To avoid double taxation between India and the US, individuals must utilize the India-US Double Taxation Avoidance Agreement (DTAA) by claiming Foreign Tax Credits (FTC) or exemptions. Key steps include obtaining a Tax Residency Certificate (TRC), filing Form 67 (India) and Form 1116 (US), and declaring foreign income in both countries.
Introduction to DTAA
The Double Tax Avoidance Agreement (DTAA) is a treaty signed between two countries to prevent double taxation of income earned in both jurisdictions. This agreement ensures that Non-Resident Indians (NRIs) do not face the burden of being taxed twice on the same income.
Double taxation can put a strain on your budget, but there are three key strategies you can use to avoid this:
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
DTAA helps ensure that NRIs/Persons of Indian Origin (PIO)/Overseas Citizens of India (OCI) don't face excessive international tax burdens or cash outflows due to the same income being taxed in multiple jurisdictions.
To avoid double taxation, use "pass-through" business structures like LLCs or S Corporations where profits are taxed only once at the owner's individual rate, instead of C Corporations which are taxed at the corporate level and again on dividends; alternatively, C Corp owners can pay salaries, retain earnings strategically, or use income splitting, while international earners rely on foreign tax credits or treaty provisions.
Understanding Income Tax Statistics in India
According to government reports, while over 7 crore people file tax returns, only a fraction of them actually pay taxes because many fall below the taxable income threshold or use deductions to reduce liability.
Tax regulations in India can be intricate, making it easier for some to exploit loopholes for personal gain.
Income tax plays a vital role in funding public services, infrastructure, education, healthcare, defence, security, and various welfare services. Income tax in some countries is as high as 60%. To your surprise, India is not a country with the highest income tax.
If you make ₹ 4,000,000 a year living in India, you will be taxed ₹ 1,533,000. That means that your net pay will be ₹ 2,467,000 per year, or ₹ 205,583 per month. Your average tax rate is 38.3% and your marginal tax rate is 43.2%.
income tax in India. The foreign income i.e. income accruing or arising outside India in any financial year is liable to income-tax in that year even if it is not received or brought into India.
From April 2025 onwards, all UK tax residents are subject to tax on their worldwide income and gains, regardless of their domicile. Under international data-sharing agreements such as the Common Reporting Standard (CRS), HMRC receives automatic information from over 100 countries.
The IRS 7-year rule primarily applies to keeping records for claiming a deduction for bad debts or losses from worthless securities, allowing a longer period to file for a credit or refund, but it's not a universal audit limit; it's often a recommended safe buffer for general record-keeping, with the standard IRS audit period usually being 3 years, extending to 6 years for substantial income omission (over 25%) or foreign income issues, and indefinitely for fraud.
Yes, Indian income earned by a taxpayer who is a resident or citizen of the United States is generally taxable in the US. The United States has a worldwide income tax system, which means that US residents and citizens are required to report and pay taxes on their global income, including income earned in India.
99% Tariff Elimination, Stronger Bilateral Trade, Catalyst for Inclusive Growth. India and the United Kingdom have signed the Comprehensive Economic and Trade Agreement (CETA), a bilateral free trade agreement marking a major milestone in their longstanding partnership.
Understanding tax implications on remittance to India
As an NRI, you are not subject to taxation on the money you send to India. However, sending money to India from overseas will have tax implications for the recipient who is a resident of India.
Income tax rates in the UK are normally more expensive than in India. The UK's introductory income tax rate is 20% (for income up to £50,270), while the highest rate is 45% (for income of over £150,000).
In India, the 30% income tax rate generally applies to individuals earning above ₹24 Lakhs (under the old regime/default for some) or ₹15 Lakhs (under the new optional regime for FY 2025-26) and to firms (as a flat rate), while certain income types like lottery winnings, online gaming, and virtual digital assets (like crypto) are taxed at a flat 30% for everyone, regardless of total income.
How can I save 100% income tax in India?
In her 2025 Budget speech, Finance Minister Nirmala Sitharaman shared big news. Under the new regime, if you earn up to Rs 12 lakh, you will not have to pay any income tax. Salaried taxpayers get an extra benefit too. The standard deduction, which was Rs 50,000 before, has now gone up to Rs 75,000 for the new regime.
Tax Rates and Deductions Comparison
In 2025, India's tax slabs range from 0% on income up to ₹4 lakh to 30% above ₹15 lakh under the new regime. The US has progressive tax brackets starting at 10% going up to 37%.
In a parliamentary session, Finance Minister of State, Pankaj Chaudhary, revealed that only 6.68% of the country's population filed income tax returns (ITRs) for the fiscal year 2023-24. There are multiple factors contributing to the low rate of income tax return filings in India.
In India, the tax system is designed not only to generate revenue but also to foster economic stability, promote equity, and drive national progress. In last 10-15 years, Indian taxation system has undergone tremendous reforms.