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Tax On Foreign Property And Deposits

Discussion in 'Individuals' started by cuckoo, Aug 27, 2015.

  1. cuckoo

    cuckoo Super Moderator

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    The law as I understand it has always required that someone with an income from india needs to pay taxes in India on that income. We are also required to declare and pay taxes on our worldwide income in the US. you can claim Indian taxes paid as foreign tax credit on your federal return (but not state). I have filed returns in both countries for at least 8 years and it's a pain but.....
     
  2. s_gan

    s_gan Super Moderator

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    No. until sep 2014 nri's could re-invest capital gains from property on real estate outside india and still get away without paying taxes. now u have to re-invest within india in order to claim benefit.
     
  3. cuckoo

    cuckoo Super Moderator

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    That interest rate of 8-10% in India is really a Mirage. I know all about because i have a large part of my savings in that form. You pretty much lose all of it in currency depreciation and income tax. You pay 30-40% state and federal tax on the interest based on its $ value for that year. I had expected rupee to appreciate considering it is among the most undervalued currencies based on purchasing power. That hasn't happened and in fact the rupee depreciation is anywhere from 5-8% every year. Yo get no relief for currency depreciation in terms of income tax till you convert the money back to $s.
     
  4. cuckoo

    cuckoo Super Moderator

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    How about US taxes on the capital gains. Apparently, an exemption applies only to sale of a residence that you have lived in for 2 years in the last five, or exchange of like investment property and foreign and us real property is not considered exchange of like kind.
     
  5. s_gan

    s_gan Super Moderator

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    Since you are already taxed at 20% on that income by another country , the capital gains would not be taxed again. I do not have any income overseas so I could be wrong. I suggest you check with a Desi CPA.
     
  6. cuckoo

    cuckoo Super Moderator

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    My point is if you didn't have to pay tax in India, you would still end up paying it it in the US.
     
  7. mar212011

    mar212011 Well Regarded Member

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    Well you are looking to bring back that money- if it stays there - its a long term deposit, it doesnt have to be on your name, say your parents invest it... ok im sensing someone is going call this wrong but i dont see it that way
     
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  8. mar212011

    mar212011 Well Regarded Member

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    Any income or deposits outside of US needs to be reported after 5lakhs but not sure how they use that information to tax
     
  9. cuckoo

    cuckoo Super Moderator

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    No matter whose name it is, if and when you take it back, you will have to pay the tax. Gifts are taxable when from resident to NRI. You are also liable in the US i believe.
     
  10. cuckoo

    cuckoo Super Moderator

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    you have to declare and pay tax on any and all worldwide income in your federal and state US return. The 5lakh ($10k) floor limit is not for income rather the total value of all accounts abroad (aggregate deposit amount) for purposes of a separate requirement to declare foreign accounts.
     
  11. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Keep in mind that you get a 100% tax credit for all foreign taxes paid. This usually wipes out any payment due in the U.S. for foreign income.
     
  12. cuckoo

    cuckoo Super Moderator

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    The % credit for the year depends on the ratio of foreign to US gross income. One has to be careful to carryback and carry forward any used credit so as to not lose it. I have lost some so just flagging that. :) also, losses due to currency depreciation cannot be deducted till you convert money back to dollars so one may end up paying taxes on notional interest income when one may in fact see your deposits dwindling in dollar terms
     
    Last edited: Sep 1, 2015
  13. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Ouch.
     
  14. mar212011

    mar212011 Well Regarded Member

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    Interesting, maybe the timing is important. I dont think Rupee will be at this high level for a long time, so if it falls down to 50's , you would still be better off than savings account here
     
  15. cuckoo

    cuckoo Super Moderator

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    After studying the dynamics of currency valuation i have come to the conclusion that the rupee dollar exchange rate is headed in one direction for the foreseeable future. It is not the purchasing power that decides the rate but the sentiment and the government policy. The dollar being the global trading currency has an undue advantage. The Indian government will not let rupee appreciate because it makes the exporters unhappy even though the country runs a trade deficit. The government wants to increase exports and considers rupee to be overvalued based on real effective exchange rate (REER).
     

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