I am a US citizen. I had invested some money in India as a fix deposit in my NRO account. I got 9000 Rupees interest on FD in 2010. I know the fact that the NRO account is taxable in India. My questions are
1 – 9000 rupees in not taxable in India because the amount I gain, on interest is not more than 10,000 rupees. Do I have to pay any income tax on this interest in the US even though it is tax free income in India?
2- Do I have to show this income in my US tax return which is tax free in India?
3- What is the foreign income limit is not taxable in US.
4 if suppose I pay income tax on my interest in India, I still have to pay the income tax in US too? How to avoid paying taxes twice on the same income?
As a US citizen, you are taxed on WORLDWIDE income. I don't know what a Rupee calculates to US dollars, but indeed if you get interest income, it is taxable in the US from whatever source it is derived.
If you have no foreign tax credit (i.e., you did not pay foreign taxes on the same income) then there is nothing to offset the taxation. You can however, if you pay taxes in India on the monies take a FTC on the same income taxed in the US.
answered 27 Feb '11, 21:56
Also be sure to disclose this foreign bank account to the IRS by this Thursday June 30th
answered 28 Jun '11, 02:35
John R. Dund...