IRS definition of a bus. apprentice to claim US?India Income Tax Treaty Benefits

[r2i-mumbai]

Discussion in this thread apply only to non US citizens so if you are a USC you can skip this. This discussion applies only to those who are filling 1040-NR as a non resident alien taxpayer.


Following lines are taken from IRS publication 519

http://www.irs.gov/pub/irs-pdf/p519.pdf

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Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States?India Income Tax Treaty may be able to claim exemptions for their spouse and dependents.

A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States?India Income Tax Treaty. You can claim the standard deduction provided you do not claim itemized deductions.

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In addition to exemptions and stranded deduction there is child tax credit and additional child tax credit available if the child is entered as a dependent on 1040-NR.

There is no IRS definition of a business apprentice however. These benefits are significant for those planning to withdraw their retirement savings (401k, IRA etc) after returning to India. They will have to pay the penalty but large amount of income can be tax free if these benefits are claimed.

Without the treaty benefits, only one personal exemption can be claimed (about $3600) rest of the income is taxable. With exemption for spouse and 2 children + standard deduction approximately $25,000 can be exempt from taxes and then you can get child tax credit for the taxes you will owe on income above $25,000.

To me anyone who has worked in US on a work visa and has returned to India and filing as a non resident alien can use these benefits.

Has anyone claimed these benefits and has IRS challenged these benefits? I went through numerous threads but there is no discussion about treaty benefits.

Any expert comments are welcome.