Reclamation of Foreign Withholding Tax

[taxmeup]

Hi Experts,

I had held ADS shares/securities in an India-based company traded in the US, which until recently were no longer being traded on US exchanges. My shares were sold, and a significant amount/percentage was taken out of my sale amount from the India government as a withholding tax. What may I do to obtain the withholding amount, and to properly account for this on IRS tax forms. Thank you for your help and insights.

[Deepp · Accepted solution]

Hi @taxmeup,

*The very first thing you will need to do is contact a local Indian Tax Preparer, who can help you file Indian Tax Return.

*If the amount withheld was all refunded to you, you are all set. You will still report your earning from sale or disposition of the securities on your US tax return, assuming you are US citizen or resident, and pay taxes accordingly if there was a gain or a loss. 

*If the amount was partial or was not at all refunded to you, once you had filed your Indian Tax return; unfortunately, you will still report your earning from sale or disposition of the securities on your US tax return, assuming you are US citizen or resident, can claim a credit on taxes paid for the sale of the security and avoid double taxation. 

You can further review the US and Indian tax treaty. https://www.irs.gov/pub/irs-trty/india.pdf

Let us know should you have any additional questions.