Information for Indian Students about the U.S.-India Tax Treaty

For more information, please refer to:

 IRS Publication 901: U.S. Tax Treaties and Publication 519: U.S. Tax Guide for Aliens

If you are an Indian student who is a non-resident for federal income tax purposes (usually someone in the U.S. on an F-1 or J-1 student visa for five years or less), here's what you should do to take advantage of the U.S.-India tax treaty:

1. Use Form 1040NR-EZ, "U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents," or Form 1040NR, "U.S. Nonresident Alien Income Tax Return." (If you are single, or if you are married but your spouse works and files a separate tax return, in most cases you may use Form 1040NR-EZ.) The treaty does not allow you to file Form 1040, 1040A or 1040EZ.

2. If you took the standard deduction last year, do not put anything on Line 4 of 1040NR-EZ or Line 11 of 1040NR even if you received a refund of state taxes.

3. If you are single, claim one personal exemption for yourself (you may use Form 1040NR-EZ in most cases). If you are married, claim one personal exemption for yourself and--if your spouse (1) had no income, and (2) is not the dependent of another taxpayer-- claim an additional personal exemption for your spouse (you must use Form 1040NR in this case). (Each personal exemption is worth $3,650 in 2009.)

4. In a few cases you may also claim a personal exemption for a dependent child in box 7c of Form 1040NR, but only if your child is a U.S., Canadian, or Mexican citizen or tax resident. If your child is also a non-resident for federal income tax purposes, which is usually true of a child in F-2 or J-2 status for example, you may not claim a personal exemption for the child.

5. In addition to your personal exemption(s), claim the standard deduction appropriate to your filing status. For 2009 this amount is $5,700 if your filing status on page 1 of Form 1040NR-EZ or From 1040NR is single ("Other single nonresident alien") and if your filing status is married ("Other married nonresident alien"). (You can not claim the "married filing jointly" standard deduction even if you are married, or the "head of household" deduction if you are a single parent.)

To claim the standard deduction on Form 1040NR-EZ place the appropriate amount for your filing status on page 1, line 11. On page 2, item J, write "India" as your tax treaty country and on the line below write "standard deduction [or "standard deduction and personal exemption..."] claimed under Article 21(2)."

To claim the standard deduction on Form 1040NR write "Standard Deduction Allowed Under U.S.-India Tax Treaty" on line 3 of Schedule A (page 3) of Form 1040NR; place the appropriate amount for your filing status in the column to the right of line 3 and repeat on line 17. Place the same amount on page 2, line 35, "itemized deductions," of Form 1040NR. On page 5 of Form 1040NR, write "India" on the country line of item M and write "standard deduction [or "standard deduction and personal exemption..."] claimed under Article 21(2)" on the lines beneath question M.

If you claim the standard deduction you can not also itemize deductions such as state and local income taxes, charitable contributions or employee business expenses. Obviously, if your itemized deductions exceed the amount of your standard deduction you should itemize rather than use the standard deduction.