Sale of Property in India

[ksh2025]

Hi @pk ,

Thank you so much for answering all the questions.  They were really helpful.

[pk]

@ksh2025 , if I have satisfied your query, please  consider  accepting my answer  -- this will close the thread.  Since we are volunteers, it helps  to close threads.

Is there more I can help you with ?

[Houstonwasi]

@pk Thank you for detailed answers on this topic. Really insightful and helpful. I have sold a flat  in India last year. For a(2) in your reply -

1. Can I include my one time portion contributed on Building exterior fixing, painting, lift  upgrade etc done before 2024 in Cost of Improvement.

2. Similarly can I include Monthly Maintenance charges (used for build and grounds upkeep) over the total duration of flat ownership in basis calculation.

Thanks.

[DaveF1006]

Yes, you can include your one-time contributions for building exterior fixing, painting, lift upgrades, and similar improvements in the Cost of Improvement. These expenses are considered capital improvements because they improve the value of the property or extend its useful life.

No, monthly maintenance charges typically cannot be included in cost basis. These charges are considered regular upkeep expenses and aren't classified as capital improvements.  

[Houstonwasi]

@ksh2025  Thanks for the quick clarification. Understood.

[sumansh1]

Hi @pk,

Thanks for your help as a volunteer answering so many questions. 

Question: I paid my taxes on property sales in India. Where should I be putting that tax paid in India in Turbo Tax?

I am assuming TDS in India, etc., is not relevant, and the only thing that matters in USA, is the Final Taxes that my CA paid to Income Tax India.

Please let me know if this above is correct. I called 2-3 experts in Turbo tax but am not getting a clear answer.

Thanks

-S

[pk]

@sumansh1  answered  you PM -- please see there.

pk

[TK_NJ]

Hello It was great to get this information very helpful

If i have receipts of TDS and Challans that was paid in India  and provide that figure in US tax return is it ok ? Considering the delay from Indians tax authorities side it is a challenge to get anything electronically.

I thought IRS accepts inputting the taxes paid overseas and take credit for it

[DianeW777]

Yes, you can use your receipts. The credit will be the lesser of what the US would tax the income or the amount paid to another country on the same income. Your credit may be less than you paid depending on your US tax.

@TK_NJ 

[TK_NJ]

Thank you for your quickness of your response ! awesome

Regarding Acceptable Receipts:

I will have the following

1. The  TDS that was paid by the buyer  will be available

2. On the top of that I have to pay the balance Taxes due in India through a Challan 

3. After that only the Chartered accountant will be able to able to issue a certificate to repatriate the Money to US

Both 1 & 2 are acceptable or a certificate issued by Chartered accountant describing both in certificate is acceptable?

Regarding Incidental costs

• I have made multiple trips to India to get this done . For past Six years I have spent six India Trips and other costs are also involved
• what are the things I can get credits for which is reasonable without being flagged
• I do not have receipts for my Trips are they acceptable without receipts?

[pk]

@TK_NJ , while I agree with my colleague's  (@DianeW777  )  response that such receipts ( for having paid taxes to India ) would be applicable, going over your response:

(a) By saying that  "TDS that was paid by the buyer  ", I am assuming that TDS was withheld  and taken out of the monies owed to you by the buyer  (AND NOT  that the buyer had agreed to pay the TDS on top of the agreed price of the sale );

(b)  By including the total amount of taxes  paid/to be paid to India on this sale  as "Foreign Taxes Paid" and claiming  FTC, may result in your having to file an amended return.  This is because if there is any changes ( very/ somewhat likely ) in the  Foreign Taxes Paid, you have   make your return recognize the final figure -- even though  your allowable credit may not change   ( but your carried back/forward amount may ).

(c)  Note that the Foreign Tax Credit allowable for the tax year is the lesser of  Foreign Taxes Paid  and  US Taxes levied  ON the SAME foreign  income.     Also  depending on which  capital gain computation you used in India  ITR ---- Indexation with 20%  tax or  No-indexation and 12.5% tax--- the  US gain  computation may be different.  Thus it is generally  ( more likely ) that it is the US gain that should be used as the foreign source income on the sale.

(d) IRS will recognize the whole amount of foreign taxes paid  and the un-allowed portion will be banked -- one year back or 10 year forward usage allowed.

(e) The receipts  ( TDS document . Challans etc. ) are not sent to the IRS -- you just keep these  in case of a challenge.  Also keep record of  exchange rate that you used.

(f) Generally air-travel  expenses , especially foreign, for purposes  selling / signing docs etc. related  activities,  will not be allowed as a deduction  ( i.e. as a cost of sale process ).  You would have a hard time justifying that you spent time only related to the sale and nothing else.   Have no case law to support  or negate this.

My general thought process is that you should ask for an extension and file the return ONLY when the ITR has been filed / accepted by the IT dept.   However, in the event that  you are likley to owe monies to the IRS/State, you may want  estimate and pay-in  ( along with the  request for extension ) amount sufficient to avoid  interest charges  when you file the final return for the year.

Is there more I can do for you ?

Namaste ji 

[TK_NJ]

Wow!

@pk 

Can I PM you with  some specific help ?  

[pk]

@TK_NJ , of course--pk