Hi,
I am planning on opening a NRO account and had a few questions related to it.

1) Is there a limit on the dollar amount I can transfer from the US to a NRO account?
2) The interest earned on a NRO account is tax deducted at source so I am paying taxes to the government on India. Do I still need to declare this interest earned as income on my US tax return. If yes, do I get credit for the tax paid in India or will I have to pay taxes in both countries.
3) How does the rate of taxation work? If I deposit $1000 in a NRO account for one year, earn $100 (4700 Rs) in interest and pay taxes in India. When I file my return here, do I have to add the $100 as my income and then claim deduction for the tax I have paid in India. Will I be able to deduct all the tax that I have paid in India?

Thanks

1. You can transfer money from U.S. to your India bank account. There is no limit. There is on requirement of filing Form Form TD F 90-22.1.

2. You must declare interest income on the U.S. tax return. You will file Form 1116 to claim foreign tax credit.

3. You will get credit based on Form 1116. Your foreign tax credit can not reduce your U.S. tax on U.S. income. Normally credit results in no tax or little in the U.S. on the foreign income. 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)