Welcome to Just Answers! Thank you for giving me the opportunity to answer your questions! I will do my best to help!(1) Should i show the income / interest earned in India in my US Income Tax Return whether i keep that income / interest in India in Indian Rupees or i get it repatriated it to my US Bank Account in Dollars ?
If you are a Green Card holder, or Resident Alien, you need to report your worldwide income, including interest earned outside of the United States, when it is earned. It does not matter if it is ever repatriated or just kept/spent outside of the US. So yes, you would have to report your interest income earned in India.(2) If i earn some interest or income in India , at which Exchange Rate how will i show it in my US Income Tax Return in the following two situations :
(a) The USD-INR Exchange Rate of that day at which i actually receive that interest or income ?
(b) The USD-INR Exchange Rate of the day when i am filing my US Income Tax Return ?
Individuals are CASH BASIS taxpayers, meaning that they pay tax
when the interest is paid to them or they have a right to take it. So you would use the interest rate that was in effect on the day that the interest is paid to you. If it is paid multiple times during the year, the IRS allows an annual average exchange rate.Give me some link from where i can take the exchange rates recognized by IRS.
The IRS has no official exchange rate. There are numerous sites available. Personally, I have over 100 clients living and working outside of the US, and for my clients I use www.oanda.com. It allows daily, monthly and annual exchange rates. I have yet to have a problem with the IRS over these rates.(3) Will the rule of FBAR even apply in that situation also when i open my NRE or NRO Account in some US Bank branch located at New Delhi , India ?
That will depend on the bank. If it is Chase Bank, for example, and they actually have a US branch in India, then no, it would not be required. However, it has been my experience that most US banks have "correspondence branches" or local
corporations (in this case, India) that handle the local banking. So your Non-Resident Ordinary and your Non-Resident External accounts would be subject to the FBAR rules
, and you would have to, depending on the size, file the TDF 90-22.1 and/or the Form 8938.
(4) If my son has an Life insurance policy in India , will it also be considered for FBAR Filing limit ? If yes , then how can we valuate it if a person is paying annual premium of Rs.20,000 from last 8 yrs but policy will start giving return of Rs.25,000 per yr after if that person keeps on paying premium for 12 yrs continuously ?
How old is your son? Is he claimed by you as a dependent? The amounts that you pay into the policy give you basis in the policy. If it will start paying you back, it sounds like a type of annuity. You would recapture earnings first, then basis. For how many years would the policy pay the Rs.25k after year 12? Do you still contribute the Rs.20k each year during the years you are receiving the funds? This is important to know, as you need to estimate how much of the return you receive is earnings and how much of it is principal being returned to you.(5) I have $ 0.12 or 12 Cents Interest from one of my Bank Saving Account in a year , $2.16 from another Bank Saving Account in a year , etc. . Do i need to report both or none in my US Income Tax Return ?
Technically, the IRS requires you to report all interest earned. However, anything under $0.50 would be rounded down to zero, and banks are not required to report anything under $10 on a Form 1099-INT. However, if you know that you have $2.16, I would still report it. If you don't, the IRS probably won't catch it, and even if they did, I doubt they would come after you for the tax on it!
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