H1B to F1 (Non-resident alien) - US -India tax treaty eligibility question

[anandakrishnan-m]

A different scenario here: My first entry to the USA was on H1B. I changed to F1 after few years. Based on substantial presence test, being an exempt individual for first 5 years on student visa, I am a non-resident alien for tax. Can I claim standardized deduction based on US-India tax treaty as I am a student? Or is there any criteria preventing me from claiming it as I came to USA for work initially? Note. Until I came to the USA for work, I was a resident of India.

[DaveF1006]

To clarify, what year were you granted the F-1 status?

@anandakrishnan-m 

[anandakrishnan-m]

I was on H1 from 2014 to 2021. Starting 2022, I am in F1.

[DaveF1006]

Yes. since you are in the five-year exemption period, you are eligible to claim a Standard Deduction under the provisions of the US/India tax treaty under Article 21(2).  

This shouldn't interfere you receiving the deduction as long as this is your first F-1 student exemption period. Contact Sprint Tax for further information here. 

@anandakrishnan-m 

[pk]

@anandakrishnan-m , having read through this thread and generally agreeing with my colleague @DaveF1006 ,  I still am troubled  -- the scenario  as I understand is 

(a) You entered US with H-1B in 2014 

(b) there was an adjustment of status  in 2022 rom H-1B to F-1

(c) For 2014 through 2021 and probably 2022  ( assuming you went back to school  in Sept of 2022 & status adj. in latter part of the year ) you filed  1040.

(d)  Thus   from  xx/xx/2022 onwards you are exempt from counting days present for purposes of SPT.

While article 21 of  US-India  tax treaty,  requires  students  with Indian residency ( prior  to entering US for educational/training purposes) be given the same deductions etc. as a US  citizen/immigrant  student, it does not define what is "immediately prior to " -- i.e. is it  three months, a year prior or what . 

So what happens  , as in this case a student of Indian origin / citizen has been living in the USA for a years and without exiting the country becomes a student with F-1 -- does he/she get the same rights  as a student whom has just entered the country for the sole purpose of  learning/training etc.? 

 In the technical explanation I find this :  referring to article 21

. Paragraph 4 provides that, for purposes of this Article, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the taxable year in which he visits the other Contracting State or in the immediately preceding taxable year. Thus, a student visiting the United States from India is considered to be a resident of India if he is so resident in the year he arrives in the United States or in the year immediately preceding his arrival in the United States.

I have underlined the text  that is applicable here.  Based on this  and only this  it seems that a student  whom has not gone back to India  to satisfy  "resident of" requirement , cannot take advantage of this  article  i.e. article 21 para 2, because he./she was not a resident of India  immediately prior to starting his/her schooling.  This would mean  that  the student would be treated as any other foreign student filing a 1040-NR and having to use  itemized deduction.  What I don't know is if this even matters .

pk

[anandakrishnan-m]

Thanks for your response. To clarify, I exited the country in Dec, 2021 and entered on F1 visa in Jan, 2022. I am not sure if that changes anything. I am filing through a CPA and will post here when I find an answer to this situation.

[pk]

@anandakrishnan-m , if you exited the country and entered  with F-1 , then  obviously  the issue I brought up is not applicable .  Your earlier post  did not articulate  that you had entered the country with F-1.  Or did I miss  that .