Avoid double taxation on bank interest

[aays2]

Hello,

I will be consider as resident of India and USA for the tax year 2023. I have Indian income from the bank interest that I have to declare in USA tax return. I will be paying the taxes on this interest in India as well.

How I can avoid paying double taxes?

The article related to form 1116 on turbo tax says I don't have to fill this form is income is through interest.

Foreign tax credit without Form 1116

Situations exist that allow you to claim the FTC without filing Form 1116, if the income concerned meets the qualifying definition.

For example:

• If all your foreign-taxed income was 1099-reported passive income, such as interest and dividends, you don't need to file Form 1116,

[MinhT1]

Your India-based interest isn't reported on a form 1099 (which is a US tax form), so you'll have to fill out form 1116 to claim a foreign tax credit, so that the interest isn't taxed twice.

[aays2]

@MinhT1 I am going to report interest on the form 1099 as US tax includes all the global income. In this case I have to fill form 1116?

Or I cannot report it on form 1099 and fill the form 1116?

[MinhT1]

You didn't receive form 1099-INT, but you'll report the foreign interest as if you received a form 1099-INT. And you'll fill out form 1116 to claim the foreign tax credit.

In TurboTax Online, you can enter your foreign interest by following these steps:

1. Open your tax return
2. Click on Federal in the left-hand column, then on Wages & Income
3. Continue to All Income, locate the section Investments and Savings and click on the arrow on the right
4. Click Start next to Interest on 1099-INT.

Also read this TurboTax article on Form 1116.

[aays2]

@MinhT1 thanks. I was reading the same article and found below info in the article related to foreign income through interest. 

Foreign tax credit without Form 1116

Situations exist that allow you to claim the FTC without filing Form 1116, if the income concerned meets the qualifying definition.

For example:

• If all your foreign-taxed income was 1099-reported passive income, such as interest and dividends, you don't need to file Form 1116, provided that any dividends came from stock you owned for at least 16 days.