Earnings from India

[Mukhiya]

Hello Friends,

I have been living in the US since Oct 2011. I came to the US on L1A visa in October 2011 and got my green card in November 2015.
In the US, I am still working for the same company that I worked for in India. However, once I got my green card in 2015, my company moved me to the US payrolls and did a full and final settlement on my India payroll.

As a part of the settlement, my company (from India) paid me gratuity in June 2016 to me (deposited to my Indian SB A/C). The gratuity amount that was paid to me was Rs. 308,000 (around 3 lakhs and eight thousand).
I would like to know from the forum if
1) I should declare this gratuity amount earned in India on the US IT returns and how should I declare?
2) If this gratuity amount earned in India is taxable in the US?

I have also earned some money in India through a postal SB maturity (around 40K of interest) and some money through a LIC policy maturing (around 60K).
Are these earnings need to be declared on the US IT returns too and are they taxable in the US?

Appreciate all your help.

Thanks
Mukhiya

[inadmissible]

People who are US residents for taxable purposes are subject to income tax on their worldwide income

They are entitled to a credit for the foreign taxes paid

Your first step is to figure out how much income you had earned and how much taxes you have already paid to India.

In the United States you owe taxes in the period in which it is accrued or earned, not when you receive it. If the 'gratuity' received was money owed to you for work you did in 2016, that would be straightforward. If it was a payout for wages & benefits and earned but unpaid over multiple years, you have to apportion it appropriately and file back taxes for previous periods. Your banking/insurance product may have been redeemed in 2016, but interest has accrued over a period of years. You are taxable on the net interest since you first became a US tax resident. With the life insurance contract, your interest is the gain in net surrender value

You may have already paid income taxes on that wages and interest to India (which may be different from the taxes withheld before it was paid to you). Even if the LIC interest is tax-exempt in India, is is taxable here

On your US tax return, you would document the wages on Form 4852, and add the gross amount to Line 7 of Form 1040. You would document the interest on Schedule B and add the gross amount to Line 8a of Form 1040. You will document your foreign taxes paid on Form 1116. You would report foreign financial assets on Form 8938 and TD 90-22.1, if they meet the combined account value threshold.

People who learn that they have years of unreported income and assets need to assess the potential penalties applicable, and make strategic decisions about reporting them