TAX for Indian citizens working in USA on L1A Visa

TAX for Indian citizens working in USA on L1A Visa

There are two classifications of people that the United States uses in regards to taxes tax residents and non-tax residents. If you have immigrated into the United States, you may be wondering how to figure out how immigration and taxes apply to you. What follows is an explanation of the interplay between immigration status and taxes.

There are many situations in which you may be required to pay United States taxes even if you are not a U.S. citizen. Whether or not you have to file and pay taxes depends on whether the government has classified you as a tax resident or not. For example, all permanent residents, or holders of green cards, are considered to be tax residents. Not all non-immigrant visa holders are tax residents, however. Even if you are not a tax resident, it may still be a good idea to file an income tax return if you have been working for an employer that withholds taxes from your wages - you might get a tax refund.

United States tax residents must report their entire income to the IRS and pay taxes. It does not matter whether the money was earned within the country or internationally, all income must be reported to the IRS. Reporting all of your income to the IRS does not mean that all of your income will be taxed by the United States Government, however. Those decisions are governed by international tax treaties.

If you are a green card holder, you may be wondering how your immigration and taxes will work. As mentioned above, as soon as you acquire a green card, you are automatically classified as a United States tax resident and must report all of your income, whether earned abroad or domestically.

United States government and Indian government signed a treaty where NRIs/US Citizens have to report their financial assets. This was implemented because lot of NRIs were not reporting their foreign assets and were avoiding paying taxes on their foreign income. To overcome this problem IRS signed a treaty with Indian government where Indian financial firms will be required to report all details about Indian financial assets of NRIs living in United States or US Citizen to IRS. This is totally separate from paying taxes on your global income. As such, if the foreign financial asset generates income, you have to report such income on your annual tax return and pay taxes accordingly. FATCA is for asset reporting purposes and your tax return is for income 
Foreign financial assets include bank accounts in India, FD, Mutual Fund , stock market investments, Insurance policies in India, Real Estate properties.

FD in NRI/NRO accounts
The FD is a capital asset, whose initial amount is known and increases every year as the interest paid is reinvested. FD maturity is like sale of a capital asset and hence a realization of capital gain or loss. Such capital gain or loss would be reported when actually realized (upon sale). The interest you earn adds to the basis of the asset. So I think you only need to report this interest is in case of maturity where you sell it.

Mutual funds and stock market investments in India
Yes the taxes have to be if there are any such incomes.

Real estate properties in own name in India
If there are properties in India don’t have to report anything. In case  sell some of these and gain some capital, that capital will be taxable in United States.

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