Ask Me Help Desk - Foreign Tax Issue

Foreign Tax Issue

Hi,
I am from India and have moved to US on H1B in Jan 2006. I have 15 days of income in India and some dividend income from Mutual Funds.

I have the following questions regarding foreign tax credit:

1. Is all foreign income tax exempt if due taxes have been filed for it? Or do we pay taxes if, for example, part of the income was tax exempt in India.
2. Indian tax year is from 1 April to 1 April. Do I take the January income and estimate what amount of the total tax was paid on that income?
3. Mutual Fund Dividends are tax free in India as they are taxed before they are given out. Will I have to pay taxes for them in the US?
4. For the dividends I received after April 1st in India, the return will be filed later. These are tax exempt in India. How should they be handled in the US returns?

Thank you
Digvijay

Quote:

Originally Posted by dslamba

Hi,
I am from India and have moved to US on H1B in Jan 2006. I have 15 days of income in India and some dividend income from Mutual Funds.

I have the following questions regarding foreign tax credit:

1. Is all foreign income tax exempt if due taxes have been filed for it? Or do we pay taxes if, for example, part of the income was tax exempt in India.
2. Indian tax year is from 1 April to 1 April. Do I take the January income and estimate what amount of the total tax was paid on that income?
3. Mutual Fund Dividends are tax free in India as they are taxed before they are given out. Will I have to pay taxes for them in the US?
4. For the dividends I received after April 1st in India, the return will be filed later. These are tax exempt in India. How should they be handled in the US returns?

Thank you
Digvijay

You may have a PFIC situation. Unfortunately, it is quite complex.

I yield to TaxSearcher's greater level of expertise on this matter!