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Posted by jmail7 on July 9, 2007, 12:31 am
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> I believe that as the mortgage is executed in India and is
> for a property located in India, the treaty and IRC would
> not apply. Admittedly, this treaty isn't my area of
> expertise but in this care, the execution of the loan is in
> a foreign country. If the loan was executed in the United
> States, I would expect that IRC would apply.
See Housden v. Commissioner, 63 TCM 2063 (1992), where a
Canadian citizen that was a resident of the U.S. was
required to withhold tax on interest payments to a Canadian
bank. That case dealt with a personal loan rather than a
loan secured by real estate. However, the fact that a loan
is secured by real estate located in another country does
not change the source of the income. Some treaties do
reduce the 30% withholding tax rate to zero. However, the
India treaty only reduces the rate to 15%.
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