Legal Question in Tax Law in India

Re: Capital Gains Tax on sale of Inherited property

You list a number of tax issues here.

First of all, you are correct that a U.S. citizen is taxed on worldwide income.

It is also possible that India may tax the transaction in some way (either through an interitance tax or a sale of property tax).

India has a tax treaty with the United States, so it is likely that the income will NOT be subject to double taxation. However, until someone reviews the treaty with regard to your specific transaction, you can not be sure.

The capital gains rate for 2008 is 15% for most transactions. Again, depending on the type of asset, this rate could vary. It is likely that the capital gains rates will be increased in 2009.

Most likely the best way to transfer the funds from India is through the Bank of India which has a branch here in Chicago. They will be able to give you advice on how to accomplish the transfer. Depending on the amount of money, there may be informational tax documents to file with the IRS.

Please feel free to contact me if you would like to arrange a meeting to discuss this further.