Hello sgd:
Thank you for your follow-up question. My answer is that there is nothing that I am aware of on the United States side of the equation that would otherwise restrict the deductions that you ask about. US Code Title 26 (i.e., the federal tax laws of the United States) allows mortgage interest and property tax deductions for overseas homes of US taxpayers.
Moreover, there appears to be supporting language for this position in the 1991 treaty document itself. Please see the following:
<a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-trty/india.pdf">https://www.irs.gov/pub/irs-trty/india.pdf</a>
Article 1, Paragraph 2:
"The Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or here after accorded:
(a) by the laws of either Contracting State; or
(b) by any other agreement between the Contracting States"
I would certainly read that to mean that a valid tax deduction, under existing US tax law (such as for mortgage interest and property taxes) is not affected by the India - US Treaty.
Once again, however, although I am a licensed CPA with many years of experience in this area, I do not have the necessary expertise to express an authoritative opinion about these same tax deductions under Indian law; and for that reason I would respectfully suggest consulting with an Indian tax expert as well to arrive at the "other half" of this answer.
Thanks!
