Tax on Rental Income from US Home

dvstvs · Post by **dvstvs** » Fri Sep 16, 2011 11:29 am

Hi,

I am an OCI, and have rental income from US home. I am trying to estimate taxes I will face in ROR period. I will continue searching the threads to see if this is already answered, but, if any experts can confirm/clarify, will be great!

Approximate rental income from USA in ROR period

Rent: 2450*12 = $29500

Deductions: RE Tax + Ins + maintainance = $8200

IRS tax on $22000 = $3300 (using 15% tax)

Income after tax = $18500

GOI tax on $18500: I iwll take credit for the 15% already paid to IRS, and be charged the remainder based on Indian tax slab and Total income.

20% bracket => 5% more => Rs 49000
30% bracket => 15% more => Rs 1,45200

Worst case net income:
$18500 - Rs 1,45200 = Rs 6,69,000

Is this calculation correct? Thanks!!

realgoogler · Post by **realgoogler** » Sat Sep 17, 2011 12:29 am

dvstvs;410390Hi,

I am an OCI, and have rental income from US home. I am trying to estimate taxes I will face in ROR period. I will continue searching the threads to see if this is already answered, but, if any experts can confirm/clarify, will be great!

Approximate rental income from USA in ROR period

Rent: 2450*12 = $29500

Deductions: RE Tax + Ins + maintainance = $8200

IRS tax on $22000 = $3300 (using 15% tax)

Income after tax = $18500

GOI tax on $18500: I iwll take credit for the 15% already paid to IRS, and be charged the remainder based on Indian tax slab and Total income.

20% bracket => 5% more => Rs 49000
30% bracket => 15% more => Rs 1,45200

Worst case net income:
$18500 - Rs 1,45200 = Rs 6,69,000

Is this calculation correct? Thanks!!

You should be able to deduct the yearly depreciation (construction value over 27.5 years) for US tax.

greyfri · Post by **greyfri** » Sat Sep 17, 2011 2:41 am

On Indian taxes, you might be able to deduct US property taxes (since you can deduct Indian municipal taxes in India) and should be able to deduct 30% of rental income out of the bat.

dbs · Post by **dbs** » Sat Sep 17, 2011 3:11 am

I would assume that you can not deduct tax paid to IRS from the income, instead you should deduct the amount from the tax payable to GOI on the income before deducting IRS tax.

dvstvs · Post by **dvstvs** » Sat Sep 17, 2011 6:20 am

Thanks for the responses!!!

To determine GOI tax: use total rental income, take deductions like tax/maintainence/etc, calculate tax based on slab, then deduct tax paid to IRS.

kkassociate · Post by **kkassociate** » Tue Sep 20, 2011 6:31 pm

Hi Dvsts,

Below will be the calculation for India tax purpose:

1) Rental Income ( $ XXX X 12 months) = $ XXXXX
2) Less: Real Estate Taxes paid = $ XXXX
3) Net Rental Income = $ XXXXX
4) Less: 30 % of (3) Deduction under = $ XXXXX
Section 24 (a) of the India
Income Tax Act, 1961
5) Less: Mortgage Interest Paid, if any = $ XXXXX
6) Taxable Income from House Property = $ XXXXX

All the $ amounts will be converted into INR at each step with the respective exchange rates. Federal taxes paid any on this rental income in the US will be allowed as a relief against the India tax liability on this rental income and the differential amount will be payable in India. Please note the 30 % deduction available under step 4 is the maximum you can claim for the expenses against rental income other than your real estate taxes paid.

We provide assistance in both US and India tax filings and are located in Pune, India. You can email us with details on [email protected] or visit us at www.kkassociate.com

Regards,
KKA
US and India tax filers,
www.kkassociate.com