@viraj , assuming that you are a resident for tax purposes for the whole year,
(a) you report your sale of Foreign Mutual funds shares just as if these were in the USA --- US tax laws for citizen/Resident/ Resident for tax purposes do not distinguish between such dispositions between US and foreign. US taxes such taxpayers on world income under its laws. You tell TurboTax that you have Barter/Exchange income ( generally reported on 1099-B or Broker's consolidated report ). You have to go through this section of entries carefully because you do not have a 1099-B and because all these share basis is not reported to the IRS. Note that the basis/cost is as of the date bought in US$ of the day-- not today's
(b) it will also ask for when acquired and when disposed and therefore will determine if it short or long term --- held for longer than 12 months ( for long term and otherwise short-term). It is a tabular entry form and all you do is enter the details of each share . Also note here that unless you instructed the broker otherwise and you are bought shares at different times, the default is First in First out
(c) Once you have gone through all the data entry , Turbo Tax will segregate the short term and long term and the gains and losses will be computed , adjusted etc. per the US capital asset rules.
(d) The tax treatment of the disposition i.e of the proceeds would be per the US tax laws without regard to sourcing .
(e) To recognize the taxes paid to India ( not the Held at Source but the final settled amount ), you have to file a form 1116 along with your return --- You will have to tell the TurboTax that you have foreign tax credit -- it will need the final taxes paid, the country where the foreign income occurred and the foreign income associated with the taxes paid. You can file now with the withheld amount and then when the final amount is in place then file and amended return or file for an extension and after the Indian tax is settled then file the US return. Note that if you are itemizing then it is possible to take a deduction for the taxes paid rather than go for the tax credit
Does this answer your query? Do you need more help / information ?
Namaste ji
