r2i forum

sanjeevm;266827Hi,

I am planning to R2I in July-2010. My company will continue to employ me in India but start paying me in INR.

I am a USC with OCI and have been in US for more than 10 years.

I have the following tax questions:

1. Since I am a USC, I will have to show my Indian income on US returns. I will also have to file taxes with GOI. Will I be able to claim Foreign Tax Credit on my US returns for 2010?

2. What is the difference between foreign income exclusion and foreign tax credit? Which is preferable? Can I choose what to take?

3. For US taxes, since I am in India, will I have to pay US State taxes on my Indian salary for 2010. Will I have to pay any US state taxes from 2011 onwards since my primary address will be my India address?

4. I have some savings/stocks in US. I plan on keeping them. Will I have to show the income/dividend earned from them on my India tax returns when my status changes to ROR?

5. Does GOI have different tax rates for USC/NRIs?

Thanks,
Sanjeev

1. yes

2. you have to compute your taxes using both methods and choose the one that you like - probably offers less tax payment. Without knowing the type of incomes involved and quantity it is not possible to answer your question.

3. No.

4. Yes

5. Tax rates are same for Indian citizens and USC living in India. You are not NRI once you moved to India.

Thanks RRK!

Regarding my income in India, it would be around INR 20 lakhs. So, any idea if foreign income exclusion will work better or foreign tax credit?

Another question is what happens if my wife also works and makes about INR 15 lakhs? How will it affect filing my taxes. I will be filing with status of Married filing jointly for US and both of us will have to file separate returns for India.

I just became a USC. Just thinking in terms of taxation, I feel it was not a right decision!