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The first year the individual is in the US they would be a dual resident if they meet the 183 days to be resident alien. The would file a 1040NR reporting the income earned while physically in the US. Then the time after they reach residency they would file the 1040 form.
Even if the income is paid in India the work is performed in the US so it is US sourced income.
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No he would be a non resident alien with US sourced income and would file the 1040NR.
It is where the service is performed that makes this US sourced and requiring tax in the US on this income.
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Kunal you still there
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No my answer is correct.
You may not like it but the correct answer is that the person is taxed in the US on US sourced income.
When work is performed in the US that is most certainly US sourced income.
Your post "Even 1040NR does not work for the L1 visa type" I am not sure what you mean by that.
An L1 VISA holder is not exempt like other VISAs,
As far as the treaty:
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the relevant taxable year;
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
(c) the remuneration is not borne by a permanent establishment or a fixed base or a trade or business which the employer has in the other State
Th"c" above would be met if an employee is in the US working for the Indian employee. So the non resident taxation would apply if they had not met the 183 days.
Does not apply to fees paid to a director of a U.S. corporation and the exemption does not apply if the employee's compensation is borne by a permanent establishment (or in some cases a fixed base) that the employer has in the United States.