Tax liability in the US for capital gains from property sale in India?

Question

Hi,

I have been in the US for the last 2 yrs, first on a F-1 and now on an H-1B visa.

I recently sold a property in India and had some capital gains which I plan to invest in another residential property there. As a result I am claiming a capital gains exemption in India.

Is there any tax liability on these capital gains in the USA? I would appreciate if you could also send me the sources for your response.

Thanks

Answer 1

If you are filing your return as a resident of USA (which depends primarily upon the number of days you spent in the US in the year...days on F-1 don't count), then you are liable to be taxed on your global income including the capital gains. You may not be eligible to foeign tax credit since you are not paying any tax on the capital gains in India.

If you filing your return in USA as a non-resident, then the capital gains is not taxable in US as it is not US source income.

You should check out IRS publication no 519 from the US IRS site www.irs.gov

Answer 2

This is a foreign-source income.

Non-citizens are taxed only on US-sourced income.

(If India has an income tax, they have jurisdiction over this income to tax it.)