@sharan0711 ,
(a) Which country -- you may need Tax Treaty clause " mitigation of double taxation ) ?
(b) assuming that you are a US person ( citizen/GreenCard/Resident for Tax Purposes ).
(c) Enter Interest income just as if it was domestic --- Under "Personal Income" or "Wages and Income" tab, select "I will choose what I work on ". This should then open a screen showing all the different types of incomes.
(d) Select the box that says Interest income, then select "I will type in myself"
(e) Now enter the entity name that gave you the interest -- ignore EIN if it asks for it ( in my case it does not enforce this )
(f) enter the interest amount.
(g) you should see your tax liability go up.
When you are all done with your incomes , go to "Deductions & Credits " tab and again select "I will choose what I work on ".
(h) Now from the list of deductions/ Credits select " Foreign Tax Credit " , near the bottom of the list.
(i) Now TurboTax will help you fill out form 1116 , after you choose / select "Credit" instead of deduction. Here your Foreign Source income is the interest income, and foreign Tax is the taxes you paid to the country concerned. Note that ( at least for India ) TDS is only an estimated tax. This means that if you use this as the "Foreign Taxes Paid ", you may have to file an amended return once your ITR has been filed and accepted.
(j) Also note that while US recognizes the full amount of taxes paid to a Foreign taxing authority, the allowable Foreign Tax Credit for the tax year under consideration is the lesser of actual paid to Foreign Govt. and that levied by the US on the same doubly taxed income. Thus you will never get more than the US tax ( this is allocated based on a ratio of Foreign Source income to your world income ) -- the rest is banked.
Does this answer your query ?
Is there more I can do for you ?
pk
