If I were to invest my US salary in India say in Fixed Deposits and pay tax on the interest earned in india, will I get benefit of double taxation treaty between US and India or would I need to pay tax again in the US. How do I show it in my tax return. What would happen if interest income is my only source of income in india as a result of which I fall below the basic exemption limit and therefore don't have to pay tax in India.

If you are a U.S. citizen or resident, then on your U.S. return, you must report your worldwide income. You will get credit for taxes paid in the foreign country. Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income (http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html)