Students paying tax: Does a working student have to pay taxes?


Many students worry about this. That is, do they have to pay taxes or not? Students want to know everything about taxes. Let me tell you that yes, students do pay taxes and there are students paying tax. This is when you are working as well as studying. 

If this is the case with you as well, then you have to pay taxes. In simple words, if you are a student and have a job, then you have to pay National Insurance and Income Tax. So, let us see at some of the important tax implications for students going from India to the United States. 

The US is one of the top most destinations for Indian students to study abroad. According to reports, 185,000 is the total number of Indian students that enrolled for higher education institutions abroad, amongst which the US is the leading destination with nearly 55% of Indian students. But, the US also has some tax rules for students, where students paying tax is the norm. 

Taxation of wages and stipend

In the United States, a student who has come on a F1 visa is considered a US non-resident for the initial five calendar years on this visa. However, students who have gone to the US on a J visa, the period is shorter by 3 years, which means it is only 2 years. This means that a US non-resident has to pay taxes in America on the income that they earn in that country only. 

Image courtesy:ISSO
Image courtesy:ISSO

You may choose to work part time as a teaching assistant or research or do any other part time job in the US and simultaneously study too. But, the income that you get either as stipend or wages in the US is taxable. 

If you want to become a non-resident of the United States, you must file the Form 8843 by 15 April for each of the five tax years. And, if you do not file this form, then you would be considered a US resident and any of your global income that you earn would be taxed in America. 

Exemptions for Indian students

As a non-resident of US, you have to pay taxes only on the income that you earn in the US. Indian students paying tax in the US get exclusive benefits here. This means that they can get a regular tax deduction, which was $5,800 in the year 2011. This exemption is not offered to any other non-resident in the US. 

Moreover, Indian students can also get one personal tax exemption for themselves, which was $3,700 in the year 2011. They can also get one tax exemption for their spouse, only if the spouse is in America during that year. If you want to claim personal exemptions for your children, then you must know that your children must either be US resident aliens or US citizens. 

Scholarship taxation

If you have got a fellowship or scholarship in the US, then you have to pay taxes on it in the US. These taxes are either on whole of the scholarship or just on a part of it. Typically, the whole fellowship amount is taxable, in case you are not an applicant for a degree. 

Image courtesy:Wikimedia Commons
Image courtesy:Wikimedia Commons

However, if you have applied for a degree program, then some part of your scholarship, which is used for supplies, books, and tuition fees for your program, is not taxable. Other than these, any part of the fellowship that is used for some other purpose, like living expenses and accommodation, is taxable. 

Thus, students paying tax is a common phenomenon in the US. Students have to pay taxes on their scholarship, wages, and stipend in the United States. However, Indian students can still benefit from tax exemptions.