My husband and I are citizens of USA. My husband acquired a house in India as a gift from his parents. We sold the house and paid TDS. The balance amount has been deposited in our NRO account. To repatriate this amount, which is more than 5 lakhs from our NRO account to US bank, do we consider this amount as taxable and submit Part C of form 15 CA or consider it non-taxable and submit Part D of 15 CA?
You need to get a Chartered Accountant (CA) in India to certify that any amount being transferred from your NRO account to your US account is money on which all relevant tax payments have been made or withheld. The CA can also advise you of what your tax obligations are in India; you might or might not get a (small) tax refund if the tax deducted at source (TDS) amount is too large.
With respect to US taxes, the capital gains from the sale of the property are subject to Federal income tax and also State income tax, but on your Federal income tax return, you can claim a credit against the Federal income tax due for the tax withheld in India. If you get a refund of some part of the TDS in 2023 after the Indian tax year closes next March 31, 2023, then you have additional income to report on your 2023 US tax return.