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I am a foreign national (and a resident alien for tax year 2022) working in the United States. I am on a J1 Research Scholar visa. I have received W2 for my salary from an US University and I have a 1099-DIV from my small investments here in the US. As I am a permanent resident of India with my family back there, I have savings bank accounts, fixed deposits, mutual funds, endowment and pension funds in Indian banks (with aggregate ~$15k). I have no other income source or assets in India except for the interests earned via the above-mentioned savings. The cumulative interest earned is < $1000 for the year 2022.

I am using TaxAct software to e-file and submit the form 1040. I am aware that I have to separately submit the Foreign Bank and Financial Accounts (FBAR) form. However, as the rulebook says "a resident alien has to pay taxes on their worldwide income", I am not sure how to declare the Indian interest income in the form 1040. The TaxAct software does not seem to be asking me any specifics about my interest income (from bank savings, securities, and endowments etc) earned from Indian savings and hence is a source of confusion.

So my questions are:

a) Whether declaration of exact interest income from Indian sources is needed in the form 1040 and if so in which field of the form and how should I declare the same?

b) Or is declaring just the accounts and their maximum value in the FBAR form is sufficient?

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  • There's a tax treaty between India and the US that may affect how this is taxed in either of them.
    – littleadv
    Mar 19, 2023 at 6:33

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You would need to report foreign interest the same way you would report US interest, i.e. on Form 1040 line 2b, and if you need to file Form 1040 Schedule B, you would list the items of interest individually there too.

The problem you might be having is that you don't have a 1099-INT for your interest from Indian sources. But not getting a 1099-INT doesn't mean you don't need to report it. (For example, banks don't have to give you a 1099-INT for interest of less than $10, but you are still required to report and pay taxes on it.) I don't know what is the proper procedure to tell TaxAct about interest income without a 1099-INT, but it would probably work if you just input into TaxAct a pretend 1099-INT with the name of the bank and the amount of interest, even though you didn't get one.

Also, you can probably claim the Foreign Tax Credit on the interest income, if it is taxed by both India and the US. But it might not be worth it if the amount is small.

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    The OP will definitely need to file Schedule B (note the aggregate 15K balance in foreign banks)
    – littleadv
    Mar 19, 2023 at 6:27
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    Thanks for the answer. I definitely have to file Form 1040 Schedule B. But that is not because of the $15k aggregate in foreign accounts but because I have foreign bank accounts. The IRS website says the following: "You must complete this [schedule B] part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust"
    – RTh
    Mar 19, 2023 at 18:35

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