI holders who live in India and hold US passports should be aware that the US taxes its citizens on the basis of their nationality and not on the basis of which country they reside in. Even though you may have OCI (lifelong visa to stay in India) you are still an American citizen. As a US. citizen residing abroad, you still must file a US Income Tax Return each year on your worldwide income! Actually even if you have no income, you should be filling US tax returns every year as in the long run this may prove beneficial to you. Worldwide income of US citizens is subject to US. income tax, regardless of where you reside.

Living in India permanently -  Shall I file US income tax

yearly?

Many foreign citizens settled in India have perhaps often thought about their obligation to pay taxes to their home country. Most countries, when it comes to income taxes from their citizens, expect them to pay their fair share. Perhaps the only way a US citizen living in India can stop filling US taxes is to give up US citizenship, acquire Indian citizenship. Remember OCI is not dual citizenship of India. In such a scenario your taxes due for previous years before you acquire Indian citizen are still due even if you did not file returns.

American OCI holder’s not filling US taxes

Suppose a American citizen living permanently in India with an OCI just stops filing US taxes yearly as he/she feels that they will never go back to the United States. They are certainly not relieved of their obligation to file US taxes. Whether they return to the US or not, they reside in India on the basis of their American passport without which there can be no OCI. At some point of time the passport will expire and may be the beginning of a few questions when application is made for a new passport. Let’s consider the case of a US citizen who decides to go back to the US after a ten year stay in India. The IRS can at any time question their failure to file returns for the previous ten years or so when they lived in India. Simply claiming you had no income will not let them off the hook! The IRS can in such cases, estimate income the way they want and charge them with penalties that can be double or triple your tax obligation depending on how many years they neglected to file tax returns from abroad.

Statute of limitations on tax collections

If you don’t file your US. taxes, the statute of limitations on tax collections never runs out. On the other hand if you file yearly taxes, the statute of limitations in most situations for IRS audits will expire three years after you file those returns. So it’s to your advantage to file from abroad every year even if you do not have any income.

Tax free - Special exemptions for American citizens working and residing abroad

US citizens who are living and working abroad and have lived in the country for at least 330 full days during any period of 12 consecutive months may qualify under the foreign earned income exclusion rules that allows them to exclude up to $91,500 for the 2010 tax year. For more information on foreign earned income exclusions check with the IRS or consult your tax advisor. 
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a professional accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation between what has been stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail. © Copyright 2006 Nriinformation.com
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Dual Taxation information

US citizens living in India

Taxation of OCI holders living in

India

OCI holders who live in India and hold US passports should be aware that the US taxes its citizens on the basis of their nationality and not on the basis of which country they reside in. Even though you may have OCI (lifelong visa to stay in India) you are still an American citizen. As a US. citizen residing abroad, you still must file a US Income Tax Return each year on your worldwide income! Actually even if you have no income, you should be filling US tax returns every year as in the long run this may prove beneficial to you. Worldwide income of US citizens is subject to US. income tax, regardless of where you reside.

Living in India permanently -  Shall

I file US income tax yearly?

Many foreign citizens settled in India have perhaps often thought about their obligation to pay taxes to their home country. Most countries, when it comes to income taxes from their citizens, expect them to pay their fair share. Perhaps the only way a US citizen living in India can stop filling US taxes is to give up US citizenship, acquire Indian citizenship. Remember OCI is not dual citizenship of India. In such a scenario your taxes due for previous years before you acquire Indian citizen are still due even if you did not file returns.

American OCI holder’s not filling US

taxes

Suppose a American citizen living permanently in India with an OCI just stops filing US taxes yearly as he/she feels that they will never go back to the United States. They are certainly not relieved of their obligation to file US taxes. Whether they return to the US or not, they reside in India on the basis of their American passport without which there can be no OCI. At some point of time the passport will expire and may be the beginning of a few questions when application is made for a new passport. Let’s consider the case of a US citizen who decides to go back to the US after a ten year stay in India. The IRS can at any time question their failure to file returns for the previous ten years or so when they lived in India. Simply claiming you had no income will not let them off the hook! The IRS can in such cases, estimate income the way they want and charge them with penalties that can be double or triple your tax obligation depending on how many years they neglected to file tax returns from abroad.

Statute of limitations on tax

collections

If you don’t file your US. taxes, the statute of limitations on tax collections never runs out. On the other hand if you file yearly taxes, the statute of limitations in most situations for IRS audits will expire three years after you file those returns. So it’s to your advantage to file from abroad every year even if you do not have any income.

Tax free - Special exemptions for

American citizens working and

residing abroad

US citizens who are living and working abroad and have lived in the country for at least 330 full days during any period of 12 consecutive months may qualify under the foreign earned income exclusion rules that allows them to exclude up to $91,500 for the 2010 tax year. For more information on foreign earned income exclusions check with the IRS or consult your tax advisor. 
next previous
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a professional accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation between what has been stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail. © Copyright 2006 Nriinformation.com
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