India and US tax agreement?

Question

India taxes non-residents on income earned from within India. Imagine some Indian in the US, if they have an India-sourced income, will it be taxed twice (in the US and India)? Is there any tax agreement between the 2 countries? If yes, can you explain it?

I am a novice in double taxation and treaties matters. I tried to find the answer but I can't find any simple answer like: if this, then you're free from tax in this country but not that...something like that...I always found long documents which are apparently hard to understand. Help please.

Answer 1

By the person being "in the US", I will assume you mean they are considered a resident (US citizen or resident alien) for US tax purposes. In that case, their India-sourced income will be subject to both Indian and US tax. However, even without a tax treaty, they will be able to claim the Foreign Tax Credit on their US tax return, reducing their US tax by the US tax or Indian tax on their doubly-taxed income, whichever is less. Effectively, this means the net tax that the person pays on that doubly-taxed income is the higher of the two taxes. If there is a tax treaty, they may be able to get even more beneficial treatment, depending on the exact provisions.