Q.832 Tax liability in USA when

claiming Section 54 exemption in

India

Question: Respected Sir, i am a USA citizen,having house in india if i sold my house in 40 lakhs and i buy new flat in 40 lakhs, so i have not to pay long term capital gain tax. in this case, is there any tax liability for me in USA ? Regards Dr Jayvadan [January 1, 2016] Answer: NRIs selling their property in India can save capital gains tax in India by virtue of exemption provided under section 54 which applies if the property sold had been held for more than three years and: 1. The capital gains amount is invested in another property in India within two years. Or 2. Invested in bonds of NHAI and REC, within six months of date of sale. I believe that tax exemptions available in India do not apply in USA and the amount of Indian capital gain needs to be declared in USA regardless of whether such capital gain was exempt from tax in India or not. In case exemption under Section 54 is not sought in India and capital gains tax is paid, then when the tax paid in India would be available as a credit when filing USA taxes by virtue of the Double Tax Avoidance Agreement. My understanding is that US NRIs are required to report such capital gains to the IRS on ‘Schedule D of Form 1040’ a link to the IRS FORM is provided: https://www.irs.gov/pub/irs-pdf/f1040sd.pdf Suggest you check with your accountant to ascertain current IRS rules as they can provide professional advice and tax planning guidelines that will eventually save you money.