MARCH 2018
Khaas Baat : A Publication for Indian Americans in Florida




I have been getting several questions about reporting of foreign income, specifically foreign (India) capital gains and their taxability in the United States in the hands of U.S. citizens or G\green C\card H\holder or U.S. tax resident. Set out below are some frequently asked questions along with answers on this issue:

  1. I have just sold a real estate property in India. Currently, I am NOT filing any Income tax return in India. Do I need to file it now for sale of real estate property in India?

Yes, generally if you have income more than RS 250,000. Yes, and you will be liable to pay capital gain tax for the sale of property or make exempt investments up to certain limits before you can repatriate the money out of India.

  1. What’s the process to file a tax return in India?

First you should have Permanent Account Number (PAN) in India and then file income tax returns for each financial year (April to March) as applicable.

  1. I don’t have a PAN (Permanent Account Number) in India? How do I get PAN number and PAN card?


and apply online for you PAN, following the simple instructions on the website.

  1. I heard that the Government of India started a new unique ID number called the “Aadhar number” and this results in the issuance of an “Aadhar card.” Do I need to apply for Aadhar card?

No. Aadhar card is issued only to Indian citizens and residents subject to certain physical presence requirements within India.

  1. When do I need to file the income tax return in India?

Individuals must file their income tax returns on or before July 31 after the end of the previous financial year on March 31.

  1. What must I report in the income tax returns that are filed in India?

If you are not a tax resident of India in the past financial year, then you only need to report you income through capital gain on sale of real estate property and any other taxable income accrued in India.

  1. What are capital gains?

It is the difference between sale price minus costs incurred when the property/asset was purchased. The purchase cost is equal to the amount paid for the property at the time of purchase plus any expenses incurred until the date of sales of real estate property. The purchase cost will be adjusted by multiplying the inflation index to arrive the true cost of purchase to determine capital gains.

  1. What is the rate of capital gains tax in India on sale of real estate property?

It is 20.6 percent (tax rate 20 percent plus 3 percent education cess tax on 20 percent) if the real estate property has been held for a period of more than two years. If the property has been held for less than two years, the income will be taxed as per the general income tax slab applicable to the individual.

  1. Do I need to report capital gains in the U.S. tax return?

Yes, all U.S. citizen/green card holder and U.S. tax resident are required to report worldwide income in the U.S. tax return

  1. Am I paying double tax, i.e. tax in India as well as in U.S.?

Initial answer is yes but the U.S. has a tax treaty with India for the avoidance of double tax; therefore, you will be allowed to claim credit for income tax paid in India as a foreign tax credit in the U.S. tax return to the extent of:

whichever is less.

  1. Do I need to file tax returns every year after the year in which the sale was made thereafter in India?

Not required, unless you have other taxable income in India that is more than the filing threshold which is currently at RS. 250,000.

  1. Am I allowed to bring money from India for sales of real estate property?

Yes, provided you are fully tax compliant and you need to follow the RBI guidelines. Generally speaking, NRIs are allowed to remit/ repatriate up to $ 1 million per calendar year from the sale proceeds of property in India from their NRO account.

  1. Do I need to report in the U.S. tax return or file any other document in US. when I bring money to the US?

Generally, you are required to file Form FINCEN 114, Form 8938, Form 3520 and Form 5471 but depend upon facts and circumstances of each case per Foreign Account Tax Compliance Act (FATCA).

  1. If I have a real estate property lying vacant, do I have to report in the US tax return?


  1. If I am earning rental income from real estate property in India, do I have to file return and report the same in U.S. tax return also?

Yes, you have to file a return in India if income earned crosses threshold of Rs. 250,000 generally and it has to be reported in U.S. tax return also as it includes worldwide income.

Sanjay Gupta, CPA, FCA, who has 27 years of experience in accounting and taxes, is based in Plantation. He can be reached at sanjayg@sanjayguptacpa.wcom or visit

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