1040 NR Schedule NEC Question

[HariS]

Doing 1040NR for the first time

Taxpayer is India resident with Dividend and Interest Income in the US. Proconnect is coming with EF critical diagnostics that says 15% rate is not allowed in Schedule NEC line 1a and line 2c.

I checked that the tax treaty allows qualified dividends to be taxed at lower rate of 15% per US-India treaty Article 11 for interest 

I did search for Ref #46725 and Ref #47310 but could not come up with anything specific to this

Is it ok for me to override (ignore) the diagnostics. 

thanks in advance

Hari

[HariS]

I called customer support and they confirmed that it is okay to override the check. The final e-file diagnostics allows me to file. So I am going to go with it

thanks 

[HariS]

Update on this topic and seeking some suggestions on this forum. All these after my original post

Here is the situation: 

1040-NR e-filed for taxpayer. I relied on this IRS notice https://www.irs.gov/pub/irs-drop/n-24-11.pdf to take the position that non-resident taxpayer is eligible for 15% reduced rate on capital gains in Schedule NEC

Proconnect gave e-file critical diagnostics error-

For efile purposes, dividends on Schedule NEC, Line 1a, 15% column, are not allowed when the country of residence for the year is India. US - Ref #46725

I called Pro Connect they said it is not a fatal error and I can try the e-file. I overrode the error and e-filed. IRS rejects with the same reason. I call Pro Connect support and they suggested I can try paper filing to force it into the 15% rate column.

Now I worry that my interpretation for qualified dividend received by non-resident taxpayer on a 1099-B is wrong and maybe it should be in the 25% rate in schedule NEC 

Question 1: - Did I misunderstand the intent of this IRS notice cited above. Is it meant only for qualified dividend earned by a "Resident" taxpayer for a foreign company in those treaty countries - this notice wording simply says "Under section 1(h)(11), a dividend paid to an individual shareholder from either a
domestic corporation or a "qualified foreign corporation" 

Question 2 - Instructions to schedule NEC - Line 3a under exceptions -if qualified dividends were not effectively connected with a US trade enter them on line 1a.  Is this where I misunderstood

Are qualified dividends not eligible for 15% in the hands of a non-resident tax payer.

thanks in advance

Hari

[HariS]

My apologies- typo

should read "dividends" here

15% reduced rate on capital gains "dividends" in Schedule NEC