How do you report foreign taxes paid in India in turbo tax to get foreign tax credit?

Forum|Forum|1 year ago
August 17, 2024
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I did not get a 1099-INT from bank in India, and the tax return includes both pension income and interest income together, so the foreign taxes paid is result of this combined income. I manually entered foreign interest income and foreign taxes paid in 1099-INT. However, I am struggling to find a place where I can enter my foreign pension income and the corresponding taxes paid for it. After walking through 1099-INT foreign income, I select General Category income and this is where it lands. Doesn't ask the income or foreign taxes paid.

Other Deductions Not Definitely Related

Enter any other deductions for general category income that are not definitely related to the gross income on this worksheet.

		Description	Amount
	First Deduction

Second Deduction

Best answer by confusedabd

@confusedabd , the reason for my questions on details of the situation is because of article 19 --- to wit:

2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political
subdivision or a local authority thereof to an individual in respect of services rendered to that
state or subdivision or authority shall be taxable only in that State.
(b) However, such pension shall be taxable only in the other Contracting State if the
individual is a resident of, and a national of, that State.

However , the technical explanation of the treaty draws attention to the use of "and " in the 2(b) above i.e. one must be both a resident and a national of US for the govt. pension from India to be taxed by the USA ( double taxation ). -- to wit :

Paragraph 2 deals with the taxation of a pension paid by, or out of funds created by, a
Contracting State or a political subdivision or a local authority thereof to an individual in respect
of services rendered to that state or subdivision or authority. Subparagraph (a) provides that such
a pension shall be taxable only in that State. Subparagraph (b) provides an exception under
which such a pension shall be taxable only in the other Contracting State if the individual is a
resident of, and a national of, that other State. Pensions paid to retired civilian and military
employees of a government of either Contracting State are intended to be covered under
paragraph 2. Social security and similar benefits paid by a Contracting State in respect of
services rendered to that State or a subdivision or authority are also intended to be covered.
Paragraphs 1 and 2 are similar to paragraphs 1 and 2 of Article 19 (Government Service)
of the OECD and the U.N. Model Treaties. These paragraphs differ from Article 19 of the U.S.
Model under which such remuneration, including a pension, is taxable only in the Contracting
State that pays it

Therefore please answer my questions fully.

Note that if you are uncomfortable in providing details in this public forum, you can always PM me -- just no personally identifiable information, please.

Namaste ji

Thank you so much for looking into this and all the questions to try and help me.

1) correct, filing as single. Taxes paid to India for interest income is more than $300.

2) Central government pension.

Yes here for 2023, so I do need to file taxes. We are in Washington state.

pk12_2

Employee

@confusedabd , assuming that you are A US person ( citizen / GreenCarxd / Resident for Tax Purposes ),

(a) for interest earnings you enter the details just as of you have had a 1099-INT -- this is foreign source income, for purposes of US return. Any taxes levied/paid to India on this is eligible for Foreign Tax Credit / deduction . Note that there is safe harbor amount ( US$300 per filer i.e. US$600 for a joint return ) for foreign taxes paid that requires nil form 1116.

(b) On pension distribution from sources in India , the tax treatment in the USA depends on the source of the income --- so please tell more about this . This is addressed in the US-India Tax Treaty.

I will circle back once I hear from you .

Namaste ji.

confusedabdAuthor

Thank you for getting back. I did come across the $300 mark, however, incase of interest income the taxes paid are more than $300. The other income and foreign taxes I am trying to enter is the government pension income from India, since I am now retired from my job.

pk12_2

Employee

@confusedabd , Namaste ji

1. Are you saying that the taxes you paid to India on interest earnings ( from bank savings accounts / CDs or such ) and allocated to the US tax year in question is greater than US$ 300 ? And you are filing as single ?

2. Your govt. pension is from the state govt. / central govt / military pension -- all of it or partly also from private pension or Provident fund etc.

I am asking for details because US-India treaty does make difference between the different types of pension.

Please help with details and I will come back on how to include the income on your US return.

I am assuming that you have been a US person for the whole year of 2023. ( when did you enter this country and with what visa etc. ? ). Which state is your home state -- most states do not recognize tax treaty conditions.

regards,