Tax liability for NRI's in the US on rent from House in India and investments

Question

• Rent If the rent earned from house in India comes within exemption limits and no tax liability is there for the NRI living in the US, does the NRI need to pay any tax in the US (reference-DTAA)?
• Interest earned from FD in NRE account This is tax free in India, however what would be the tax liability for the NRI in the US where this income is taxable I believe?
• Income from sale of house in India owned for more than 10 years What is the capital gains tax in India for this and does the NRI need to pay tax over and above that in the US also ?

Answer 1

India Taxes:
On point 1 & 2, yes there is no tax liability in India.

What is the capital gains tax in India

You have to pay Capital gains tax in India. At present this is 10% without indexation and 20% with with indexation. You can choose whichever works out more tax efficient.

Assuming you are resident in US for tax purposes, US taxes on Global income. So you would have to declare all the income and pay taxes accordingly. The DTAA provides benefit in terms of ability to deduct the tax paid in India and pay the difference if any in US, for example if the tax in India is 20% for a type of gain / income, if the corresponding tax in US is 10% you don't need to pay anything, if the corresponding tax in US is 30%, you need to pay 30-20; i.e. 10% to US IRS

Answer 2

Addendum to Dheer's answer.

Tax residents of the US pay tax to the US on their global income and so the rental income and the interest income received in the (hopefully NRO) account in which said income is deposited, as well as any other income received from nonUS sources must be declared on the US income tax return. (Furthermore, the existence of bank accounts (whether NRE or NRO or ordinary savings accounts) held outside the US must also declared not only on Schedule B of the US income tax return, but also separately to the US Treasury in accordance with FBAR regulations). Now, there is credit for taxes paid on foreign income which can be applied to the US tax due, but if you paid no taxes to India on the rental income because the income is below the exemption limit, then you cannot use this exemption to claim that no US tax is due on this income.