TDS deduction and income tax refund from tds in india

[ezjava]

i have rupee 200000 interest earned in indian fixed deposit. The bank took rupee 60,000 as tds.

I filed indian income tax return and got 60,000 back. my question is, should i report  200000 in

schedule B with foreign tax 60,000 or report zero because i got all the tds back. 

[LinaJ2020]

If you did not pay any taxes to India on the $200K, you do not enter $60,000 foreign taxes on your US return.  

If you are a US citizen or resident, you are required to report worldwide income including your Indian Fixed Deposit interest income on your Form 1040.  However, you only qualify to claim a foreign tax credit if you pay taxes to both the India and US governments.  

[RG2K]

@ezjava @LinaJ2020 Thanks for the question. I have a related question and wanted to understand this a bit more:

In your above example, lets say Rs. 200000 (say ~ $3000) you earned as interest in say 2020. Out of that India deducted the taxes at source (TDS) of Rs 60000 (say ~ $850) in 2020.  Now the refund you got from India is usually next year (2021):

So, my questions:

1. When filing the 2020 taxes in US, should this be reported as $3000, ignoring the fact that the India tax refund will be received next year in 2021

OR

2. On 2020 US taxes, one will report $2150 ($3000-$850) as income AND then on your 2021 US taxes (when you receive your India tax refund) you report $850 as the income? 

Thanks,

RG 

[vin_sphinx]

@RG2K Did you get an answer to this question? I always end up in this situation every tax year (I've been doing your option 1, but end up show the TDS refund as income in the next tax year - it's a mess!).

Or anyone else who has a more accurate info about the TDS refunds...

[DaveF1006]

No. You would report the TDS deduction refund as interest income in your return.  Here is how to report.

1. log into your account
2. Go to income
3. Go to Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto)
4. Navigate through these entries until you reach a page where you will select interest.
5. Fill in the section.  If it asks for a FEIN, use 99-0999999
6. Finish out the section. Make sure you report this in US dollars.

If using Turbo Tax Desktop:

1. Go to Federal Taxes
2. Wages and salaries
3. Interest and Dividends
4. Interest  on 1099 INT

[RG2K]

I have not been able to find the authentic reply to this. Have been doing option 1. If you do find any relevant details or source, please update this thread. 

[DaveF1006]

There really isn't an authentic authoritative source to cite this but TDS does need to be reported as taxable income since it was a refund. Instead of reporting this as taxable interest, there is a more appropriate way to report this in your return.

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed. Here call it a TDS refund from India and the amount.

@ezjava 

@RG2K