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Tax and Repatriation Issues on Relocation between the U. S. and India

Sweta Khandelwal
Friday, April 18, 2008
Sweta Khandelwal
For Indians staying in the U.S. and for those who move between the two countries for various reasons have difficulties in coping with the different income tax rules followed in the two countries. In addition, the observance of different tax year patterns in the respective countries increases their woes. We will take the case of Udyan Sreenivasan, a Green Card holder, as an example at hand to explain the issues in the area of personal taxation that arise when one decides to relocate from U.S.A. to India or vice versa.
Sreenivasan decided to head home on August 31. After returning to India and glancing through the taxation edicts, he learnt to his dismay that he would have to pay taxes for this tax year both in the U.S. and in India. In other words, he is a resident of both India and the U.S. for tax purposes.

First, the Law
January 1 to December 31 constitutes a tax year in the U.S., the last date for filing returns being April 15 the next year. In the case of India, the tax year is from April 1 to March 31, with returns to be filed by July 31 the same year.

In the U.S., one is taxed on his or her world income if one is a U.S. Citizen or Green Card holder or if one is physically present in the U.S. for 31 days in a particular year and for a total of 183 days in the current and previous two years. In both cases, the taxpayer is a Resident Alien.

In India, tax liability depends upon the residential status of a taxpayer, as defined in the income tax law.

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