How to fill F1116

[ramanathan1720]

When we sell shares in foreign companies say in India, for passive category we have three figures namely, (1)gross sales receipts from sale of shares in India, (2) Sales expenses like brokerage, security txn tax, gst etc and (3) cost of acquisition.  My problem is which figure is to be entered in line 1a of F1116:

(i) Is it gross receipts in Line 1a and sales expenses (SE) and cost of acquisition (COA) in line 2 of F 1116

(ii) Net sales (gross - SE) in Line 1a and COA in line 2

(iii) Net taxable capital gain that is gross receipts - SE-COA in Line 1a and nil in Line 2

The tax credit will vary in narrow range in each case.

Please clarify.

[pk]

@ramanathan1720  -- Namashkaram ji

(a) The reporting  of the sale  of stocks , bonds etc.  and therefore the  Gain / loss per US rules is entered  as if you had a 1099-B.  You use  US$ of the day  ( generally ) and from published sources .  Keep notes on what exchange rate you used and why ( just in case of a challenge ).

(b)   Absent a US-India  tax treaty limitation that you wish to avail ( and depending on type of asset ), everything up to this point is just as if these were domestic asset.

(c) For 1116 ( foreign tax credit ) things are really based on double taxation  clause of the tax treaty.  Thus  US is required to give you a credit ( allowable for the year ) based on the lesser  of  the US tax  and  that actually paid to India ,  on the DOUBLY taxed income.  In most cases  it would be the  lesser of the gain computed  under US laws and under Indian   tax laws.  That is your foreign source income.

Does this make sense  ?

Is there more I can do for you ?   ( you can add to this post or PM me  ).

pk