By Indian, I assume you mean mortgage interest claimed on Schedule A of a resident return for interest paid on a home loacted in India.

Yes, such interest IS leaglly permitted. However, the IRS CAN require you to withhold up to 30% of the payment as a pre-payment of the taxes assessed by the IRS on the loan payment received by the Indian bank.

Since the Indian bank will NOT allow you to make that withholding, that payment would have to come OUT OF YOUR POCKET, with virtually NO CHANCE of reimbursement from the Indian bank. To date, NONE of my clients have had to make that withholding, but it IS legally allowed and MAY happen.

Additionally, you need to make sure that the interest, combined with all of the other itemized deductions, exceeds the standard deduction of $5,700 if you are filing by yourself or $11,400 if you are filing jointly.

If you need professional help to file, email me at [email protected] for a fee quote.