Have question regarding Foreign Accounts - What is the Exchange Rate should I consider and what forms should I fill for the Interest that I earned

You use the yearly average of foreign currencies from the IRS for calculating the dollar amounts.

 

You enter the interest from India in Schedule B as bank interest.

 

You can split the interest depending on the number of people if it is a joint account.

 

Yes, you can take credit for the taxes paid in India after including the income in the tax return.

 

• Open your tax return
• Search for foreign tax credit
• Click on Jump to
• Enter the information

How do we adjust for depreciation in principal amount for a deposit in a foreign currency. E.g. if I deposit 100 INR as principal and I get 10INR as interest. However, the USD-INR exchange in the year of deposit was 70INR = 1USD and in the tax year it changed to 80INR=1USD.  In other words, the principal itself reduced in value due to exchange rate change. How do we account for that?

Income and expense transactions must be reported in U.S. dollars on U.S. tax returns. Review a chart of yearly average currency exchange rates:

 

Average Currency Exchange Rates

 

@y6t 

instead of an average you can use the currency exchange rate on the day of your transactions.

 

Inflation is reducing the value of everybody's money. IRS doesn't care about that.