Foreign income for non resident alient

[yashK1]

Hello,

I am currently on my F1 student visa. I am on this visa from last three years. I am still a Non resident alien and I fill 1040NR form. I get around $200 interest from my indian bank account. This is my only foreign income source. This is below minimum taxation amount in India. So i dont pay taxes for this in India. Do I have to include this interest in my taxes in USA. As far as I know Non Resident Aliens have to show only their US based income. I want to verify it here.

[mesquitebean]

@pk 
Are you please able to assist here when you are next in the forum?  Thanks!

[pk · Accepted solution]

Since   (a) you have been in the USA only for the last three years ( i.e. entered USA on F-1 in 2016);  (b) assuming that you have not been in the USA prior to 2016 on another F or J visa;  (c) you are compliant with the condition s of your F visa ( i.e. a full time student / trainee at a qualified educational institution ), you are exempt from counting days present and therefore still a Non-Resident Alien for the year 2018.

Thus you report to the USA tax authorities ONLY US sourced / connected income and NOT world income.  You file form 1040-NR ( not supported by TurboTax ).  It is not material whether IT dept in India taxes your  interest income or not -- you do not report this income nor do you get any foreign tax credit for taxes paid to another taxing authority.

Does this answer your query?

Namaste ji

[yashK1]

Thank you so much @pk . That was a super awesome explanation. Just one doubt. I did not mention this in my question. 

I earned some money in USA from my salary and then I sent this to my NRE account to get interest. I pay proper taxes for my USA salary. Does this interest from NRE account still consider as foreign source when the base money is the one I earned in USA from my salary   

[pk]

Monies that already have been taxed at source ( US ) is your money . If this monies were to earn interest or other income in the USA , it would be deemed US sourced income and therefore taxable by the USA.  The same monies earning foreign income is foreign sourced and hence not taxable to the USA , in your particular case.   If this money was used to own shares in an Indian company, the dividend  thereof may or may not be taxable depending on the source character ---- a purely Indian entity, not listed in the USA, probably would be Indian sourced, while  a publicly traded Indian entity and listed in US stock exchange  and doing business in the USA, may be  considered at least partly US sourced.  Gets complicated  very quickly. 

In your particular case, your interest income from an Indian bank is India sourced ( even when the deposit is held in US $ ).  However, if the bank is a US bank or its branch  ( depending on how it is registered/taxed in India ) may raise complications.

Namaste ji

[yashK1]

Got it. @pk You are awesome. Thank you very much for the detailed explanation. This is the best reply I have ever found on Internet for this question