I have a follow up question about reporting interest income from foreign bank deposits. I incurred losses by investing money in fixed deposits in India due to changes in currency rate though banks deposited some interest. The percentage loss incurred due to change in conversion rate (last year to this year) is more than the interest gain percentage.
Do I pay taxes for the interest income deposited by Indian bank though overall my bank balance when converted into USD this year is lower than last year’s balance even after including the interest income (no other debits or credits on the account other than interest income deposited).
Taking some numbers for example below.
Last year, my bank balance was say 5,00,000 INR = 7843 USD (using exchange rate for 2017 noted in <a rel="nofollow" target="_blank" href="
https://fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/historical.html">ht...>)
Interest rate for this fixed deposit amount = 5%
Current balance including interest income = 5,25,000 INR i.e. 7521 USD (using exchange rate for 2018 noted in <a rel="nofollow" target="_blank" href="
https://fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/historical.html">ht... If I just look at interest deposited by the bank, I made interest income of 25,000 INR i.e 358 USD. Am I supposed to pay tax on this income though overall there is a loss (or) should I just report zero interest income (or) is there a way I can report the loss in this investment and reduce my tax liability from other investments/income I made in US.
PS: For the last 5+ years, I have been paying taxes by just converting interest deposited by bank in INR to USD without considering the losses due to falling INR conversion rate with respect to USD. However, it doesn’t feel reasonable. I may have overpaid in taxes
