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Taxmatters
Level 2

Senior citizen family member living in India but she is US citizen

I am asking this question for 68 years old female who is US citizen but since May 2019 she has lived in India and has not returned to USA for a single day.

She has earned income from stock trading in India and has some interest income but that total income is less than standard deduction of $14050 (she is senior citizen so higher amount) .

So here are questions. 

1. Does she still need to file tax return in USA even though total income is less than standard deduction amount?

2. I guess yes, but earning from stock market trading which includes either day trading or short term trading (holding less than a year) is considered self employment income (or business income?) In India it is considered business income.

3. If she files return in USA and due to having less than std. deduction income - if she does not pay any taxes - does she need file tax return in India and pay taxes ? in India anything above 3 lac = about 4000$ she has to pay taxes. 

4. My understanding is she has to file taxes in both countries. When she files in India and under India slabs - she has to pay about 2500$ in taxes - but the same income is excluded for US income tax purpose (std. deduction) So how can she avoid paying taxes in India? Can she claim that because I filed in USA and that I was not suppose to pay any taxes as per US laws ..I don't owe anything to Indian income tax authorities?

 

Thanks ..in advance. I already know this question is difficult.

3 Replies
ColeenD3
Employee Tax Expert

Senior citizen family member living in India but she is US citizen

I can only speak to US taxes. You will have to consult India for rules on how she needs to do her taxes there.

 

The filing requirement for persons over age 65 is $14,050 as you mentioned. If her income is less, she does not have to file. Income from stock trades is investment income, not self-employment. Unless she meets the very stiff requirements to be considered a day trader, which is doubtful, she does not have SE income.

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Taxmatters
Level 2

Senior citizen family member living in India but she is US citizen

Thanks ..more questions.

1. You said income from share/stock trading is not considered self employment income so I guess it goes under item no. 7 on 1040? 

2. She has mix of trading income (In India if its less than 1 year it is called trading - otherwise its investment) and interest income from fixed deposits.---I guess she qualifies for earned income credit because of trading income? She does not have qualifying child.

3. Where can I find more info about who is considered day trader so I can check if she has SE income.

4. If you find that she qualifies for earned income credit ...even though total income is under fillable limit - she should file tax return correct?

ThomasM125
Employee Tax Expert

Senior citizen family member living in India but she is US citizen

The investment sales would appear on line 7 in TurboTax.

 

Trading income would have to be considered self-employment income to be considered earned income, which is necessary for the earned income credit. Investment sales are normally considered investment income, not self-employment income.

 

Here is a helpful article on being considered a day trader:

 

https://www.marketwatch.com/story/tax-strategies-for-day-traders-2015-02-25#:~:text=The%20courts%20s....

 

You can file a tax return to get the earned income credit even if there is no filing obligation.

 

 

 

 

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