How can I get tax treaty benifits for J1 visa?

My Name is Om, I have joined a university in Boston on Dec 1, 2018, as a post doc scholar on J1 visa. It is my fisrt time in US. My DS-2019 and visa is up to 5 years (Dec2018 to Nov 2023). I have submitted the foreign national data through the Foreign National Information System (FNIS) to university account officer for analysis of Indo-US tax benefits. After analysis he replied that “you are a Non-Resident Alien for Tax Purposes (NRA) for this tax year(2018). As a NRA, you are exempt from Social Security and Medicare (FICA) taxes and are not eligible for any tax treaty benefit because your expected stay in the United States is greater than 2 years. The tax treaty with India contains a time-based retroactive loss provision.” But I have to go back India within 2 years so in this situation how can I get the tax benefits. Please advise.

The university account officer is mistaken. You don’t have to pay taxes for next 2 years and will be filing form 1040 NR EZ during tax season. If you do stay beyond 2 years, then the third year taxes will need to be reported. The retroactive clause is no longer active

I am AK, I have joined as a research scholar on J-1 Visa at Chicago University. I had claimed for Tax exemptions under the US - India Treaty, My Finance officer says that The treaty between the US and India has a retroactive clause. If I stay in the US for longer than 24 months, I may be taxed from the first day. I am in a Fix now, Is it true that I will be Taxed on a retroactive base? I have plans for staying in the US after two years but it all depends on my research funds and that very difficult to predict right now.
Please let me know how best i can handle this tricky situation.

Hi Ateeq,

The J-1 tax treaty retroactive tax clause has been defunct for 25 years. Enjoy the tax exemption for 2 years (after all, what you are earning is just a fellowship stipend) and then start paying taxes normally after that time. There will be no penalty because a research fellowship meets an internal tax exempt code of the IRS separate from a salary and it has been this way for decades. Your finance officer is mistaken but you don’t need to share that

Thanks a lot for your reply, I am getting a salary for my research work(J1-research scholar), is that considered as stipend? I am bit confused and here no one is their to help me and my tax per month is up to 400 USD. I want to save it for my future. Thanks a lot.