The India–United States Double Taxation Avoidance Agreement was signed on 12 September 1989, came into force on 18 December 1990, and has been the governing framework for cross-border taxation between the two countries for 36 years. With around five million NRIs in the US (the largest single NRI corridor by population), it is the most frequently invoked tax treaty in Indian tax practice. The treaty does not eliminate double taxation — it caps source-country withholding, defines which country gets primary tax rights, and prescribes how the residence country must give relief for source-country tax already paid. Understanding which article applies to your income type, and how Form 67 (India) and Form 1116 (US) coordinate, is the difference between a clean cross-border tax year and a 40% effective rate. Here is the 2026 detailed rates table, article-by-article walkthrough, and the four worked scenarios that cover ~85% of US-NRI tax events.
2026 detailed rates table
| Income type | Article | India TDS (with TRC + Form 10F) | India TDS (without TRC) | US treatment |
|---|---|---|---|---|
| Interest on NRO deposits / Indian bonds | 11 | 15% | 30% + cess + surcharge | Ordinary income on Form 1040; FTC via Form 1116 |
| Dividends from Indian stocks | 10 | 15% (if <10% holding); 25% otherwise | 20% + cess + surcharge | Ordinary or qualified dividend (varies); FTC via Form 1116 |
| Capital gains — Indian listed equity (STCG <12m) | 13 | 15% + cess | Same | Short-term capital gain; FTC if Indian tax paid |
| Capital gains — Indian listed equity (LTCG >12m, >₹1.25L threshold) | 13 | 12.5% on excess + cess (post Jul 2024 rate) | Same | Long-term capital gain; FTC if Indian tax paid |
| Capital gains — Indian property (LTCG >24m) | 13 | 20% with indexation OR 12.5% without (taxpayer choice; pre-23 Jul 2024 properties get the option) | Same | Long-term capital gain in US; FTC |
| Rental income from Indian property | 6 | 30% TDS by tenant under Sec 195 | Same | Schedule E rental income; FTC via 1116 |
| Salary / wages | 16 | Indian residence-of-source rule | n/a | US wages on W-2; foreign-earned-income exclusion available for foreign salary; FTC for India tax on India salary |
| Royalties / fees for technical services | 12 | 15% | 10% domestic OR 15% TDS — typically the lower | Schedule E / Schedule C; FTC |
| Independent personal services | 15 | Source state if 90+ days, fixed base, or income > ₹15L | Same | Self-employment income; FTC |
| Other income | 22 | Both sides retain right | Same | Catch-all; FTC at the lower rate |
Article-by-article walkthrough
Article 4 — Residence (the tie-breaker)
If you are tax-resident in both India and the US in the same year (typical in the year of relocation), Article 4 paragraph 2 applies the tie-breaker rules: (a) permanent home, (b) centre of vital interests, (c) habitual abode, (d) nationality, (e) mutual agreement. Most India-USA dual-residence cases resolve at the centre-of-vital-interests test — where the family, business, and economic ties primarily are.
Article 6 — Income from Immovable Property
Rental income from Indian property is taxable in India regardless of recipient's residence. The Indian tenant must deduct 30% TDS under Section 195. The US-resident NRI offsets this via Form 67 in India and Form 1116 in the US.
Article 10 — Dividends
India-source dividends to a US-resident NRI: 15% withholding tax (down from 20% domestic rate). The 15% applies under treaty if the recipient is the beneficial owner. Without TRC + Form 10F, the domestic 20% applies.
Pre-1 April 2020, Indian companies paid Dividend Distribution Tax (DDT) and dividends were tax-free in shareholders' hands. Post-1 April 2020, dividends are taxable in shareholders' hands — and 195 TDS applies to NRI recipients.
Article 11 — Interest
India-source interest to a US-resident NRI: 15% withholding (or 10% for interest paid to certain financial institutions). For NRO bank interest, NRI presents Form 10F + US-side TRC to the bank to apply the 15% rate; without TRC, 30% TDS plus surcharge plus cess applies.
NRE interest is exempt in India under Section 10(4)(ii); the DTAA does not need to be invoked. But the US continues to tax NRE interest as ordinary income — no Indian tax means no FTC on the US side.
Article 13 — Capital Gains
India retains the right to tax capital gains on Indian assets. The Finance Act 2024 (effective 23 July 2024) restructured Indian capital gains:
- Listed equity / equity MF: STCG 20% (was 15%, hiked); LTCG 12.5% above ₹1.25L (was 10% above ₹1L)
- Unlisted equity / debt MF / debt securities: STCG slab rate; LTCG 12.5% without indexation (was 20% with indexation)
- Immovable property: LTCG 12.5% without indexation OR 20% with indexation (taxpayer choice, only for properties acquired before 23 July 2024)
- Property sale by NRI: 1% TDS by buyer under Section 194-IA does NOT apply to NRI sellers — instead 20% / 12.5% LTCG TDS under Section 195 applies
Article 16 — Dependent Personal Services (Salary)
Salary is taxable in the country of residence unless the work is physically performed in the other country. A US-resident NRI on a 2-week India business trip: salary for those 2 weeks is technically Indian-source. In practice, the 183-day / employer-borne-cost de minimis usually keeps short India trips out of Indian-source.
Article 22 — Other Income
Catch-all for income types not covered in earlier articles. Both India and the US retain the right to tax. Common scenarios: alimony, gambling, prizes, miscellaneous trust distributions. FTC available at the lower rate.
Article 25 — Relief from Double Taxation
The relief mechanism — both countries follow the credit method:
- India: allows credit for US tax paid on US-source income (Section 90 read with Article 25), limited to Indian tax on the same income
- USA: allows credit for India tax paid on India-source income (Section 901 of IRC), limited to US tax on the same income
Form 67 + Form 1116 coordination
| Form | Country | Direction of credit | Filing window |
|---|---|---|---|
| Form 67 | India | US tax paid as credit against Indian tax on US-source income | Before or with the Indian ITR for the AY |
| Form 1116 | USA | India tax paid as credit against US tax on India-source income | With the US Form 1040 by 15 April (or extension) |
The two forms operate independently. The US-resident NRI typically files both — Form 1116 for India tax paid on NRO interest / dividends / capital gains, and Form 67 only if there is US-source income offered to Indian tax (less common; happens in transition years or when the NRI has US-business income that India also taxes).
Four worked scenarios
Scenario 1 — US-resident NRI with NRO interest
NRO FD generates ₹1,80,000 interest in FY 2026-27. Bank deducts 15% TDS (₹27,000) with TRC + Form 10F on file. US side: ₹1,80,000 converts to roughly USD 2,100 at average TT rate; offered on Schedule B as foreign interest income; US tax at 24% bracket = USD 504; FTC via Form 1116 = USD 324 (the ₹27,000 = ~USD 324); net US tax payable USD 180. Total tax burden: 15% India + ~9% US incremental = ~24% effective.
Scenario 2 — US-resident NRI with Indian rental income
Indian flat rented out for ₹3,00,000/year. Tenant deducts 30% TDS = ₹90,000. NRI claims Section 24(b) standard deduction of 30% on net annual value + actual home loan interest deduction. Indian tax computed at 20% slab (NRI rental falls in residential property and standard slab applies) — ITR refunds the difference between ₹90,000 TDS and actual Indian tax of, say, ₹35,000 — net Indian-side burden ₹35,000. US side: reports on Schedule E; FTC via Form 1116 = US dollar equivalent of ₹35,000; offsets US tax on rental income.
Scenario 3 — US-resident NRI selling Indian property held 8 years
Property bought 2018 ₹50 lakh; sold 2026 ₹1 crore. NRI seller — buyer deducts TDS at 20% on full sale (Section 195), not 1% Section 194-IA (the 1% rule is only for resident sellers). NRI seller can apply to the Assessing Officer for a Lower Deduction Certificate under Section 197 — typical scenario reduces TDS to ~10-12% based on indexed cost calculation. Indian LTCG: indexed cost ~₹70 lakh; gain ₹30 lakh; tax at 20% with indexation = ₹6 lakh. Lower Deduction Certificate aligns TDS to actual LTCG. US side: long-term capital gain on Form 8949 + Schedule D; FTC via Form 1116 for the ₹6 lakh paid; US tax at 15-20% LTCG rate on USD gain. Mostly absorbed by FTC.
Scenario 4 — Returning NRI in RNOR window
Indian-citizen worked in California 12 years; permanently returned April 2025. FY 2025-26 status: RNOR. US Q1 2025 salary = pre-return income (foreign-source); RNOR-exempt in India. Form 67 not required for the RNOR-exempted slice. From FY 2027-28 (assumed ROR), worldwide income taxable; any remaining US 401(k) distributions, US RSU vesting, foreign property income become subject to Indian tax with Form 67 FTC available.
A note on US state tax
The India-USA DTAA is a federal treaty — it does not bind US states. California, New York, New Jersey, Massachusetts tax Indian-source NRE / NRO interest as ordinary state income, with no DTAA-rate relief. Texas, Florida, Tennessee, Nevada have no state income tax. State residence at the time of foreign income receipt is the primary determinant.
Practical playbook
- Get a fresh TRC from the IRS (Form 6166) every year. Apply via Form 8802 well before ITR filing season — IRS turnaround can be 8-12 weeks.
- File Form 10F on the Indian portal at the start of the FY — needed for treaty-rate TDS at the bank or broker.
- For Indian property sale, apply for a Section 197 Lower Deduction Certificate at least 2 months before the transaction — reduces buyer-deducted TDS to the actual LTCG rate.
- Maintain a year-by-year FTC register tracking India tax paid, FTC claimed in the US, FTC carry-forward (10 years in the US under Section 904(c)).
- Coordinate the timing of capital-gain realisations across both calendar years — the India FY (Apr-Mar) and the US tax year (Jan-Dec) misalign, and large gains realised across the year-end need careful pro-rata handling.
Frequently asked questions
Does the India-USA DTAA exempt NRE interest from US tax?
No. NRE interest is exempt from Indian tax under domestic Section 10(4)(ii). The US continues to tax the same interest as ordinary income because the US taxes worldwide income of US-residents and the DTAA does not exempt it US-side.
What is the difference between Article 22 and Section 91 unilateral relief?
Article 22 is the residual catch-all in the DTAA — both countries retain the right to tax, and FTC is provided under Article 25. Section 91 is the Indian unilateral FTC provision used when there is no DTAA at all. Since the India-USA DTAA exists, Section 90 (treaty-relief) supersedes Section 91 for India-USA tax events.
Can I claim FTC for US Social Security tax paid?
No. Social Security is a social security contribution, not an income tax. Indian FTC under Section 90 is restricted to "income tax of any like nature."
Do I file Form 67 if my only income is NRO interest and India already deducted TDS at the DTAA rate?
If the TDS at the DTAA rate is the final Indian tax (no further India return needed), Form 67 is not relevant in India. Form 1116 is relevant in the US to claim credit for the India tax paid. If you file an Indian ITR-2 to claim a refund (because tax slabs leave a refund position), Form 67 is not used because the foreign credit direction is US-on-India-tax, not the other way.
Is the treaty about to be renegotiated?
India and the US periodically discuss Protocol amendments. As of 2026 no major renegotiation has been notified. Smaller Mutual Agreement Procedure (MAP) bilateral clarifications continue. Stay current via CBDT international tax circulars.
Sources: India-USA Double Taxation Avoidance Agreement (12 September 1989); Protocol thereto; CBDT circulars on India-USA DTAA; Income Tax Act Section 90 + Section 195; US Internal Revenue Code Sections 901, 904, 911; IRS Form 1116 instructions; Indian Income Tax Department Form 67 + Form 10F instructions; accessed May 2026. DTAA-rate application is fact-specific — borderline cases require an Indian CA + US CPA with cross-border experience. Editorial research, not tax advice.