Tax for foreign bank accounts

[dipsatch]

I am on H-1B visa and I have multiple bank accounts in India (my country of citizenship), in which I am a joint owner in some & sole owner in the rest. My total 2021 Indian bank balance (including those in which I am secondary owner) is more than $50000, but my total income through interest in those banks is around $2000.  Questions:

1. What are the things I need from my Indian bank accounts for 2021 tax filing?
2. What are the steps I need to take on TurboTax online (or forms I need to submit additionally) to do the foreign taxes & reporting of the Indian accounts?
3. In India, if income is less than a particular amount then we don't have to pay any taxes, so I didn't have to pay taxes for my Indian interest income back in India. Do I need to pay taxes on those income in US?
4. In my situation, will I be able to apply any foreign tax credit?
5. If some of those bank accounts are resident accounts (not NRO/NRE), should I file taxes for those? If I file taxes for those accounts here, it might incur a penalty back in India because according to FEMA, all resident accounts should be converted to NRO once a person becomes NRI citizen.

[LoganathanB · Accepted solution]

As a resident alien, you have to report worldwide income in your tax return.

1 You need the details of income like interest, the dividend for the calendar year. 

2. You gather all relevant information and enter the foreign taxes paid in form 1116 to claim credit for the taxes paid in India. You will have to file FBAR with FINCEN if your deposits in India are more than $10000.

3. You have to report all the income here in the USA irrespective of whether it is taxable in India.

4 Yes you will be able to apply for the foreign tax credit

5 You have to follow the rules of your home country but report worldwide income here.

Click on the link for more information

Where do I enter Foreign Tax Credit Form 1116

FBAR

[dipsatch]

Will I get tax credit on my foreign income even if I didn't have to pay taxes on those income in India?

[LoganathanB]

No, You will get a tax credit if you did not pay taxes on those incomes in India.

The taxes should have actually been paid or accrued on the income to claim any credit.

[dipsatch]

Trying to confirm the following:

I did not pay taxes on the foreign income because under Indian tax rules, income is not taxable if it is below a certain amount. Now on Turbotax I have to enter that income under Wages & income section. Also like you mentioned, I cannot claim a foreign tax credit since I did not pay any taxes in India.

Essentially, does this mean I will be paying taxes on the foreign income here in US although that income was not taxable in India?

[DianeW777]

Yes, you report worldwide income on your US tax return.