Thursday, March 30, 2006

Tax Returns for Indian Students in California

I happen to attend a small seminar on the basics of filing your tax returns in California state. For people who are totally confused what is what, this might be a good start. Please note the information given here might not be accurate.

Go ahead if you are,
1. An Indian citizen, who came to California on F1 visa (I am not sure if the rules below will apply to other states)
2. Earn your wages through Research/Teaching Assistanceship -( I am not sure if the rules below will apply to Fellowship candidates)
3. Have no other sources of income in America
4. Have no investments in stocks, bonds etc
5. Do not owe a business
6. Do not have to claim theft, loss or Charity deductions.

  • The wages you earn and *received* in a financial year - 1st Jan - 31st Dec is the taxable wage for that year. Note if you receive your pay for Dec 05 in Jan 06, do not include that in your tax return for 2005.
  • Usually your employer 'withholds' certain amount of money, which is meant for tax. Your job now is to check at the end of the year when you know yout exact income, that if the total money withheld was more or less. (See Next Point)
  • From every Job that you have, you need to take a W2 receipt from your employer, which tells you exactly how much you earned and how much of it was withheld. This information is most critical and used to fill all the forms.
  • You pay/file return for two administrative organizations - The State of california using the form 540NR and the Federal Government using forms 8843, 1040NR, (and 1042).
  • For the purpose of Federal Tax Returns, if you have been here for less than 5 years you are a NON RESIDENT ALIEN.
  • For the purpose of State Govt, I am not sure if you are a Resident or a Non Resident Alien.
  • The interest you earn on bank accounts is non taxable only if you filled a form W8BEN while opening the bank account (which most of us did unknowingly, thanks to the bank but you should confirm.).
  • There is a tax treaty between India and America that $5000 of your income is non taxable, which you can claim as deduction only if you signed the tax treaty form (8233 I think) before the end of the year.
  • I think for the people on fellowship its the 1042s form/receipt they get from the university instead of W2 - though I am not sure about this.
  • So when you have the form ready, just see the instructions and fill it ;-).. its simple. Make sure you do it before 15th of April of the next Year. For tax return of 2006, do it before 15th April 2007.
  • For people at UCSD, the International Center Provides a software, CINTAX, which automatically fills the federal tax return forms for you. You still need to fill the state tax return forms yourself.

Happy Taxing.


At 6:02 AM, Anonymous Razib Ahmed said...

Nikhil, thanks for your useful info. I am writing about South Asian business and receently have written some entires about NRIs. I am curious to know how many Indians are in California. Are most of them students or professionals?
Right now, nearly

20 millions NRIs around the world,
and last year they contributed immensely to the Indian economy.

At 7:44 PM, Blogger Ankit said...

dhanyawaad nikux... mere jaise procrastinators ke liye tumne bahute badhiyan kaam kar diya hai... bhagwaan tumhe lambi umar de

At 11:24 PM, Anonymous Anonymous said...

Thanks seniorji..we are interning in California from IITK...and were googling for taxes...ur points answered our queries


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