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Foreign tax credit on ESOPs in India

In 2023, my previous company in India compensated each employee for the loss in value of their stock options due to the separation of an entity.
The umbrella company had three subsidiaries - A, B, and C. When C was separated, the umbrella company compensated for the loss in stock price.
There was no stock sold here. I still maintain the same count of the shares with a slightly lower value.
I left this company in 2018 and stocks were in the form of ESOPs.

The payments made have been subject to withholding tax at the maximum rate of 30% (plus applicable surcharge and cess) following the new regime of tax in India.

I am filing taxes in the US now. How do I show this income and claim foreign tax credit for the tax paid in India using TurboTax?
I have not received any tax document, just the details of loss in value, total no. of shares, gross value, and tax paid.

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1 Reply
DaveF1006
Expert Alumni

Foreign tax credit on ESOPs in India

Here is how to report. 

 

  1. Go to federal
  2. Wages and income
  3. Investment Income
  4. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’  
  5. The first screen will ask if you sold any investments during the current tax year ( 
  6. Since you did not receive a 1099-B, answer “no” to the 1099-B question
  7. Choose type of investment you sold - Stocks, Mutual Funds, Bonds, O
  8. How did you receive the investment. Choose the appropriate answer
  9. On what did did you receive this investment.  The date of purchase of the stocks.
  10. Some basic information:
    1. Description –  Usually the address of the property sold
    2. Sales Proceeds –  The amount you received for the sale
    3. Date Sold – Date you sold the stocks
    4. Cost or other basis  (This is where you put the purchase price of the stocks)

Now to claim the foreign tax paid.

 

  1. Go to Federal
  2. Deductions and credits 
  3. Estimate and other taxes paid 
  4. Foreign Tax Credit>start or revisit
  5. When it asks We just need to check if you have any uncommon situations indicate I paid foreign taxes on income I earned while working in another country. 
  6. At some point in the interview, it will ask if you wish to take a deduction or a credit. If you are able to itemize deductions, you may consider taking the deduction.
  7. There will be questions in the next screen asking you the description of the Foreign Taxes paid and the amount.
  8. If you find that this has no effect on your tax return, you may circle-back and choose you wish to take a credit.
  9. Navigate and record the entries that the program asks for and when you reach the page that mentions Foreign Tax Credit Worksheet, this is where you take notice.
  10. The first that you will be asked is what category of income is it, you will say Passive income.
  11. Next screen will say Country Summary, select add a country 
  12. When it says Other Gross Income - XXXX, Here you put in the Gross Amount you earned in that country. 
  13. Then you will navigate through the screens until you come to a screen that says Foreign Taxes Paid - XXXX, here is where you record the amount paid under Foreign Taxes.
  14. Finish out the section. 
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