Tax related question for 1040NR

[aays2]

Hello,

I am non-resident of USA and haven't spend a single day in USA during the year 2024.

I am filing my USA tax returns as I have income from Dividends.

My total dividends income is $2921, out of which QUALIFIED DIVIDENDS is $2400.

In sprint tax I am seeing I owe only $730 but I think I should be taxed 30% which will be $876.

There is no tax treaty involve as current I don't have to pay international income in India.

[SabrinaD2]

As a nonresident alien, your US dividend income is generally subject to a flat 30% tax rate

• This rate applies to Fixed, Determinable, Annual, or Periodical (FDAP) income, which includes dividends
• For your total dividend income of $2,921, this would indeed amount to $876. However, if Sprintax shows you owe only $730, it might be considering some other factors or deductions.

You can find more details on the IRS website about taxation of nonresident aliens and figuring your tax

[aays2]

@SabrinaD2 thanks for the inputs. As per my understanding non-resident are not eligible for any deduction on dividend. Is my understanding correct?

What will be the tax rate for USA bank interest income?

[DaveF1006]

Non-residents generally cannot claim deductions on dividends unless specific tax treaties between their country and the U.S. provide reduced withholding rates. For example, the standard withholding tax rate for non-residents on U.S. dividends is 30%, but treaties may lower this rate.  Since your country doesn't have a treaty with the US, all income should be taxed at 30%, including bank interest.

@aays2 

[aays2]

India and USA has a tax treaties as per below. So I need to pay 25% tax on dividends?

The Convention provides maximum rates of tax at source on payments of dividends, interest and
royalties which, in each case, are higher than the rates specified in the United States Model. Dividends
from a subsidiary to a parent corporation are taxable at a maximum rate of 15 percent; other dividends
may be taxable at source at a 25 percent rate.

[DaveF1006]

Yes.  The tax treaty specifies that dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of the State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: 

(a) 15 percent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 percent of the voting stock of the company paying the dividends; 

(b) 25 percent of the gross amount of the dividends in all other cases.