topic Re: Splitting foreign income and capital gains from financial years different from calendar years in Get your taxes done using TurboTax

Splitting foreign income and capital gains from financial years different from calendar years

nitingupta — Wed, 17 Sep 2025 16:23:10 GMT

Hi,

For passive foreign income and long term capital gains in a country where the financial year (April-March) is different from the calendar year (Jan-Dec), how will the foreign income and tax credits for foreign taxes already filed be split for US taxes for a resident alien?

For example, if 2024 US tax returns are filed, will Jan-March of 2023-2024 and April-December of 2024-2025 be used from the past two foreign tax returns?

Re: Splitting foreign income and capital gains from financial years different from calendar years

nitingupta — Wed, 17 Sep 2025 16:24:56 GMT

Secondly, how would foreign long term capital gains be treated if the sale was done in Dec. 2024 but the taxes were filed in 2025?

Re: Splitting foreign income and capital gains from financial years different from calendar years

vithalanin — Wed, 17 Sep 2025 16:32:42 GMT

You would need to calculate the income from January to December of the tax year and the corresponding taxes paid or accrued for them. The income is reported for the year and not based on the foreign countries reporting fiscal year system. So interest income for the period from 1/01/2024 to 12/31/24 and not from 4/1/23 to 3/31/24. The taxes can be paid in the same calendar year or can be accrued and paid in the following year for this income
So to answer your next follow up question, you would report the sale of stock in the year sold. So if it sold in December,2024, then the reporting is done in 2024 tax return and taxes paid for it in January 2025, are reported as accrued taxes on your 2024 tax return.

Re: Splitting foreign income and capital gains from financial years different from calendar years

nitingupta — Wed, 17 Sep 2025 16:41:01 GMT

Thanks!

Per your response, it sounds like 25% of the income from Apr. 1, 2023- Mar. 31, 2024 i.e. Jan-Mar 2024 and 75% of the income from Apr. 1, 2024 - Mar. 31, 2025, i.e. Apr-Dec 2024 would go in 2024 US returns. Correct?

It is very hard to separate the interest received if it is not monthly.

Secondly, long term capital gains are on the sale of rental property, not stock.

Could the above formula be applied, i.e. applying 75% of gains in 2024 and 25% in 2025 US tax returns?

Re: Splitting foreign income and capital gains from financial years different from calendar years

pk — Wed, 17 Sep 2025 17:18:24 GMT

@nitingupta agreeing with my colleague @vithalanin for his excellent response to your post and would just like to add:

(a) generally passive incomes like rent , interest, dividend should be allocated as and when received. Thus if it quarterly credited to your account , then yes you can use quarterly allocation. I do recognize that while Indian tax year runs from April 1st of one year to March 31st of the next year, most rental agreements / raises etc. are based on calendar year and so must be allocated /recognized correctly for US tax purposes. Ditto for Interest earnings ---recognize / allocate as credited. Dividends should be based on ex-dividend dates.

(b) Sale / alienation of capital assets like residential property must be based on when actual sale occurs not allocated.

(c) For Foreign Tax Credit, while TDS is often used but that may lead to having to file an amended return when the Indian IT is settled/finalized ,. esp. given the current dual method of residential gain taxation ( Basis indexation with 20% or no-indexation with 12.5% ) leading to correct figure only after IT is filed and accepted.

Namaste ji

Does this make sense ?

Is there more one of us can do for you ?

Re: Splitting foreign income and capital gains from financial years different from calendar years

nitingupta — Wed, 17 Sep 2025 20:28:38 GMT

Thank you so much @pk and @vithalanin !

Could all the foreign passive income, i.e. foreign interest, rent, pension and long term capital gains be filed electronically using Turbo Tax Premier software for 2024 US taxes?

There are no 1099s. So where should this information be entered?

My understanding is I will have to file the following forms:

Form 1040

Schedule B - Reporting interest from foreign accounts

Form 8949 - Sales & other dispositions of capital assets

Form 1116 - Claim Foreign Tax Credit for taxes paid abroad

Form 8938 - Statement of Foreign financial assets (FATCA)

FinCEN Form 114 FBAR - Report foreign accounts > USD 10,000

Any other form that I missed?

Re: Splitting foreign income and capital gains from financial years different from calendar years

pk — Wed, 17 Sep 2025 20:40:42 GMT

@nitingupta , Namaste Guptaji

All the items mentioned in your post are supported by TurboTax.

The only exception is FBAR --- FinCen.gov form 114. This last one does not go with your federal return, filed ONLY on-line at -->

FinCEN Form 114

Is there more one of us can do for you ?

Re: Splitting foreign income and capital gains from financial years different from calendar years

nitingupta — Thu, 18 Sep 2025 13:43:06 GMT

Thanks so much @pk ji.

I entered all the foreign passive income + foreign capital gains in Turbo Tax within 1099 OID, Foreign Accounts after converting into USD at 2024 average exchange rate published by IRS.

But the numbers do not appear in the Income Summary - it still shows 0.

Is there a different section in which the information should be entered?

Re: Splitting foreign income and capital gains from financial years different from calendar years

pk — Thu, 18 Sep 2025 19:04:15 GMT

@nitingupta on going back and reading this thread , I want to make sure that:

1. You entered all foreign and domestic earned interest as if you have received a 1099-INT. TurboTax will allow you to enter foreign earned interest ( tell TurboTax that you do not have a 1099-INT, but want to declare earned interest ), just with the name of the institution providing the interest, address and the amount in US$. ( Make a note of the US$ amount because you will have to report this as part of other Foreign source passive income for form 1116).

2. Foreign dividends are also reported similarly ( with no fed ID ) under the dividends.

3. Rental income , foreign or domestic are reported on Schedule-E --- Tell TurboTax that this is foreign residential property. Note the final income figure from Schedule-E --- this is foreign source that will have to be added as part of the foreign source income for 1116

4. Pension is reported under "pension" -- kind of format for 1099-R --- you will need the distribution amount, taxable amount, distribution code is generally 7 -- but look at the form and instructions for form 1099-R ---See here ---> About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. | Internal Revenue Service

5. For sale of Capital assets --- you use 8949, Schedule-D etc. and /or 4797

Note that in all these cases, the above is ONLY valid for US tax purposes. You foreign country IT filings ( India in your case ? ) are distinct and follow local rules.

Also when you are in form 1116, you have to enter the total foreign source income ( it is based on the US "income for those categories " , because that is the usually the doubly taxed income) and the taxes paid to the foreign taxing authorit(y/ies)

Does this make sense ? Is there more I can do for you ? If you are uncomfortable putting info here on the public board, you can always PM me ( just NO PII -- Personally Identifiable Information )

Namaste Guptaji

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Thu, 19 Feb 2026 21:17:39 GMT

Thank for everyone's messages, very informative.

I found it easy to be able to calculate yearly numbers for interest and dividends from form 26AS. The most difficult part i am facing is how to handle the taxes paid in india vs receiving credit for the taxes paid.

Form 26AS has TDS deducted record but eventually the actual tax paid is only known after one files taxes. That in india is done around July -Septermber 2026(for this year) but I am currently required to put in the numbers for 2025 in my us tax return. Money earned is easy to calculate, but how to tackle the taxes paid in foreign country to claim foreign tax credit here.

If I go by TDS paid, then that may create a situation to amend return or having a false number as TDS paid is not necessarily the actually taxes paid.

Please help .

Re: Splitting foreign income and capital gains from financial years different from calendar years

nvithalani — Thu, 19 Feb 2026 22:42:17 GMT

You take credit based on foreign taxes accrued. Then when you get a refund on taxes paid in India, you can amend your return to reflect the correct amount of taxes paid. The better option is to wait till your India return is finalized, so that you do not have to amend your tax return.
You do not have to wait till June/September to file your taxes in India. If you have your figures ready, you can have your India CA give you the actual amount of taxes owed and there by report that amount.

Re: Splitting foreign income and capital gains from financial years different from calendar years

AmyC — Thu, 19 Feb 2026 22:53:29 GMT

In the US: You are allowed to file an extension and file your taxes by October 15, 2026. You must make a payment by April 15, 2026 if you believe you will have a balance due.

Reference: How do I file an IRS tax extension?

@samirarora

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Thu, 19 Feb 2026 22:55:42 GMT

Not Really.

1. India finacial year is 1 April to 31 March

2. Form 26AS for last quarter ( jan-mar) only show up by May

Due to above, any decent CA Will not venture out to preempt tax liability or file tax return.

Regarding AMENDING return if tax paid is lesser or more than tax claimed is the obvious answer and the very thing one wants to avoid . This is the complexity one is seeking to solve in the first place.

Not to mention that if one has a tax redetermination , then one has to file schedule. C , FORM 1116 in subsequent year.

The only way I can think of so far is to use PAID METHOD vs ACCRUAL METHOD.

In paid method, one declared actual interest or dividend received and claims credit on Actual taxes paid. The actual taxes paid will be for previous year in India and may result in excess of less liability on one year to be covered in next year but numbers will always remain correct.

Not sure about the sanctity of this methodology.

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Thu, 19 Feb 2026 23:02:54 GMT

An extension is an option with disadvantages of having to file manually etc. Also, the financial year is still not in sync. Jan-dec vs apr-mar.

Could one declare actual interest and dividend received and take credit for actual tax paid in the year ( even though the tax paid would include tax paid for previous year but nothing wrong as one only takes credit for tax paid one time, as it is paid in cash method.

Re: Splitting foreign income and capital gains from financial years different from calendar years

AmyC — Thu, 19 Feb 2026 23:19:47 GMT

Yes, 2025 payments made are what is used for a cash basis payer. Payments to India for a 2024 return paid in 2025 count on your US tax return. It is a mismatch with years between the countries and credit but the IRS knows that.

Financial year options:

Cash basis: Most US taxpayers are cash basis which means only what you paid to India during 2025 is counted. If you make a payment to India in 2026, it goes on your 2026 US tax return.
Accrual method. This is where you claim a credit for taxes that relate to you 2025 income, even if you haven't paid the final bill yet. When you are filing form 1116, you can select to use the accrued method in Part II. Estimate your total Indian tax liability for the income earned in 2025 and claim it now.

If you have been filing using the actual payments / cash basis for the year, you want to continue using that method.

FYI: You can e-file through Oct 15. Once the IRS shuts down the system a week or two later, you must mail forms.

@samirarora

Re: Splitting foreign income and capital gains from financial years different from calendar years

pk — Fri, 20 Feb 2026 00:33:55 GMT

@samirarora , having gone through this thread, and generally agreeing with my colleague @AmyC , I am not quite sure that we are all on the same page.

(a) Should one assume that you are yourself a US person ( citizen/GreenCard/Resident for Tax purposes ) ?

(b) That your tax-home is US

(c) what type of income are we talking about that is being taxed by India --TDS. I ask because first there is treaty considerations and second income types may have different receipt dates -- e.g. dividend is gen generally the ex-dividend date etc. and thus may fall outside the US tax year , while still in India tax year.

(d) Generally, the preferred way to claim FTC is after India IT has been submitted and/or computed as final.

(e) If the income was credited in Jan-March of 2025, then you would have to split out the income earned within that window ( as foreign source income for US 2025 ) and get the allocated Indian taxes on that income from your 2024/2025 IT return. Obviously any Indian income credited in the window Apr-Dec of 2025 and the tax there-on can only be finalized after 2025-2026 IT has been completed/finalized.

(g) You always have the option to file US 1040 , recognize all the foreign source income applicable to calendar year 2025 and use the allocated TDS ( applicable final portion from 2024/2025 IT and TDS from 2025/2026 ) but this means that you may have to file an amended return when the Indian IT return is finalized for the year 2025/2026.

Is there a way you can tell us what types of incomes are we talking about ?

Is there more one of us can do for you ?

Namaste ji

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Fri, 20 Feb 2026 02:52:24 GMT

Wow Amy, you are good!

I am glad to hear that the cash basis system I had in mind is acceptable to the IRS and I am most likely going to chose this route. Calculating income earned is very easy, especially if one has their form 26AS at hand, which I do but i was struggling with what to do about claiming the tax credit.

My plan as of now, is to calculate income (interest plus dividend) earned during 1jan25 to 31dec25 , report it and then claim tax that I paid for year 2024 in my India tax return.

I was wondering what would happen if one earned less in a year but tax credit is very high (as previous year income was very high). This will make current year tax credit taken on US return look relatively much larger than the income one is showing. Can this create an issue , ie create audit risk etc?

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Fri, 20 Feb 2026 02:54:45 GMT

Amy, just to confirm. If I took an extension, i can do so on turbotax and then later in the year when one is ready to file the taxes, one can come back and efile subject to the two week margin you mentioned. Is this true for state taxes as well, in particular California (in my case)?

Re: Splitting foreign income and capital gains from financial years different from calendar years

samirarora — Fri, 20 Feb 2026 03:07:26 GMT

Hi Champ,

Yes, Amy's reply is immensely knowledgeable and useful. It has offered something workable which is to confirm the cash method and to confirm IRS's understanding of the mismatch in financial years and hence its openness to accept taxes paid during the year, irrespective of the fact that they were in fact paid for the previous financial

(India) year.

To answer your questions,

1. I am a us resident and tax payer. My tax home is US.

2. My income in india is interest income from banks and dividend income from mutual funds.

3. Form 26AS (which is like a 1099) from india clearly mentions the effective receipt date for incomes and one is best of sticking to those dates as those are the ones recognized by indian tax authorities as well.

4. When income was received and how to pick out incomes received jan-dec is not a challenge at all. It is very easy to segregate and put together. The challenge lies in taxes paid, as taxes are paid basis on different type of tax year (apr-mar vs jan-dec). Further, taxes paid in India are delayed, for example, my CA files my return in September

5. Using TDS method is highly flawed and creates more work than anything else. One could use TDS if they dont file returns in india and TDS = actual taxes paid. In my case, i file returns in india and a lot of the TDS paid gets returned the next year.

The whole conversation is look for ways to get things done without having to amend returns several months later as that is an OBVIOUS way to do it but not the most effective unless one has nothing better to do.

Incomes in my case are ;investment income = interest+ dividends

Re: Splitting foreign income and capital gains from financial years different from calendar years

pk — Fri, 20 Feb 2026 18:28:27 GMT

@samirarora , Namaste Aroraji.

While I agree with you on all points, I kind of don't understand your issue with your point#5. I do agree with you that TDS and TDC are similar to US "withholding" and often lead to need for amended returns .

My concern is because while you can get the actual foreign source income for the period Jan1st. 2025 through Mar 31st. 2025 from the AS26 ( I was not aware of this form but have familiarized myself with it ), the actual taxes levied on this can only be based on an average allocation from ITR for the Indian Tax Year 2024/2025. Absent specific rates applicable such as Capital Gains rate 12 -1/2% without or 20% with indexation, the average rate is probably the nearest you can get. Plus there is the exchange rate complication.

Please note that no matter how you come-up with an equitable case for the US return, you need to retain detailed documentation as to how and what you relied on, just in case there is a question from the IRS.

Also note that while the federal return has provisions for FTC, there is no such benefit for the state ( although some border states have specific agreements with neighboring countries.

A point you should be aware of is that most foreign Mutual Funds are classed as PFIC, requiring mark-to-market or similar value recognition regime.

While you did not mention, may I draw your attention to the fact as a US person you do come under the FBAR ( form 114 at FinCen.gov) and FATCA ( form 8938 with your return) and possibly form 3520 ( NRA/ foreign trust gifts/distributions etc. ). None of these are tax events but ignoring the requirement can result in onerous fines.

Is there more I can do for you ?

If you have more on this , please feel welcome to add to this thread ( even though it is a bit long ) or PM me ( just NO PII -- Personally Identifiable Information).

Namaste Arora ji