What is W-8 BEN?

Generally US government taxes non-residents for income sourced out of USA at 30%. But if USA has Income tax treaty with your country, you can get reduced rate or exemption in withholds on your US income by sending form W-8 BEN to your client in USA.

Purpose of W-8 BEN form:

Purpose of W-8 BEN form:

• Interest (including certain original issue discount (OID));
• Dividends;
• Rents;
• Royalties;
• Premiums;
• Annuities;
• Compensation for, or in expectation of, services performed;
• Substitute payments in a securities lending transaction; or
• Other fixed or determinable annual or periodical gains, profits, or income.

If you receive certain types of income, you must provide Form W-8BEN to:

1. Establish that you are not a U.S. person;
2. Claim that you are the beneficial owner of the income for which Form W-8BEN is being provided or a foreign partner in a partnership subject to section 1446(a); and
3. If applicable, claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty and who is eligible for treaty benefits.

USA tax treaty with India:

India has entered into DTAA (Double taxation avoidance agreement) with the USA and treaty explains the taxability of various sources of income for US residents and Indian residents.

For an example, if an Indian freelancer works as independent consultant for US entity, he might not be subject to withholding tax in the USA on providing W-8 BEN.

Visit the below link to check out US treaty with India.

https://www.irs.gov/pub/irs-trty/india.pdf

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