Withholding From Other Income Other income subject to 30% withholding generally includes fixed ordeterminable income such as interest (other than portfolio interest),dividends, pensions and annuities, and gains from certain sales andexchanges, discussed in chapter 4.It also includes 85% of socialsecurity benefits paid to nonresident aliens. Income (other than compensation) that is effectively connected withyour U.S. trade or business is not subject to withholding at the 30%(or lower treaty) rate. You must file Form 4224 with the payer of theincome. Special rules for withholding on partnership income, scholarships,and fellowships are explained next. Tax Withheld onPartnership Income If you are a foreign partner in a U.S. or foreign partnership, thepartnership will withhold tax on your share of effectively connectedtaxable income from the partnership. The partnership will give you astatement on Form 8805, Foreign Partner's Information Statementof Section 1446 Withholding Tax, showing the tax withheld. Apartnership that is publicly traded may withhold on your actualdistributions of effectively connected income. In this case thepartnership will give you a statement on Form 1042-S,Foreign Person's U.S. Source Income Subject to Withholding.In either case, the withholding rate is 39.6%. Claim the taxwithheld as a credit on line 61b of Form 1040NR. If you are a foreign partner responsible for withholding, seePartnership Withholding on Effectively Connected Income inPublication 515. Reduced Withholdingon Scholarshipsand Fellowship Grants There is no withholding on a qualified scholarshipreceived by a candidate for a degree. See chapter 3. If you are a nonresident alien student or grantee with an"F,""J,""M," or "Q" visa and you receive a U.S.source grant or scholarship that is not fully exempt, the withholdingagent (usually the payer of the scholarship) withholds tax at 14% (orlower treaty rate) of the taxable part of the grant or scholarship.However, if you are not a candidate for a degree and the grant doesnot meet certain requirements, tax will be withheld at the 30% (orlower treaty) rate. To reduce the amount subject to the 14% rate, you should fill outForm W-4 and the Personal Allowances Worksheet(attached to Form W-4) every year and give it to thewithholding agent. Use the following procedures instead of the FormW-4 instructions to complete the worksheet. Line A.Enter the total of the following amounts on line A. Personal exemption.Include the prorated part of your allowable personal exemption.Figure the amount by multiplying the number of days you expect to bein the United States in 2000 by the daily exemption amount ($7.65). Expenses.Include expenses that will be deductible on your return. Theseinclude away-from-home expenses (meals, lodging, and transportation),certain state and local income taxes, charitable contributions, andcasualty losses, discussed earlier under Itemized Deductionsin chapter 5.They also include business expenses, movingexpenses, and the IRA deduction discussed under Deductionsin chapter 5. The amount of away-from-home expenses should be the anticipatedactual amount, if known. If you do not know the amount of actualexpenses at the time you complete Form W-4, you can claim the currentper diem allowance for participants in the Career Education Programunder the Federal Travel Regulations. The current per diem allowanceis $18 per day. Nontaxable grant or scholarship.Include the part of your grant or scholarship that is not taxableunder U.S. law or under a tax treaty. Line B.Enter -0- unless the following paragraph applies toyou. If you are a student who qualifies under Article 21(2) of theUnited States-India income tax treaty, and you are not claimingdeductions for away-from-home expenses or other itemized deductions(discussed earlier), enter the standard deduction on line B. Thestandard deduction amount for 2000 is $4,400 if you are single or$3,675 if you are married. Lines C and D.Enter -0- on both lines unless the following paragraphsapply to you. If you are a resident of Canada, Mexico, Japan, South Korea, or aU.S. national, an additional daily exemption amount may be allowed foryour spouse and each of your dependents. If you are a resident of India who is eligible for the benefits ofArticle 21(2) of the United States-India income tax treaty, you canclaim an additional daily exemption amount for your spouse. You canalso claim an additional amount for each of your dependents notadmitted to the United States on "F-2," "J-2,"or "M-2" visas if they meet the same rules that apply toU.S. citizens. Enter any additional amount for your spouse on line C. Enter anyadditional amount for your dependents on line D. Line H.No entries should be made on lines E, F, and G. Add the amounts onlines A through G and enter the total on line H. Form W-4.Complete lines 1 through 4 of Form W-4. Sign and date theform and give it with the Personal Allowances Worksheet toyour withholding agent. If you file a Form W-4 to reduce or eliminate the withholdingon your scholarship or grant, you must file an annual U.S. income taxreturn to be allowed the exemptions and deductions you claimed on thatform. If you are in the United States during more than one tax year,you must attach a statement to your yearly Form W-4 indicatingthat you have filed a U.S. income tax return for the previous year. Ifyou have not been in the United States long enough to be required tofile a return, you must attach a statement to your Form W-4saying you will file a U.S. income tax return when required. After the withholding agent has accepted your Form W-4, taxwill be withheld on your scholarship or grant as if it were wages. Thegross amount of the income is reduced by the amount on line H of theworksheet and the withholding tax is figured on the remainder. You will receive a Form 1042-S from the withholding agent(usually the payer of your grant) showing the gross amount of yourscholarship or fellowship grant less the withholding allowance amount,the tax rate, and the amount of tax withheld. Use this form to fileyour annual U.S. income tax return.