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Smkmi123
New Member

Question on reporting capital gains on sale of home in India

I sold my house in India in 2023. I wanted to know where should I enter this sale in turbo tax premier (desktop version) and how to get the foreign tax credit on the TDS for the sale of house

pk
Level 15
Level 15

Question on reporting capital gains on sale of home in India

@Smkmi123 , my assumptions for your scenario:

(a) You  an US person ( citizen/GreenCard/ Resident for Tax purposes) ,  having US tax home, filing MFJ

( b) Sold a property in India  in 2023,  TDS for Indian Tax year 2023/24 ( at 20% 0r 1.3% or ? )

(c)  Have US tax return for 2023, did not recognize the disposal of the  asset in India.

(d) Now you wish to recognize the  disposition / alienation of the asset  and claim Foreign Tax Credit  based on finalized  Indian Tax  Return).

 The only recourse that you have is to pursue this  through amending your  US return for the year 2023. To do this 

(1) You will need to open  your 2023 TurboTax and  Open your 2023 return and save it  under a different name  ( e.g.   append -- "As Filed" to the name  that TurboTax had assigned  originally assigned ), so it is available  for future reference.

(2)  Tell TurboTax that you wish to amend a return, select  the default return for the 2023 -- i.e. not the one you saved  in  step (1) above.

(3). TurboTax will go through some machinations and then open the  return to be amended.

(4). Now go through the Income section and  select  -- sold home  ( here I am assuming that the  home that you sold  was not ever used as an income property / rental property etc. on which  depreciation was allowed/used ).

(5) Answer TT questions regarding the sale  -- cost basis ( the price at which you acquired the asset plus any cost of any improvements etc. ); when did you acquire the property and how  etc.;   sales price ;  allowable sales expenses ( commission, transfer tax, repairs/changes  done for the purpose of the sale etc.).

(6). TT will sue all these items to compute the  gain per US tax laws.  And this will then flow  on to your form 1040 as   capital gain.

(7).  Now you have to move to the  "Deductions & Credits  " Tab.   This will open a list of  deductions and credits .  From here select  "Foreign Tax Credit " Select this.

(8).  This will now walk you through filling out the form 1116.  Here your foreign source income is the "gain" that  is  was computed form the sale of the property per US rules -- form 1040-line 7.  Here you also provide the  final Tax that India levied on the sale of the property.  TT will compute the allowable Foreign Tax credit for the tax year 2023-- this will show up on Schedule- 3 line 1  and comes from form 1116 line 35.  

Note that  while all your foreign taxes paid is recognized , the allowable amount  for the current tax year  is the lesser of  US tax  levied   and    actual paid  to India on the same foreign source income.  The  rest of the Tax Credit is banked   -- ( one year back or up to 10 year  forward ).

 

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