175. Capital gains tax on

property sold in India by US

Citizen

Q: Hello, I am a U.S. citizen, of Indian origin, living in the U.S. Recently, some family property in India was sold, and I inherited a portion of the sale proceeds. The amount is being deposited in an NRO account I had opened in a State Bank of India. I had a few questions about this situation: 1) Is it better to pay capital gains and other taxes in India, and then repatriate? 2) How is the proof of having paid the above taxes in India to be obtained? 3) If all taxes are paid in India, what steps should the accountant in India do? 4) What is to be done to avoid double taxation (in India and in the U.S.)? 5) How is the repatriated amount to be declared in the U.S.? 6) Are there any other major issues to be aware of in this regard? Thank you very much for this much-needed service that you are providing to people of Indian origin who are unsure about the details of the requirements as above. regards, John A. As for question one, you don't have a choice as all taxes due have to be paid before you can repatriate. Proof of filling taxes in India is the acknowledgement stamp and signature of the tax officer who receives the tax return. Taxes can also be filed electronically. In India whether taxes are filed in electronic or paper format, documents normally do not have to be sent but must be maintained in case they are required for verification later by the tax authorities. Any accountant in India should be able to do this for you. When it comes to capital gains, selling of property in India is the same for income tax purposes as if the property were located in the United States. To report capital gains on your tax return you normally are required to fill Schedule D (Form 1040). Click HERE to view this form. Regards to your question on what can be done to avoid double taxation? You need not do anything! Tax treaties between USA and several other countries (India being one of them) are meant to reduce or avoid double taxation of the same income by two countries. US citizens as well as all US permanent residents such as green card holders are required to report their worldwide income every year. Your US income tax return filed every year must include earnings such as: Foreign pension income Foreign dividends Foreign rental income Foreign capital gains and just about any other type of income. Make sure you file taxes in a timely manner. The statute of limitations on tax collections in the United States never runs out and the later one files the more penalties etc can accrue.