Indian Nationals working in US

This blog is designed to assist foreign citizens and nationals who work or live in the United States to understand the U.S. tax law as it applies to them. Becoming familiar with U.S. income tax rules should help foreign nationals to better understand the compliance obligations and the opportunities for tax planning available to them.
The US has a policy of worldwide taxation for its Citizens and Green Card holders. This means that even though a US citizen or Green Card holder works in a foreign country, he/she is still subject to US income tax.
US citizens and Green Card holders living abroad must file a US tax return and, with several important exceptions, must use the same forms and must compute tax by referring to the same tax rules as their counterparts back in the US.

A foreign national may be subject to one of two drastically different systems of taxation by the United States depending on whether he/she is classified as a resident or a nonresident alien of the United States. The determination of residency status is critical.

As a rule, classification as a nonresident foreign national may provide distinct tax
advantages, but, in individual cases, the advantages of resident versus nonresident status may vary from year to year. Therefore, it is important for foreign nationals coming to the United States to annually review the options available to minimize their tax liability in the United States as well as in their home countries.

Nonresident aliens are normally taxed only on income derived from US sources. US-
source income that is considered “effectively connected” with a US trade or business,
such as salary and other forms of compensation, is taxed at graduated rates. Taxable
income from US trade or business entities can include some kinds of foreign-source
income, as well as US-source income. US investment income is generally taxed at a flat 30% tax rate, which may be reduced by a tax treaty. Certain types of investment
income may be exempt from US tax.