If a United States citizen were hired by an Indian corporation and
moved to India to work, what are the tax implications? That is, does
the person pay taxes in India to the Indian government and not pay US
Taxes or does he have to pay US taxes? Is it dependent on the salary
earned - the salary in question would be around $25,000.

Hello and thank you for your question.

The first place to look is in Article 16 of the US-India Tax Treaty.
[see page 41 of the following .pdf]
http://www.unclefed.com/ForTaxProfs/Treaties/inditech.pdf

That 1991 version is the current treaty.
http://www.irs.gov/publications/p54/ch06.html

Unless any of the special provisions described there apply, the treaty
will cover your service only if your days in India do not exceed 183
days each (calendar) year.

If you're there 183 or fewer days, then under the treaty you'll pay US
income tax on your income, and nothing to India.

But if you're there more than 183 days, the treaty won't apply.  So
you'll pay income tax to India, you'll also pay income tax to the
United States, and the U.S. will give you a foreign tax credit that
will in effect reimburse you for most or all of the income tax you
paid in India.  [Commenter seshadrinathan-ga tells us the India rate
is ~35%, while the credit will be limited to US tax rates.]
You can read the IRS' version of all this at
http://ftp.irs.gov/pub/irs-soi/ftcredit.pdf

But wait, there's more!
Internal Revenue Code Section 911 allows an income tax exclusion for
the first $80,000 of foreign-earned income.
http://www.escapeartist.com/efam/76/Overseas_Taxes.html
So the answer is actually simpler if you also meet the Section 911 definition.
In that case you'll still pay income tax to India (if you're in India
more than 183 days in the year, as described above), but instead of
the foreign tax credit you'll simply be able to exclude your
foreign-earned income from your US tax return.

Search terms used
india "tax treaty
india "foreign tax credit" rate
india "foreign tax credit" 911

Thanks again for letting us help.
Google Answers Researcher
Richard-ga

Thanks. This was exactly what I was looking for.

Expatriate taxation is fairly complicated, but in general, you could
plan for paying US tax (and receiveing an foreign earned income
exclusion based on your days worked outside the US, and possibly a US
foreign tax credit for any taxes paid in India), as well as paying
taxes to India.  Based on the salary level you mention, your entire
salary may be covered by the foreign earned income exclusion.

Trust me to say that at least for the first year (and probably every
year you work abroad), you'll need a tax professional to prepare your
taxes.  Get someone who is fluent in expatriate taxation.

You didn't mention if you were doing this on your own or through an
employer, but many employers do something called "tax equalization",
which means reimburse you for any excess taxes you might have, but
that is not a matter of law, but rather employee and expatriate
benefits.

Good luck!

happytobeme

I am a Chartered Accountant from India (equivalent of a CPA) working in the US.  

Taxation in India is based on incidence of income and residency rules.
Former means that if your employer is Indian, you would pay taxes
there.  Residency rules also will apply, which means that if you were
in India for more than 181 days a fiscal year (April - March), your
income will be taxable.  In the intial two years that you are
resident, you will not be taxed for income arising outside India. 
After the two years, you will lose that shelter too.

I believe the US taxation is based on citizenship and the citizen is
taxed on the worldwide income.  However, you should be able to claim
foreign tax credit.

Based on current tax rates, you will pay more taxes in India - at $25k
which is about Rs.1.1 Million - you will be taxed at the 30% tax rates
at the highest tax bracket with surcharges of around 10%, in effect
33%.  Your US tax rate, being lower for the same income, will mean
that you will be able to claim entire US tax due as tax credit.

Interestingly, you may face another situation of dual status for at
least one tax year because of the difference in tax years for the two
countries.

I was able to check the Double Taxation Avoidance Agreement (DTAA)
between United States and India.

DTAA specifically provides that the taxation can be only in one
country and in the country where the income originates, which in this
case is India.  This confirms that you will be taxed in India.  This
is specifically so since the employer is an Indian corporation and you
are going to be working out of India (Article 16).