@vk29 , having read through your post and reply from my colleague @DaveF1006 ( and agreeing with in general ), I am surprised by some statements:
(a) India uses an indexed valuation and thus the Capital gain amount is generally lower i.e. the owner's basis is indexed year over year, in contrast to US basis ( acquisition cost [plus cost of improvements during the holding period).
(b) For US purposes, :
(1) your basis is stepped up ( to FMV ) the time of passing of the decedent, if you received the asset by inheritance.
(2) you tell TubroTax that you have sold a house ( under Personal Income; I will choose what I work on ; then go down the list of income categories and choose sale of assets/ business and follow through with all the questions. Turbo will ask for whether it is your home ( choose not my home ), basis ( FMV at death of the decedent ) etc.
(3) then under deductions and credits tab, choose Foreign Tax credit --- this will bring up form 1116, where the foreign income doubly taxed is "gross income from foreign sources" ) = your capital gain per US rules) and the foreign taxes you paid. Category of foreign income is passive.
Does this make sense ? Is there more I can do for you ?
Namste ji
pk
