The US and the UK are top destinations where people prefer to go for higher education. They are the hosts of majority of international students. The US has devised tax rules for international students, who want to study there. Students must keep those tax rules in mind if they are heading to the US, they are: 1. Taxation of Stipend US universities permit its students to work part time while studying. The working hours may vary from university to university. Any income that the students earn as wages or as stipend is taxable in the US. Roy Vargis an Illinois based CPA and promoter of www.IndianCPA.com, explains; "As a student on F1 visa, you are considered to be a non-resident of the US for the first 5 calendar years that you are on this visa". "If you are on a J visa, this period is 2 years. So as a non-resident of the US, you will have to pay taxes in the US only on your income from the US." Vargis also states: "In order to claim the status of non-resident in the US, the student must file Form 8843 by April 15th for each of the 5 tax years. If he fails to file this form, he will be treated as a resident and any global income that he may have will be taxed in the US." 2. Special Exemption for Students from India Foreign individuals are subject to pay tax on income from U.S. sources only. Students from India enjoy special privilege here, as they can avail a standard deduction ($5,800 in 2011) which is not allowed for other non-residents. Vargis explains; "Students can also claim one personal exemption ($3,700 in 2011) for themselves and another for their spouse, provided the spouse is in the US during the year. To claim personal exemptions for children, the children must be US citizens or resident aliens". It means that if you are unmarried, you will get a total deduction of $9,500 (based on 2011 numbers). Your income up to $9,500 would be exempt from tax in the US. While seeking employment you need to submit a W4 form to your employer to help him understand the exemptions and benefits you will be availing and so that he can deduct tax accordingly. If you are a student from India, don't forget to claim the standard deduction benefit. 3. Taxation of Scholarships Universities abroad offer scholarships to all the deserving students. Scholarships and fellowships are taxable in US, in total or partly. Generally, the entire amount is taxable in case you are not a candidate for a degree and if you are a candidate for a degree, the portion of scholarship used for tuition fees, books and supplies required for your course would not be taxable. The remaining used for other purposes like accommodation and living expenses will be taxable.
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