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vijoshi · Feb 25, 2008, 05:14 PM

Hello!

For 2007, I paid federal and state income taxes in the US from January 2007 through December 2007.

Since the Indian financial year is from April through march, I had to pay Indian income tax on the US income earned from January 2007 through 31st March 2007.

Am I eligible to get tax credit while filing my 2007 US TAX return for the 3 months ( Jan 2007 through march 2007 ) - for these 3 months I also paid Indian income tax.

If yes, which additional forms do I need to file along with 1040. And also, do I need to provide proof of income tax paid in India for the months Jan-07 through March 07?

FYI... I was a resident alien in the US for 2007 based on the substantial stay clause. I had no other income in India.

Appreciate the help!

Thanks

Vijay

AtlantaTaxExpert · Mar 27, 2008, 11:30 AM

Yes, you CAN claim the Foreign Tax Credit using Form 1116.

MukatA · Mar 27, 2008, 11:37 AM

vijoshi:
You should be clear about this:
If income is earned in the U.S. you pay taxes in the U.S. If you report this income on the India tax return, then you claim credit for the taxes paid in the U.S. on your India income tax return.

Similarly, if you had income in India, you pay tax in India. Then if you report that income on the U.S. tax return, you claim credit for taxes paid in India.

vijoshi · Apr 6, 2008, 12:43 PM

Hello I am having trouble filling out form 1116. For Jan 07 through Dec 2007 I have US income. During the same year for Jan 2007 through March 2007 - I have paid taxes ($1634) in India on the income earned in the US for these 3 months (Gross Income $17495) . US taxes were also deducted in the US. Also, I had no Indian income for the above 3 months. When filling 1116, if the "Gross Income in foreign country" is ZERO (which is true in my case) - and if I mention $1634 as foreign taxes paid - it shows that I am eligible for a foreign tax credit of $1634. But for LINE 16, if the value for net foreign source taxable income is ZERO, it says that I cannot have a foreign tax credit. So how do I claim the credit if my FOREIGN SOURCE INCOME was ZERO, but foreign taxes were paid? Please advise...