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Do i need to file capital gains taxes for a property sale in India?

Fairfax, VA |

Hi,
About 5 years ago I bought a house in India using the pension money I had been accumulating in India( I worked in India for about 20 years before immigrating to US). I recently sold this property and managed to transfer the proceeds of that sale( about 77K) to my US bank. So, my question what is my responsibility towards IRS and US taxes when it comes to this 77K. Does this qualify as capital gains?
Does this need to be reported anywhere on my taxes?
I dont know if this is relevant or not but I am a US citizen.

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Attorney answers 3

Posted

US citizens are taxed on their worldwide income. So if you sold this property for a gain you must report it as a capital transaction on Schedule C. However, if it was depreciated and used as an investment, first you would need to report this on Form 4797. This would break the gain up between ordinary income recapture and capital gain. If you paid any income taxes in India on this transaction you can claim an income tax credit to offet the taxes due as a result of this sale.

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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net . For further tax advice check out his website at www.sjfpc.com . and his blog at >

LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.

Posted

U.S. Citizens are taxed on their worldwide income. That means if you had a capital gain in India you would have to pay U.S. Capital gains tax on the income. You would also get a credit for any tax that you may have paid in India.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

Posted

Sadly, you must pay. U.S. citizens are subject to tax on worldwide income. The U.S. does provide a foreign tax credit to reduce US tax for taxes paid in India. You should pay the taxes due with your estimated taxes to avoid penalty. You also do not mention if you collected rental income on the property prior to the sale.. Check with an attorney for advice in this area.Hope this helps.

This answer is not legal advice.and does not constitute tax advice. This answer does not provide advice related to tax shelters. Consult an attorney for legal or tax advice.