Understanding the US-India Tax Treaty for Nonresidents: What F-1, J-1, and H-1B Visa Holders Need to Know
The U.S.–India Tax Treaty provides several unique tax advantages for Indian nationals working, studying, or training in the U.S.
If you’re in the U.S. on an F-1, J-1, or H-1B visa, understanding how this treaty applies to you can help reduce your tax liability and ensure compliance with the IRS.
This guide breaks down key treaty provisions—especially Article 21, which offers benefits for students and trainees—and explains how to claim them correctly.
🧾 Tax Treaty Benefits by Visa Type
1. F-1 Students (Nonresident Aliens)
Under Article 21(2) of the U.S.–India Tax Treaty:
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F-1 students from India can claim the standard deduction, just like U.S. citizens.
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This benefit is exclusive to Indian nationals—most other nonresidents cannot claim it.
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The standard deduction can reduce taxable income by $13,850 (for single filers, 2025).
2. J-1 Interns and Trainees
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J-1 visa holders from India are also eligible for the standard deduction under Article 21(2).
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This helps reduce their taxable income while they gain professional experience in the U.S.
3. J-1 Teachers and Researchers
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Exempt from U.S. income tax on teaching or research income for up to 2 years under Article 22.
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However, if they stay even one day beyond two years, the IRS can revoke the exemption retroactively, making prior years taxable.
4. H-1B Visa Holders
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Typically become resident aliens after meeting the Substantial Presence Test.
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They may still claim treaty benefits if:
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They stay less than 90 days (independent services), or
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They stay under 183 days and are paid by a foreign employer (dependent services).
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📘 What Is Article 21(2) of the US–India Tax Treaty?
Article 21(2) is a powerful clause for Indian students and trainees.
It states that a resident of India, temporarily in the U.S. for education or training, and not treated as a U.S. tax resident, is entitled to the same deductions as a U.S. citizen.
This means you can:
✅ Claim the standard deduction
✅ Use itemized deductions for expenses like charitable contributions or state taxes
However, note that personal exemptions were eliminated under U.S. tax law in 2018.
💰 Capital Gains and the India–U.S. Tax Treaty
The treaty does not include a special exemption for capital gains.
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Short-term capital gains (assets held ≤ 1 year): taxed at ordinary income rates.
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Long-term capital gains (assets held > 1 year): taxed at 0%, 15%, or 20%, depending on your income level and filing status.
📝 Using Form W-8BEN to Claim Treaty Benefits
If you earn interest, dividends, or other U.S. income, your employer or payer may ask for Form W-8BEN (Certificate of Foreign Status).
This form allows you to:
✅ Certify your nonresident status
✅ Claim your treaty benefits to reduce or eliminate withholding tax
Without it, a flat 30% tax may be withheld from your payments.
For short-term work income, Form 8233 may apply instead.
🇮🇳 Final Takeaway
The U.S.–India Tax Treaty can significantly reduce your tax burden — but only if applied correctly.
By understanding your visa type, residency status, and which forms to submit, you can maximize your benefits and stay fully compliant with the IRS.
At J1 Summer Tax Back, we help Indian students and professionals claim eligible deductions and treaty benefits, ensuring a smooth and accurate tax filing experience.
📘 Need help with your U.S. tax return?
We make filing simple, accurate, and stress-free — while helping you get every refund you’re entitled to.