Sale of Property in India

Forum|Forum|1 year ago
January 9, 2025
2 replies
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Hello,

I am a resident of Washington State. In October 2024, I have sold a property in India which I owned 50% and my mother who is a resident Indian owned 50%. The property was bought 16 years back and since the capital gains calculated in India considers an inflation index due to which the gains calculated are on lower side as compared to the US The buyer had deducted the TDS before paying the final amount.

I had bought the flat 16 years back with my mother being the co-owner. The capital gains calculated in India considers an inflation index due to which the gains calculated will be lower than the TDS deducted, which means I am expecting refund on TDS deducted during sale of property in my 2025-26 Tax return in India as the capital gain on sale of property will be almost zero.

In that case, do I still need to pay capital gains tax in US and do we consider indexing rule while calculating capital gains tax in US for sale of property in India?

pk12_2

@ksh2025 , Namaste ji.

(a) when did you enter the USA and which visa ?

(b) when did you complete the sale of the condo in India ?

(d) What was your Acquistion cost for the prop., cost of any improvements , how did you use it ,, how much did you sell it for --- I need ball park figures.

Generally , if you are /were a US person ( Citizen/GreenCard/ Resident for tax purposes ) at the time of the sale , then you would be subject to world income tax, including any gains from sale of assets in India. US does not use indexing of basis ( like India does ), and the gain may be taxed partly at marginal rate or at ca[pital rate ( depending on exact facts and circumstances ).

I will circle back once I hear from you -- you can also PM me if you are un-comfortable sharing details -- just NO PII ( Personally Identifiable Information ) please.

AmeliesUncle

Indexing and TDS has nothing to do with US taxes, so they don't affect your US tax return.

After converting the purchase price and sales price to US dollars, if there is a gain you will need to report that gain on your US tax return.

If you have a mortgage on the property or if the property has been used as a rental property, I highly suggest that you go to a tax professional that is experienced with US tax from international sources.

Don't forget FBAR and FATCA forms, if they apply. If you have not been filing those in the past (if they apply), I highly recommend going to a tax professional that is experienced with correcting those prior missed forms.

jkbasak

I have a followup question, does this mean tds need to deducted from actual sale price to report net sale price in us tax return?

pk12_2

@jkbasak , for US tax purposes ,

(a) you treat a foreign asset alienation/sale just like a domestic asset sale. The gain/loss computation uses 1. Sales Proceeds ( =Sales Price LESS sales expenses such as preparation for sales expenses, transfer tax, title work cost, commission etc. )

2. Adjusted Basis ( = Acquisition cost + cost of any improvements over the holding period LESS accumulated allowable depreciation )

3. Period of holding,.

(b) If there is gain per US rules, then the portion of the gain caused by accumulated depreciation is treated as ordinary gain ( taxed at your marginal rate -- recovery ) and the rest is eligible for capital gain tax treatment.

(c) For Foreign tax credit ( reducing the impact of the same income being taxed by both taxing authorities and as per Tax treaty between US and the "other country"), the foreign source income is only that which is being doubly taxed ( when multiple taxing authorities are in volved, then an allocation process is required ).

(d) While US recognizes dollar for dollar the taxes paid to foreign taxing authority(ies), the allowable amount for the year is the lesser of the US tax or actual paid to foreign govt.

Thus , when you enter the Foreign Gross income there is no deduction for TDS -- the TDS shows up as Foreign taxes paid.

Does this make sense ?

Is there more I can do for you ?