Taxing a US LLC for Indian Residents
An Interactive Guide to Navigating Pass-Through Taxation & Double Taxation Avoidance
The Income Tax Journey
This interactive diagram outlines the path income from a US LLC takes, from being earned in the US to being taxed in India, and how double taxation is ultimately avoided. Click on each step to learn more.
Click a Step to See Details
Select a step from the left to understand its significance in the cross-border tax process.
The US Perspective: Pass-Through Taxation
What is a "Disregarded Entity"?
By default, the US Internal Revenue Service (IRS) treats a single-member LLC as a "disregarded entity." This means the LLC is not seen as a separate entity for tax purposes. It's fiscally transparent.
How Income "Passes Through"
The LLC itself does not file a US federal income tax return. Instead, all profits and losses are "passed through" directly to the owner. The owner reports this income on their personal tax return (e.g., Schedule C of Form 1040 for residents, or 1040-NR for non-residents).
The India Perspective: Global Income Taxation
Tax Residency is Key
Under Section 5 of the Indian Income Tax Act, an individual who qualifies as a "Resident and Ordinarily Resident" (ROR) in India is liable to pay tax on their entire global income, regardless of where it was earned.
US LLC Income is Indian Income
Since the Indian resident's global income is taxable in India, the profits passed through from the US LLC are considered part of this global income. This creates a situation where the same income is subject to tax in both the US (source country) and India (residence country).
The DTAA Bridge
The Double Taxation Avoidance Agreement (DTAA) between India and the US is a critical treaty that allocates taxing rights between the two countries to prevent the same income from being taxed twice.
The Solution: Foreign Tax Credit (FTC)
India provides relief from double taxation through the Foreign Tax Credit mechanism under Section 90 of the Income Tax Act. You can claim a credit for taxes paid in the US against your Indian tax liability. Use the calculator below to see how it works.
FTC Calculator
Calculation Results
Enter your details and click calculate to see the breakdown of your tax credit and final liability.
Your Compliance Checklist
- 1
File US Tax Return
Report your LLC's pass-through income to the IRS and pay the required US federal and state taxes. Typically, this is done using Form 1040-NR if you are a non-resident alien from the US perspective.
- 2
File Form 67 in India
This is a mandatory form to claim Foreign Tax Credit in India. It must be filed electronically on the Indian Income Tax portal on or before the due date of filing your Indian Income Tax Return (ITR).
- 3
File Indian ITR
Declare your US LLC income under the appropriate head (e.g., "Profits and Gains from Business or Profession") in your ITR. Report the FTC claimed in Form 67 in the "Taxes Paid and Verification" schedule of your ITR to reduce your final tax liability.