Have Tax Questions? Ask a Tax Expert for Answers ASAP
HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
Your answer to second question is not complete. I understand and know that any US person, resident or citizen is subject to reporting worldwide income and paying taxes and use of foreign tax credit as applicable.
My question still stands unanswered because I have asked specifically:
1. The U.S. resident was working in a former employment out of the country prior to becoming a resident and is receiving pension on account of his past services. What is the U.S. taxation law on taxing pensions received from foreign employers in foreign country to a U.S. resident. I will need the IRC§ and regulation on it.
I said "Under the tax treaty, the individual will only pay tax once (the purpose of the treaty is to prevent double taxation), and will pay tax in the country of domicile. See this:"
"Vaibhav Sankla, Director H&R Block India explains, "If a US resident earns Government pension from India, his pension is taxable ONLY in US if he is a resident of and national (citizen) of US. So if a US resident is not a citizen of the US, then irrespective of whether he is a green card holder or not, his pension income from the Indian governmentwill be taxable ONLY in India."
Since Patel is not a US citizen but just a green card holder, he will have to pay tax on that pension ONLY in India.
Article 20 states:
Any pension, other than a pension referred to in Article 19 (Remuneration and Pensions in Respect of Government Service), or any annuity derived by a resident of a Contracting State (in Patel's case, US) from sources within the other Contracting State (India) may be taxed only in the first-mentioned Contracting State (US). According to the above, if a resident, green card holder or citizen of US received private pension or annuity from India, then that is taxable only in US"
Apparently the tax treaty makes a noncitizen of US taxable only by India on nongovernmental pension from India sources.