India-US Tax Services: Income and Assets in Both Countries

Yes, if you are a US tax resident. NRE interest being exempt is a feature of Indian law for non-residents of India, and it has no effect on your US return — the US taxes a resident on worldwide income, so NRE interest is ordinary interest income to the IRS. This catches people out precisely because they have correctly been told it is tax free, which is true in India and not true in the US. NRO interest, by contrast, is taxable in India and usually has TDS deducted, and it is taxable in the US as well, with foreign tax credit available for the Indian tax. Both account types count towards your FBAR and Form 8938 balances either way.

It is reported on your US return as rental income, computed under US rules rather than Indian ones. That means the deductions you are used to claiming in India — notably the standard 30 percent deduction on net annual value — do not carry across; the US allows actual expenses, mortgage interest and depreciation instead, and foreign residential rental property is depreciated over a longer recovery period than a comparable US property. Indian tax paid on that rent, including TDS withheld by the tenant, is generally creditable on Form 1116. Because the two computations differ, the same property routinely produces a different taxable figure in each country, and both are correct.

The gain is taxable in the US as a capital gain, computed under US rules and converted using appropriate exchange rates, which means the indexation benefit available in India does not reduce the US gain. India will generally tax the gain too, often with TDS withheld at the point of sale, and that Indian tax is normally creditable against the US tax on the same gain. Two things frequently cause problems: the gain can be a different size in each country because of indexation and currency movement, and repatriating the proceeds involves Indian banking and regulatory steps that need to be planned before the sale rather than after.

It depends on your Indian residential status and your India-source income. Many Indians in the US become non-residents of India for Indian tax purposes and still need to file an Indian return — for example where rental income, capital gains, or interest on an NRO account exceeds the filing threshold, or where TDS has been deducted and a refund is due. Filing is often worthwhile precisely because TDS has been over-deducted. Your Indian and US filings should be prepared consistently, since each is evidence about the other.

Form 26AS, and the newer Annual Information Statement, is the Indian tax department record of income reported against your PAN and tax deducted at source on it. It is the practical starting point for a cross-border return: it evidences the Indian tax you are claiming credit for on Form 1116 and it surfaces income you may have forgotten, such as interest on a deposit or a dividend. A US preparer who does not ask for it is usually claiming your foreign tax credit from whatever you happen to remember.

That is what this service is. The credentials genuinely differ — a Chartered Accountant is qualified for Indian tax and is not authorised to practise before the IRS, and a CPA is the right credential for the US return but not for an Indian filing — so the work is done by the appropriate professional on each side, against one shared set of facts. The advantage is not convenience; it is that the two returns are prepared with knowledge of each other, which is where the credit and treaty positions actually come from.