The US-India Double Taxation Avoidance Agreement (DTAA) - officially the Convention Between the United States of America and the Republic of India for the Avoidance of Double Taxation, 1989 - is one of the most important tax frameworks for the ~4 million Indian-origin US residents. It prevents the same income from being taxed twice in both countries.
This 2026 guide covers Article-by-Article treaty rates, Tax Residency Certificate (TRC) + Form 10F documentation for India, US Foreign Tax Credit via IRS Form 1116, dividend/interest/salary/pension treatment, and step-by-step claim process.
The US-India DTAA is an established bilateral treaty in force since 1990. Article numbers, tax residency rules and TRC/Form 10F requirements are established provisions. Specific tax rates and CBDT/IRS forms change - verify at incometax.gov.in, irs.gov and treasury.gov before filing.
Who Benefits From US-India DTAA?
- Indian citizens working in the USA on H-1B, L-1, F-1 OPT/CPT, Green Card, etc.
- US citizens / permanent residents earning Indian income (rent, dividends, interest, capital gains)
- Indian companies with US operations + vice versa
- Retired NRIs with pension from either country
- Anyone with dual-source income (India + US)
Determining Tax Residency
DTAA benefits require establishing tax residency in ONE country. Key rules:
India Residency Test (Section 6, Income Tax Act)
- Resident: 182+ days in India during previous year, OR
- 60+ days in India + 365+ days in preceding 4 years (relaxed to 182 days for NRIs)
- Deemed resident: Indian citizen with global income > ₹15 lakh + no other country residency
US Residency Test
- US citizen: always US tax resident on worldwide income
- Green Card holder: US tax resident
- H-1B/L-1 substantial presence test: 183 weighted days over 3 years
- F-1 students: exempt for 5 calendar years typically
Tiebreaker Rules (DTAA Article 4)
If both countries claim you as resident:
- Permanent home available (in one country only)
- Centre of vital interests (personal + economic ties)
- Habitual abode
- Nationality
- Mutual agreement between competent authorities
Key Treaty Rates on Common Income
| Income Type | DTAA Article | Treaty Rate (India Source) | India Domestic Rate |
|---|---|---|---|
| Dividend | Article 10 | 15% (or 25% for <10% shareholding) | 20% + surcharge (Section 115A) |
| Interest | Article 11 | 15% | ~31.2% (Section 195) |
| Royalty | Article 12 | 15% (various categories) | Varies |
| Technical Services (FTS) | Article 12 | 15% | Varies |
| Capital Gains - LTCG Equity | Article 13 | 12.5% domestic prevails | 12.5% above ₹1.25L |
| Capital Gains - Property | Article 13 | Domestic prevails | 20% LTCG / slab STCG |
| Salary (short-term) | Article 16 | Exempt if <183 days + specific conditions | Slab rates |
| Pension / Social Security | Article 20 | Country of residence taxation | Slab rates |
Verify current article citations and rates at the CBDT DTAA page (incometax.gov.in/iec/foportal/help/knowyourdocument-DTAA-agreements).
Tax Residency Certificate (TRC) + Form 10F
Tax Residency Certificate (TRC)
Required by India from the US resident-taxpayer to claim DTAA benefits. Obtained from:
- US: IRS Form 6166 - request via Form 8802 ($120 fee, 6-8 weeks processing)
- India (for US-resident Indians receiving Indian income): not applicable (India is source, not residence)
Form 10F
Additional declaration form required by India Income Tax Portal:
- Filed online at incometax.gov.in (linked to your PAN)
- Contains: name, address, tax identification, status, source of income, DTAA article claimed
- Valid for the specific financial year
- Must be filed BEFORE receiving Indian income taxable event
US Foreign Tax Credit via Form 1116
For US taxpayers receiving Indian income (with Indian TDS deducted):
- Report Indian income on US Form 1040 (worldwide income)
- Claim credit for Indian tax paid via Form 1116 (Foreign Tax Credit)
- Credit limited to US tax liability on that same income
- Excess credit carried forward 10 years
Form 1116 Categories
- Passive income (dividends, interest, rent)
- General limitation (business, salary)
- Section 951A GILTI
- Section 901(j) sanctioned countries
Dividend Treatment - Detailed
Indian Company Dividend to US Resident
- India TDS (Section 195): 20% + surcharge (~26.4%) at source
- DTAA reduction: to 15% or 25% with TRC + Form 10F
- Effective TDS with DTAA: 15% on most dividends
- US: report on Form 1040 Schedule B
- Claim FTC on Form 1116 for the 15% India TDS
US Company Dividend to Indian Resident (NRI back to India)
- US: withholding tax at 30% (default) or 15% with W-8BEN filed
- India: taxable in India per slab rates
- Claim FTC in India (Section 90) for US tax paid
Interest Treatment
- Bank interest (NRO, NRE): India TDS ~31.2%, DTAA reduces to 15% with TRC
- NRE interest is tax-free in India (Section 10(4)) but taxable in US
- Corporate bond interest: 15% DTAA rate
- Government securities: 15% DTAA rate
Capital Gains Treatment
- LTCG on Indian equity: India 12.5% above ₹1.25L; also taxable in US
- Property sale gains: India LTCG 20% (with indexation); also US taxable
- DTAA Article 13 - taxable in source country + residence country
- Claim FTC in country of residence
Salary Treatment
Short-Term US Assignment (Indian Resident)
- Less than 183 days in US, paid by non-US employer: exempt in US per Article 16
- Taxable in India (slab rates)
Long-Term US Employment
- H-1B holders reaching substantial presence: US tax-resident, worldwide income taxed in US
- India income (rent, dividends) subject to India TDS + US worldwide tax
- Claim FTC on Form 1116 for India TDS
Pension & Social Security
- India pension to US resident: DTAA typically taxable in country of residence (US)
- US Social Security to Indian resident: US 30% withholding default; India also taxable; complex - consult specialist
- NPS + 401k treatment: further complexity - see DTAA Article 20 + specific circulars
Step-by-Step DTAA Claim Process
- Determine tax residency (Section 6 India + IRS substantial presence)
- Apply for US TRC via IRS Form 8802 ($120 fee, 6-8 weeks)
- Receive Form 6166 TRC from IRS
- File Form 10F online at incometax.gov.in (link to PAN, upload TRC copy)
- Submit TRC + Form 10F + PAN to your India payer (bank, tenant, company)
- Payer applies reduced DTAA rate on future payments
- File India ITR-2 annually to reconcile
- US: report worldwide income on Form 1040 + claim FTC on Form 1116
Common Pitfalls to Avoid
- Missing annual TRC renewal (TRC is year-specific)
- Not filing Form 10F before receiving income (must be prospective)
- Assuming NRE tax-free in India = also tax-free in US (NOT true)
- Forgetting Form 1116 in US filing - loses double-tax relief
- Confusing Form 8802 (TRC request) with W-8BEN (US withholding certificate)
- Overlooking substantial-presence test for H-1B multi-year holders
- Missing FBAR + Form 8938 US disclosure for Indian bank accounts
FAQ
What is the TRC and how do I get one?
Tax Residency Certificate proves your tax residency. US residents obtain Form 6166 via IRS Form 8802 ($120 fee, 6-8 weeks processing).
Is Form 10F mandatory in India?
Yes - since October 2023 mandatory electronic filing on incometax.gov.in linked to your PAN for DTAA benefits.
What is DTAA rate on Indian dividend for US residents?
15% for >=10% shareholding, 25% otherwise. Reduces the default ~26.4% India TDS.
Can I claim FTC in both US and India for the same income?
No - foreign tax credit is claimed in country of residence for tax paid in country of source. One credit per tax dollar.
Does DTAA cover state income tax (California, New York)?
No - US-India DTAA is federal-only. State taxes not covered. Consult state-specific credit rules.
How long is TRC valid?
Typically one calendar year. Renew annually via IRS Form 8802.
Trusted Sources
- Incometax.gov.in - CBDT DTAA schedule + Form 10F filing
- IRS.gov - Form 8802 (TRC), Form 1116 (FTC)
- Treasury.gov - full text of US-India tax treaty + protocols
- Cross-border CA + CPA - highly recommended for complex DTAA situations
Related NRI Globe Coverage
- NRE vs NRO 2026 (DTAA on NRO interest)
- PAN Card for NRIs 2026
- FCNR(B) Deposit Guide
- NRI Property Buying 2026
Disclaimer: Informational only, not tax or legal advice. DTAA articles, rates and forms change - verify at incometax.gov.in, irs.gov, treasury.gov. Consult qualified cross-border CA + CPA for case-specific counsel.
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