Yes. India does have a tax treaty with the US, signed in New Delhi on September 12, 1989 and in force since December 18, 1990 for tax years beginning on or after January 1, 1991.1Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India The agreement caps the tax each country can withhold on cross-border dividends, interest, royalties, and technical service fees, and it gives residents of both countries a credit mechanism so the same income isn’t fully taxed twice. It has real limits though: it covers only income tax, some U.S. states ignore it, and there is no companion agreement for Social Security.
What the Treaty Covers and What It Leaves Out
The treaty applies to anyone who is a tax resident of the United States, India, or both. On the U.S. side it covers federal income tax. On the Indian side it covers the income tax and surtax. It does not cover India’s Goods and Services Tax, and it does not cover U.S. state income taxes.
That state point matters. The IRS itself notes that some states do not honor federal tax treaties and may still tax income the treaty exempts at the federal level.2Internal Revenue Service. United States Income Tax Treaties – A to Z If your income is sourced in a specific state, check that state’s rules on their own.
The treaty also does not reach Social Security taxes. More on that below, because it is the gap that most often surprises people on international assignments.
Withholding Rate Caps
Without a treaty, the default U.S. withholding rate on payments to foreign persons is 30%. The treaty lowers that ceiling for several categories of income, although a few of its caps are higher than what the U.S. gives other major trading partners.
Dividends
Dividend withholding under this treaty runs higher than in most. A company that owns at least 10% of the paying company’s voting stock gets a 15% cap. Everyone else, including individual investors, faces up to 25%.3Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 10 That 25% figure is notably steep next to the 15% ceiling common in other U.S. treaties. Dividends from a Regulated Investment Company (the structure used by most U.S. mutual funds) always sit at the 25% rate regardless of ownership share, and Real Estate Investment Trust dividends carry their own restrictions.
Interest
Interest paid on a loan from a bank or similar financial institution is capped at 10%. Interest in all other cases is capped at 15%.4Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 11 A bank deposit gets the lower rate; a private loan between individuals or non-bank entities faces the higher one.
Royalties and Fees for Included Services
Article 12 handles royalties and technical service fees together, which is unusual. The standard cap is 15% for royalties on intellectual property (copyrights, patents, trademarks, secret formulas) and for fees for included services. Royalties for the use of industrial, commercial, or scientific equipment, and fees for services ancillary to such equipment use, are capped at 10%.5Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 12
“Fees for included services” is the concept that trips people up. It covers technical or consulting work where the provider actually transfers usable technical knowledge, skill, or processes to the recipient. The test is whether the work “makes available” know-how the recipient can use on its own afterward. Routine services that do not transfer that kind of know-how generally fall under the business profits article instead.
Business Profits
A company’s business profits are taxed only in its home country unless it operates through a permanent establishment in the other country. If a U.S. company has a permanent establishment in India, India can tax the profits attributable to it, and the same works in reverse.6Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 7
Why U.S. Citizens Still Owe U.S. Tax
Article 1, Paragraph 3 contains what tax lawyers call a “saving clause.” It preserves each country’s right to tax its own residents and citizens as if the treaty didn’t exist.7Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 1 The U.S. can still tax American citizens on worldwide income no matter what the treaty says about a particular income type. An Indian tax reduction on your consulting fees does not stop the IRS from taxing them.
A few narrow exceptions survive the saving clause. U.S. citizens and residents can still use the treaty’s double-taxation relief (Article 25), the nondiscrimination rules (Article 26), and the mutual agreement procedure (Article 27). People who are neither citizens nor permanent residents of a country can also claim the articles covering government service pay, student payments, and the professor and researcher exemption.8Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 1 Paragraph 4
Students, Teachers, and Researchers
The treaty carves out meaningful breaks for people crossing borders to study or teach, and these sit among the exceptions to the saving clause.
An Indian student or apprentice studying in the U.S. does not owe U.S. tax on money sent from India for living costs, tuition, or training expenses. The exemption lasts for whatever period is reasonable to finish the program. While in the U.S., the student also gets the same tax relief on grants, scholarships, and employment income that a U.S. resident would receive.9Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 21
Professors, teachers, and researchers who visit the other country to teach or conduct research at a recognized educational institution are exempt from tax on that pay for up to two years. The research exemption applies only to work in the public interest, not research primarily benefiting a private company.10Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 22
How the Treaty Prevents Double Taxation
The core purpose is keeping the same income from being fully taxed in both places. Each side gets there a little differently.
For U.S. residents, the main tool is the foreign tax credit. Indian income tax paid on Indian-source income becomes a credit against the U.S. tax bill, dollar for dollar, up to the amount of U.S. tax owed on that same income. It cannot push your U.S. tax below zero.11Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 25
For Indian residents, the treaty allows a deduction from Indian tax equal to the U.S. income tax paid. India may also exempt certain income categories from Indian tax entirely when the treaty gives the U.S. primary taxing rights.11Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the Republic of India – Article 25
How to Claim the Benefits
If You Are a U.S. Resident: Form 8833
A U.S. resident taking a position on a tax return based on the treaty, such as claiming reduced-rate or exempt treatment of Indian-source income, generally files Form 8833, Treaty-Based Return Position Disclosure, with the annual return.12Internal Revenue Service. About Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) Skipping it when required carries a $1,000 penalty per failure, or $10,000 for a C corporation.13Office of the Law Revision Counsel. 26 USC 6712 – Failure to Disclose Treaty-Based Return Positions The IRS can waive the penalty for reasonable cause and good faith, but counting on that waiver is not a plan.
If You Are an Indian Resident: TRC and W-8BEN
Indian residents claiming treaty benefits must obtain a Tax Residency Certificate from Indian tax authorities. Under Section 90 of India’s Income Tax Act, the TRC is mandatory, and benefits can be denied without one. If the certificate does not contain all the required details, Form 10F is filed with the Indian tax department as well.
For U.S.-source income such as dividends or interest, submit Form W-8BEN to the U.S. payer before you receive payment. It confirms you are a foreign person, identifies you as beneficial owner, and claims the reduced treaty withholding rate.14Internal Revenue Service. Instructions for Form W-8BEN Without a valid W-8BEN on file, the payer must withhold at 30%. A W-8BEN generally stays valid through the end of the third calendar year after signing (one signed in June 2026 expires December 31, 2029), unless your circumstances change.15Internal Revenue Service. Instructions for Form W-8BEN (10/2021)
The Social Security Gap
The treaty covers income taxes only. The United States has totalization agreements with about 30 countries that keep workers from paying Social Security to both governments on the same wages. India is not one of them.16Social Security Administration. U.S. International Social Security Agreements
The practical result: a U.S. company sending an employee to India, or an Indian company sending a worker to the U.S., may owe Social Security contributions in both systems on the same wages. The U.S. system covers American citizens and resident aliens working abroad for American employers regardless of assignment length, and it covers anyone working inside the U.S. regardless of citizenship. India’s provident fund system runs on its own rules. Cross-border workers and their employers often end up paying into both systems, and the foreign contributions frequently produce no benefit because the worker never stays long enough to vest.16Social Security Administration. U.S. International Social Security Agreements
Reporting Indian Accounts Is a Separate Obligation
The treaty can lower your tax bill. It does not relieve U.S. citizens, green card holders, and U.S. tax residents of reporting duties for foreign accounts and assets, and the penalties for ignoring them are harsh.
FBAR (FinCEN Form 114)
If you have a financial interest in or signature authority over Indian bank accounts, fixed deposits, or other financial accounts whose combined value exceeds $10,000 at any point during the year, you must file a Report of Foreign Bank and Financial Accounts electronically with FinCEN.17Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) The $10,000 threshold is aggregate across all your foreign accounts worldwide, not just Indian ones. Civil penalties for non-willful violations can top $16,000 per account per year. Willful violations carry penalties of the greater of roughly $165,000 or 50% of the account balance, and criminal penalties can reach $500,000 and imprisonment.
FATCA (Form 8938)
Separately, the Foreign Account Tax Compliance Act requires reporting specified foreign financial assets on Form 8938 with your tax return. Thresholds vary by residence and filing status:18Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers
- Living in the U.S., single or married filing separately: foreign assets over $50,000 on the last day of the year or $75,000 at any point.
- Living in the U.S., married filing jointly: over $100,000 on the last day or $150,000 at any point.
- Living abroad, single or married filing separately: over $200,000 on the last day or $300,000 at any point.
- Living abroad, married filing jointly: over $400,000 on the last day or $600,000 at any point.
FBAR and Form 8938 are separate filings with different thresholds, different deadlines, and different agencies. Many people with Indian bank accounts, PPF accounts, or National Pension System holdings cross both lines without noticing.