In the previous chapters, you learned how investing and trading in the Indian stock market are taxed as per the Income Tax Act. We also touched upon maintaining books of accounts and rules of the tax audit.
Those chapters were written by @Nithin Kamath himself, that too, from an investor/trader’s perspective, giving you a clear picture of Indian markets and taxation.
In this chapter, I, @Satya Sontanam, look at how investments in foreign stocks are taxed in India.
If you think the tax rules of Indian investments are overwhelming, tax laws for foreign investments can get tricky and complicated.
The main challenge comes when the investments are taxed in a foreign country as well. On top of it, the tax laws of all countries differ from one another.
Here, we tried to simplify as much as we could to give you a brief understanding of what to consider when it comes to taxing income from foreign assets. We focus on investments in the stock market abroad and not on other forms of assets, including real estate.
8.1 – First Things First: Rules for Global Investing
When we hear about a few international stocks like Meta, Microsoft, Tesla, and Alphabet, it is totally natural to want to own a piece of these companies, isn’t it?
Lately, Indian investors have caught on to buying international stocks and diversifying their portfolios.
But how to invest in these stocks?
Many fintech platforms in India made investing in some of the foreign country’s stocks and ETFs (exchange-traded funds) simpler for retail investors compared to a few years ago.
But here’s the thing, investing in international stocks isn’t as straightforward as dealing with the Indian stock market. There are a few rules we have to keep in mind before taking the leap.
First, your overseas investments fall under the Liberalised Remittance Scheme (LRS). This is a scheme by the Indian government that lets you send up to 2.5 lakh dollars annually abroad. That’s about Rs 2 crore in Indian currency at the current exchange rate of Rs 82. So, you must keep your investments, along with other foreign trip expenses, abroad education costs, etc.. within that limit.
Next comes the tax collection at source (TCS) at 20% (5% before October 2023) if your foreign spending or investments exceed Rs 7 lakh per year. (Update: the Rs 7 lakh limit has been increased to Rs 10 lakh from FY25 onwards)
That is, even before you invest Rs 100, a tax of Rs 20 is deducted, and the balance is invested. Of course, you can use that Rs 20 to set off with your other tax liability later that year or claim a refund. To give some relief, Budget 2024 made it easier for salaried employees to offset TCS with TDS on their salary. For example, if you have a TCS credit of Rs 1 lakh and the TDS on your salary is around Rs 3 lakh a year, you can provide all the details to your HR, who will offset the TCS with your TDS liability. This results in only Rs 2 lakh being deducted during the financial year. This is a positive for taxpayers as the money deducted as TCS doesn’t get stuck with the government for a long time.
Next is about remittance: When you sell your investments, any money you get from the sale must be brought back to India within 180 days unless invested back. Funds can’t lie idle in foreign bank accounts.
Oh, and one more thing: when you file your income tax return in India, do not forget to disclose your foreign assets separately. The income tax department wants to know about all your global assets.
Remember that these restrictions apply when buying foreign stocks or ETFs directly. If you do not want to deal with LRS, TCS, tax disclosure, and remittance rules, you can also invest through Indian mutual funds in select international stocks and ETFs.
8.2 – Residency Status
An Indian resident must pay taxes on his/her global income, the taxman says.
What does it mean? If you are an Indian resident, you have to pay taxes on any income you earn, whether from India or abroad – be it in the US, UK, Australia, Singapore, or any other country.
But if you are a non-resident, the Indian government does not care about your foreign income. Our friends and family residing abroad investing there would not pay any taxes in India, right?
The taxman has specific rules to decide who is a resident and who is not. Basically, it depends on the period of stay in India. The definition of ‘resident’ is a bit technical. You can refer to the definition in the annexure to this chapter at the end to understand who qualifies as a resident.
The simplistic explanation is that if you are like many – live and work in India – and take occasional trips abroad – you are a resident.
8.3 – Tax In India
When it comes to investments in stocks, there are two types of income to consider: capital gains and dividends.
Let’s talk about capital gains first. The taxability of capital gains depends on the holding period of the stocks. If you hold foreign company shares for more than 24 months, the gains are considered long-term capital gains and are taxed at 12.5% (plus applicable surcharge and cess).
On the other hand, if you hold the shares for up to 24 months, any resulting gains are considered short-term capital gains. These are added to your total income and taxed according to the applicable slab rates.
Now, let’s consider an example to understand how this works. Suppose you invested Rs. 1,00,000 in foreign stocks on April 1, 2018, which was equivalent to, say, $1,500.
When you sold your investment on August 31, 2024, say, you received $2,500.
As the stocks are held for more than 24 months, it qualifies for a long-term capital gains tax rate of 12.5%.
For tax purposes in India, you need to convert the sale amount into Indian rupees. You must use the exchange rate (telegraphic transfer buying rate provided by the State Bank of India) on the last day of the month prior to the month in which the sale happened.
In our example, since the sale happened in August, take the exchange rate at the end of July 2024. It was Rs. 83.7.
So, your sale value, as per Indian tax rules, would be about Rs. 2.09 lakh (Rs. 83.7 * $2,500).
Next, let’s calculate the taxable capital gains: Capital gains = Rs. 1,09,250 (Rs. 2,09,250 – Rs. 1,00,000).
Therefore, tax to be paid = Rs 1,09,250*12.5%, about Rs 13,656.
The above mentioned tax rates are applicable for shares that are sold on or after July 23rd, 2024, when Budget 2024 changed the rules. For shares sold between 1st April 2024 and July 22nd 2024, LTCG is taxed at 20% (with indexation benefit) and STCG is taxed at slab rates. The holding period is the same at 24 months.
Moving on to dividend income, it is treated as ‘income from other sources’ that has to be added to the taxpayer’s total income.
Just like with capital gains, you need to convert dividend income into Indian rupees using the exchange rate on the last day of the month prior to the month you received the dividend.
This will be added to your total income and taxed at your slab rate.
So far, we have discussed tax on investing in foreign stocks.
If you invest in foreign ETFs listed outside India directly or Indian mutual funds that are investing primarily in foreign stocks/ETFs, different tax rates are applicable based on the purchase date and the date on which the units are redeemed.
For units bought after April 1, 2023, any capital gains made during the financial year FY25 (April 1, 2024 to March 31, 2025) will be taxed at your income tax slab rate, no matter how long you held the investment. However, starting from April 1, 2025, new tax rules apply:
- If you hold units for 24 months or more, Long-Term Capital Gains (LTCG) will be taxed at 12.5% without indexation.
- Short-Term Capital Gains (STCG), for units held less than 24 months, will still be taxed at your income tax slab rate.
However, if you had invested in Indian-listed ETFs in foreign securities, the time period to differentiate between short—and long-term gains would be 12 months, with LTCG taxed at 12.5% and STCG at the slab rate. This rule, too, is applicable from April 1, 2025, onwards.
Sidenote: Quicko, a tax portal, has helped us in clarifying the tax rules on foreign investments, applicable after Budget 2024.
8.4 – Foreign Tax
Don’t breathe easy just yet. The toughest nut to crack is up next.
Just like non-residents investing in India are taxed in India, Indians investing abroad might face taxation in the foreign country too. You might wonder why you have to pay taxes twice, right?
Well, most governments, too, agree that taxing income twice isn’t fair.
The Indian government offers relief if you are taxed abroad. You might either be exempted from tax in India or receive a tax credit that you can use to pay your taxes here. To figure out which one applies, we have to dig into the Double Taxation Avoidance Agreements (DTAA) that India has with other countries.
Now, if finance stuff is not your cup of tea, these agreements can be pretty overwhelming, especially on the first read. You will need the expertise of a tax consultant to decipher it all.
Your broker or fintech platform might provide tax details on your investments, but you would be better off understanding how it works.
In many DTAA treaties, India follows the credit method to avoid double taxation. This means they give credit for taxes paid in the foreign country. This can set off tax liability on the same income in India. You can claim this credit by submitting Form 67 when filing the income tax return.
Let’s take the example of DTAA with the US-
For capital gains, the DTAA between the US and India states that each country may tax as per the provisions of its domestic law. This implies that both countries can charge tax.
But the US income tax laws do not charge capital gains tax on non-residents. So, the gains of Indians on US stocks are taxed only in India; hence, no double taxation.
Now, dividends. As per the DTAA between the US and India, dividends received from a US company are taxed only in India.
But here comes the catch – there’s a 25% withholding tax on gross dividends in the US. That means 25% is deducted at the source by the US, and you get the rest in your account.
No matter how much you receive, the entire gross dividend (converted into Indian rupees) will be taxed in India. In such cases, you need to submit Form 67 to claim credit for the withholding tax paid in the US.
Remember, these DTAA provisions and available tax credits can vary from country to country. If you are investing in countries other than the US and your broker isn’t helping with precise information, consider consulting your tax advisor. They will guide you through this tax maze!
8.5 – Reporting Of Foreign Assets In ITR
If you hate paperwork and endless documentation, reporting foreign assets and income in your tax return won’t be a walk in the park.
As a resident, you must disclose all foreign assets, like bank and depository accounts, stocks etc., held outside India while filing your income tax return. But if you fail to disclose them, you’ll face penalties and possibly even imprisonment under the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
The income tax returns have dedicated schedules to fill in the detail of foreign assets, including foreign stocks.
As of now, there are three schedules (FSI, FA and TR) and one form (Form 67 discussed above to claim credit for tax paid abroad). Select the correct ITR form to fill in these details.
While we cannot discuss every aspect of these schedules, here are a few key points to keep in mind before reporting foreign assets and income. Note that these details are as per the rules as of FY23.
- The calendar year is relevant for reporting, while the financial year matters for taxing the income. So, don’t mix them up!
Here’s an example –
Say, you bought a stock of Microsoft in September 2022, which issued a dividend in November 2022. Take a share of another company – Alphabet – which was bought in January 2023 that gave dividends in March 2023.
For reporting assets and income for FY23, calendar Year 2022 would be applicable.
Microsoft stock: You bought the stock in September 2022. Since the purchase was made in the calendar year 2022, you would need to disclose this investment in your income tax return for the financial year 2022-2023. Even if you sell the company as of the date of filing the return, you still must report it as you held the company at least for a day in the year 2022. If the stock was bought in 2021 or before, and you own it at least for a day in 2022, you still have to report it in the ITR.
The dividend from the stock, which was received in November 2022, has to be reported in schedules as it was received in calendar year 2022. The dividend amount has to be considered for taxability in FY23 since it falls within the financial year period from April 2022 to March 2023.
Alphabet stock: You bought the stock in January 2023. As you do not hold the stock in the calendar year 2022, you do not need to disclose this investment in the schedules.
The dividend from Alphabet stock received in March 2023 would be considered for taxability in 2022-2023 (FY23). But it need not be disclosed in schedules as it was not received in the calendar year 2022.
Income earned from assets held outside India will be taxable as per the provisions of the Income Tax Act, even if it is not required to be disclosed in schedules.
- The schedules may ask for details such as peak balance, opening balance, closing balance, and amount debited and credited from the accounts and assets you have abroad. Keep all the details handy.
- You also need to provide the tax details paid in the other country and how much you are claiming as a tax credit in India.
- To report details in schedules, the rate of exchange for conversion is the telegraphic transfer buying rate of the foreign currency on the specified dates. While most of these details could be provided by the fintech platform through whom you are buying the stocks, always do your due diligence.
- If your total income exceeds Rs 50 lakh per annum, you may also need to provide details of assets (Indian and foreign) held as on March 2023 again in ‘Schedule AL.’
Annexure
Definition of ‘Resident’ as per the Income Tax Act
A taxpayer will qualify as a resident of India if he/she satisfies one of the following two conditions:
- Stayed in India for 182 days or more in a financial year; or
- Stayed in India for at least 60 days in the financial year and 365 days or more in the immediately four preceding years
If you are a citizen of India or a person of Indian origin who leaves India for employment or visits India during a financial year, the conditions are a bit different and also depend if your total income from India is more or less than Rs 15 lakh in that year.
Further, if an Indian citizen is considered ‘stateless’ and earns a total income in India exceeding Rs 15 lakh during a financial year, he/she will be treated as a resident in India for that year.
For example, say you are an Indian citizen who works in a country where people are not subjected to income tax as per local tax laws (For example, UAE). If your income from India during the financial year exceeds Rs 15 lakh, you will be considered a deemed resident in India, even if you haven’t set foot in India throughout the year.
Key takeaways from this chapter
-
- Direct investing in foreign stocks is not as straightforward as investing in the Indian stock market. You need to take into account the LRS, TCS, remittance to India and disclosure rules.
- If you are a ‘resident’ in India, your global income (including gains and dividends from foreign stocks) is taxed in India.
- If you are taxed on those profits in the foreign country as well, you can claim either an exemption or get a tax credit in India on the same income while filing the income tax return.
- Whether an exemption or tax credit is known only by checking the double taxation avoidance agreement (DTAA) entered by India with the other country. This may need an expert’s help to .understand the rules.
- Do not forget to disclose your foreign assets separately in the ITR. The income tax department wants to know about all your global assets.
Disclaimer – The information provided in this article is intended for general informational purposes only and should not be considered as tax, financial, or legal advice. Readers are strongly advised to consult a qualified tax professional or advisor for guidance specific to their circumstances before making any tax-related decisions.
Can short term capital loss on foreign shares (Eg loss on seling shares of Tesla) be carried forward ?
Hi Vivek,
As far as we understand, there is no distinction for capital loss from foreign shares to be carried forward compared to other asset classes. It can be carried forward.
Thank you for the detailed article.
I read the article & I have 2 questions about this:
1. Does LTCG made on US listed stocks by the Indian investors can be offset & harvested by both US stocks STCL & LTCL and Indian equity STCL & LTCL or any other asset class losses?
2. Does LTCG from US stock taxed in India at 12.5% have any exemption like 1.25L have for Indian equity LTCG?
Hello Ero,
Here are the responses for your two queries-
1. Capital loss from foreign shares can be adjusted against the profit from Indian shares as well as foreign shares. The same principal applies loss from Indian shares that can be set off against gains from foreign shares. The only condition is that short term capital loss can be adjusted against both short and long term profit but Long term capital loss can only be adjusted against long term profit.
2. No, not available for foreign shares.
Quicko, a tax filing portal, whom I reached out to, confirmed the above answers. Thank you.
Can you provide the section where it is written that the indexation benefit is available for R-OR on selling of Foreign Shares in Income tac act 1961
Hi Tanmay
R-OR refers to Indian resident. You can go through section 48 of the IT ACT that talks about computing capital gains. You can go through second proviso to sec 48 (ii), which talks about the indexed cost.
Having said that, I would like to point out that for any sale after 23rd July 2024, there is no indexation benefit available for sale of foreign shares. Indexation is only available for sale before that date.
Hi Satya,
I was having this doubt , as capital gains are taxed as per tax slab for foreign equity in short term. For a high income individual it is 30% , but domestic equity capital gains are taxed at 20% in short term.So , was thinking if capital gains/losses which are taxed at different rates can be offset against each other, because it looks like a loss to the government , if stcl of a lower tax rate is offset against stcg of a higher tax rate.
No such restriction that we are aware of, Prem.
Hi, can short term profit from foreign shares be offset against short term loss of Indian shares. Ex: I have short term profit of 100$ = 8700rs. I also have short term loss in Indian shares of 8700rs. Can I offset both of them to make my tax=0?
Hi Prem,
To what we understand, there is no restriction on setting off short-term capital loss from investing in Indian shares against profit from investing in the US shares. Short-term capital losses can be set off against long-term and short-term capital gains.
Hi Satya,
Thank you so much for the detailed insight on this subject, this will definitely help me to take better decision on Foreign investing. Also, if you please help me to get answers to my below queries, that will be great help –
1. Can we offset LTCG/STCG from Foreign Shares/ETFs with Basic Exemption limit (Which is 4 Lakh in New regime as per latest declaration) if there is no other source of Income?
2. Can we offset LTCG/STCG from Foreign Shares/ETFs with 87A (which is up to 12 lakh in New regime as per latest declaration) rebate?
3. What is the tax rate for dividend income from Foreign Shares?
4. For a salaried person, any gain/dividend income from Foreign Shares/ETFs in calendar year 2024, by which date Form 67 to be filled?
5. Can someone invest in Foreign Shares/ETFs if the person has no other source of Income?
6. Can HUF invest in Foreign Shares/ETFs?
Hi Tubai,
This is what I think about the points you highlighted –
1. Yes
2. No, rebate is not available for capital gains
3. Will be added to \’other sources of income\’ and will be taxed at your slab rate; if there is a withholding tax, you can claim credit for it
4. On or before the due date to file the return – https://www.incometax.gov.in/iec/foportal/help/statutory-forms/popular-form/form67-um
5. I don\’t think there is any restriction for that.
6. One has to use the LRS route to invest in foreign stocks directly. But LRS is not available for HUFs. – https://www.rbi.org.in/commonman/english/Scripts/FAQs.aspx?Id=1834#:~:text=The%20Scheme%20is%20not%20available,account%20held%20abroad%20under%20LRS.
Hope this helps. I checked with Quicko, a tax filing portal, too, to confirm the answers once.
Hi,
I want More info about Section 54F. I have LTCG in Foriegn assets. I am an indian resident. I am constructing a house from LTCG. Can i avail the benefit under Section 54F
Hi Nilesh,
Section 54F of the Income Tax Act allows you to claim tax benefits if long-term capital gains from ‘any’ long-term capital asset (not being a residential house) are reinvested in a residential property in India. It did not specifically exclude foreign stocks. Hence, we believe that section 54F benefit will be available on LTCG from the US listed shares as well. You can check with tax experts to confirm the same.
Kya canadian company ka stock kharid skta hu
Hi Abdul,
Frankly, I have no idea about it. You can check with the broker platform (foreign broker or the Indian platform that has an association with a foreign broker) through which you are planning to invest if access to Canadian securities is allowed. A few brokers allow access to stocks from multiple countries.
The other indirect route would be to invest in ETFS in the US that has Canadian stocks as underlying securities.
Let us know if you figure out a way. It would be informative for me too.
Thank you!
If I had purchased US stocks when I was working in the US and sold them returning to India and assume that I have held the stock for 4 years, how do I calculate long term capital gains.
e.g I bought XYZ at $1000 in 2005 [USD-INR exchange rate was say Rs. 60] when I was working in the US (and was an Indian citizen) from my US income. Now I am back in India (Indian citizen, India tax resident) and sell the stock for $1500 [USD-INR exchange rate is Rs. 80]. My long term capital gain in USD is $500. How do I calculate my gain in INR? Will it be (1500*80)-(1000*60) or will it be (500*80)
Hi Ajay,
As per our understanding, as you are resident of India now, you will be capital gains will be charged to tax in India. We assume you are showing these shares as foreign assets in your income tax return. Not very sure of whether it is taxed in the US as well. If yes, please check with your CA on how to claim tax credits.
For tax purposes, capital gains in INR is considered after converting the purchase cost and sale proceeds. let me check with Quicko too for their views.
OK.
Got to know many things related to foreign stocks and taxation. Thanks! @Satya Sonatanam for your effort to provide us such valuable informations on this topic.
Thanks for your kind words, Aryan. Best wishes
Hello Satya Sontanam,
Through indian mutual funds means ?
I bought those etfs directly using my demat ac balance,let say with zerodha as we take delivery of shares and hold units in demat form, I mean not invested indirectly through any MUTUAL FUNDS OR FUND of FUNDS available like motilal oswal nasdaq 100 FUND OF FUND.
Now what will happen in my case?
Hi Aryan,
I am assuming you bought the ETFs traded on the Indian stock exchange. They may not be considered as foreign assets to be reported in the ITR. You may refer to this article from Mint as well. https://www.livemint.com/money/personal-finance/income-tax-deadline-of-itr-u-extended-to-48-months-all-you-need-to-know-budget-2025-itr-11738573818881.html
Since this is a subject matter that requires interpretation and understanding, we urge you to check with your CA as well regarding the same.
I have investment in MAFANG etf and MOTILAL NASDAQ 100 ETF .Are they considered foreign asset under income tax ? Shall I have to fill details corresponding to those etfs in shedule FA, FSI(if gain from selling those ETFs) of itr form? If yes, which shedule under shedule FA applicable?
Hi Aryan,
I assume you hold both foreign ETFs through Indian mutual funds. In that case, you are not required to show these assets under foreign assets, in our understanding. Hope this helps
Related to Tax on foreign equities. Last year Govt. announced LTCG of 12.5% on shares sold after 23rd July 2024 and 20% with indexation on shares sold before 23rd July 2024.
How is following situation handled if I want to offset STCL?
STCL loss: ₹1000
LTCG Total: ₹1600
A: LTCG (Shares sold before 23rd July): ₹800
B: LTCG (Shares sold after 23rd July): ₹800
Where should I offset the 1000 rupee loss? Would it be offset in A or in B? or depends on date of sale of short term shares?
If possible please do share where I can read more about this information?
Hi Jack,
As per my understanding, Budget announcement in July 2024 has no bearing on the set off provisions.
I also reached out to Quicko, a tax filing portal, about their POV on this.
This is what they replied – \”Budget 2024 has had no change in c/f and setting off the loss.
The loss is first adjusted against the higher tax rate i.e 20% in this case. We will have more clarity once the AY 2025-2026 utilities are live.\”
Hope this helps. thank you.
capital loss can only be set off with capital gains
Short term capital loss can be set off with both short term and long term capital gain whereas long term capital loss can only be set off with long term capital gain….If not set off it will be carry forwarded
Well explained. Thanks, Adwaith
Hi Satya,
Can we set off short-term capital loss from investing in US shares against salary income?
Hi Pavan,
No, capital loss cant be set-off against the salary income.
The articles that you pointed out hold good for someone filing taxes in the US. Looks like if you are reporting capital gains on foreign stocks in ITR forms as a resident of India, FIFO is the only model to follow. Been searching for this information as well since there\’s no concrete data available. Found some references listed below.
https://www.reddit.com/r/IndiaTax/comments/1f5jiud/fifo_applicability_for_foreign_stocks/
https://www.reddit.com/r/IndiaTax/comments/1f718gx/ask_away_your_finance_tax_queries_ca_here_not_a/
Thank you Satya for your prompt responses which have been very informative.
Yes, Karthik.
There seems to be contradictory opinions on this. These are the cases, usually, we see the intent of introducing a particular rule.
As Quicko pointed out, check this circular which talks about why FIFO has been introduced for dematerialised stocks in India. – https://cleartax.in/v/it/income-tax-circulars/768-circular-no-768-dated-24-6-1998-24-june-1998/
It clearly mentions that FIFO is the way to go because all the holdings of a particular security in demat form will be identical and inter-changeable and they will have no unique characteristic such as distinctive number, certificate number, folio number, etc. As the holdings of any securities in dematerialised form is represented only by the account with the depository and all transfers are effected through book entries in the accounts maintained by the depository, under this system it is not possible to link the purchase of a security with its sale by means of its distinctive number, etc.
Going by this, as Quicko stated, if one can clearly identify and specify the stocks being sold, that can be used.
Again, needless to say, this is just an interpretation.
Thank you Satya.
Since most of us hold the foreign shares in demat form and cannot identify individual shares or lot via a contract I believe FIFO is the model to follow.
It would be good to update this page given a lot of people are investing in foreign stocks.
Noted, Karthik. Thanks for your feedback.:)
Karthik,
I also want to highlight out one more point. As I understood, in the US, brokers give you options on what method you want to choose for selling shares – FIFO, LIFO, or average cost/specific shares method. Brokers may give a default option, but you can also change as you choose it to be. I urge you to check this with your broker in the US once.
Some articles that helped me in this regard are –
https://www.investopedia.com/articles/05/taxlots.asp
https://www.schwab.com/learn/story/save-on-taxes-know-your-cost-basis
These are not from official tax sites. Just sharing for your reference.
Hi Satya Sontanam, Thanks for the reply. From your reply:
>>There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off
I had this doubt because STCG in the US is added to our income and taxed at at income tax slab rate (as high as 30%). So STCG in US (STCG @Slab rate) and India (STCG @20%) are treated differently, So I was not sure if US stocks STCL it can be setoff against Indian STCG. I had checked with a CA, although they were not completely sure about it, they told that there is high change that it can\’t be setoff. Now I\’m a bit confused
Hi Pavan,
You can go through the third FAQ – https://incometaxindia.gov.in/Pages/faqs.aspx?k=FAQs+on+Set+Off+and+Carry+Forward+of+Losses – this link is from the income tax website. They do not have any such restrictions for foreign shares in terms of intra-head set-off provision.
Also, we contacted Quicko, tax filing portal, to get their view on this. As per their interpretation too, capital loss from foreign shares can be adjusted against the profit from Indian shares. Short term capital loss can be adjusted against both short and long term profit. Long term capital loss can only be adjusted against long term profit.
Having said that, your CA would have gone through your specific case or can have a slightly different interpretation. We urge you to note that this is not a tax advice.
Hi, I have 2 questions:
1. Can we setoff Short Term Capital Loss (from investing) in US listed stocks against Short Term Capital Gain earned (from investing) in Indian listed shares.
2. Is there any exemption for Foreign LTCG like 1L (like that for Indian Stocks). Or are the Foreign gains taxed at flat 12.5% even for 1rs
Hi Pavan,
1. There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off
against long-term or short-term capital gain.
2. No exemption available for capital gains on foreign shares.
can short term profit from US stocks be offset against short term loss in indian stock
Hi Kamal,
There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off
against long-term or short-term capital gain.
can i offset my short term capital gain profit in US stcoks versus my short term loss in indian stock market
Hi Kushal,
There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off
against long-term or short-term capital gain.
Additional clarification: Since this is a foreign stock, Am I allowed to report 27500 as capital gains given the flexibility to select any stock to sell or should I follow FIFO for foreign stocks as well assuming I am an Indian resident filing IT returns in India
Hope the response to your previous question helps.
Thank you. The query is not for reporting the foreign stocks. Please consider the below scenario
Lot1: 10 APPL stocks bought at $50 each on 1st Dec 2020. INR = 60
Lot2: 20 APPL stocks bought at $150 each on 1st Dec 2022. INR = 70
on 1st Dec 2024, APPL stock is at $200, INR = 80. I want to sell 5 APPL Stocks. The brokerage allows me to sell from Lot1 or Lot2.
If I sell from Lot2 my capital gains would be
5 * ($200 * 80 – $150 * 70) = 27500
If I sell from Lot1 my capital gains would be
5 * ($200 * 80 – $50 * 70) = 65000
As per FIFO model stocks I will have to report my capital gains as Rs.65000. Since this is a foreign stock, I am allowed to report 27500 as capital gains given the flexibility to select any stock to sell.
Interesting question, Karthik.
We contacted Quicko, a tax filing portal, for your query. Here\’s their view on this –
\”For shares listed on recognized exchanges in India, the tax treatment is clearly defined under Section 45(2A). However, I could not find any specific case law/section addressing the treatment of foreign shares.
As per our understanding,
Under the Double Taxation Avoidance Agreement (DTAA) between India and the United States Article 13, each contracting state may tax capital gains in accordance with its domestic laws. Based on this, the following treatment can be applied to an Indian resident selling APPL shares:
1. Specific Identification of Shares
If you can clearly identify and specify the stocks being sold (e.g., Lot2 in this case), you may report ₹27,500 as your capital gains. (Circular No. 768, dated 24-6-1998)
2. Dematerialized Shares or No Specific Lot Identified
If the stocks are held in dematerialized form, or if no specific lot is identified at the time of sale, the FIFO method will apply. Under FIFO, the shares from the first lot will be deemed sold first. Consequently, you would need to report ₹65,000 as your capital gains. (Circular No. 704, dated 24-6-1995).\”
Since the answer to your query involved interpretation, we would also urge you to consider getting a tax expert advice on this who looks into your specific question at hand thoroughly and provide a solution.
I have purchased a same stock listed in NASDAQ at different times in the last five years. The brokerage does provide an option to select the specific shares to sell. Selling the recently acquired shares would result in low tax liability.
Can I sell selective stocks and is this allowed from Indian taxation perspective or does FIFO needs to be followed for the foreign stocks as well ?
Hi Karthik,
As far as the reporting of foreign stocks is concerned, stocks purchased at different times have to be reported separately.
This suggests that you can show the closing value of stocks that are bought earlier and capital gains for stocks held for short-term, if you sell them.
Hi and thanks for this very useful information.
Please help me understand the following from this chapter:
\”The tax collection at source (TCS) at 20% (5% before October 2023) if your foreign spending or investments exceed Rs 7 lakh per year\”.
The year is Calendar year or Financial year?
Thanks again.
Hi Anil,
This should be applicable for financial year. Any TCS credit available for the financial year can be off-set with tax liability on your overall income.
Hii,
I am resident in India. I am receiving dividend from investments made in US Stocks. Since dividend receiving in different months, what should be ideal exchange rate to convert into INR for filing ITR? And how to claim 25% withholding tax on those dividends?
Hi Swapnil,
As mentioned in the chapter,- just like with capital gains, you need to convert dividend income into Indian rupees using the exchange rate on the last day of the month prior to the month you received the dividend.
And you need to submit Form 67 to claim credit for the withholding tax paid.
Hi Satya,
I have 2 queries.
Query 1.
I understand that we have to report in ITR schedule FA a foreign share according to calendar year Jan2022-Dec2022 which i held for this period of calendar year, pertaining to Indian FY 2023 . Now lets say i sold that share in Feb-2023.
A> What value i have to provide for schedule FA declaration for this share for the field “” Total gross
proceeds from sale or redemption of investment during the period” ? 0 or sale value or something else?
B> Though i sold the share in Feb-2023, but we still need to mention that share in ITR filing time in Schedule FA for the CY Jan2023-Dec2023? Correct?
If Yes then What value i have to provide for schedule FA declaration for this share for the field “” Total
gross proceeds from sale or redemption of investment during the period” ? Sale value or 0 or something else?
C> The CG has to be reported in FY 2023-2024 as the share was sold according to India FY year 2023-2024. Is this understanding correct?
Query 2: Do we need to make individual entry for each share lot received or we can club them?
For ex: I received 10 RSU shares of my employer in Jan 2023, and again i received 20 shares in March 2023. So can i club and make single entry reporting of 30 shares and average the price to calculate and provide “initial value of investment”? and Mention the the “Date of acquiring interest” as one of the date either Jan 2023 or March 2023?
Thanks
Hi Azeet,
We reached out to Quicko, a tax filing portal, for your queries. Below are their responses. Hope it helps.
Query 1:
a) If the shares are sold on Feb 2023, In Schedule FA, the \”total gross proceed from sale or redemption of Investment during the period?\” will be 0 as of Dec 2022 for FY 2022-2023,
b) Yes, the shares sold in February 2023 should be included in Schedule FA for the financial year 2023-2024. The \”total gross proceeds from sale or redemption of investment during the period\” should be the sale amount, and the closing balance will be 0.
For the financial year 2023-2024, all foreign assets held at any time from January 2023 to December 2023 will be shown.
c) Capital gains tax will apply in the financial year 2022-2023 for the sale of foreign shares in February 2023 following the Indian Financial year.
Query 2:
We should list each individual investment separately, along with its initial value, peak value, acquisition date, and closing balance as of December 31.
To take your example: there would be one entry for 10 RSUs for January 2023 and another entry for 20 RSUs for March 2023.
Hi Satya,
I have 2 queries.
Query 1.
I understand that we have to report in ITR schedule FA a foreign share according to calendar year Jan2022-Dec2022 which i held for this period of calendar year, pertaining to Indian FY 2023 . Now lets say i sold that share in Feb-2023.
A> What value i have to provide for schedule FA declaration for this share for the field \”\” Total gross
proceeds from sale or redemption of investment during the period\” ? 0 or sale value or something else?
B> Though i sold the share in Feb-2023, but we still need to mention that share in ITR filing time in Schedule FA for the CY Jan2023-Dec2023? Correct?
If Yes then What value i have to provide for schedule FA declaration for this share for the field \”\” Total
gross proceeds from sale or redemption of investment during the period\” ? Sale value or 0 or something else?
C> The CG has to be reported in FY 2023-2024 as the share was sold according to India FY year 2023-2024. Is this understanding correct?
Query 2: Do we need to make individual entry for each share lot received or we can club them?
For ex: I received 10 RSU shares of my employer in Jan 2023, and again i received 20 shares in March 2023. So can i club and make single entry reporting of 30 shares and average the price to calculate and provide \”initial value of investment\”? and Mention the the \”Date of acquiring interest\” as one of the date either Jan 2023 or March 2023?
Thanks
I am house wife and income is only investment income.
I have invested in March 2024 to till date in US equity, and sold some equity investment December 2024.
STCG is 750000.
STCG will be add in income and as per income tax slab tax will applicable.
Means 50000 standerd deduction and no tax till 7 Lakhs income.
Is it correct?
Please advice.
Hi Lakshmi,
We shared your query with Quicko – here\’s what they say –
The standard deduction is available only for salary income. In this case, the income is from capital gains and hence, standard deduction will not be allowed.
Moreover, now as the total income exceeds ₹7L, rebate u/s 87A will also not be available and the income will be taxable as per your tax slabs.
Motilal Oswal Nasdaq 100 ETF (MON100) bought in Mar 2023
1) What would the applicable holding period to count it in LTCG? I’m assuming it should be 1 year since it’s listed in India.
2) Would the limit of 1.25L exemption apply to this as well?
3) Does the taxation for this change between this FY and next FY as per the new budget?
Hi Niket,
I covered this point in the story. We got in touch with Quicko to understand this. As per them, since it is listed in India, the holding period to determine CG would be 1 year. This tax rule will be applicable from Apr 2025.
If an Indian AMC having one Mutual Fund Product that invest all the funds in United States Stocks, then as per present Indian Taxation regulatory requirement, will I be taxed or declare it under Foreign Assets Schedule during Income Tax Returns filing ? Please Guide Me. Thanks
Hi S Vasudevan
As mentioned in the article, if you are investing in an Indian mutual fund that invested in foreign securities, that will not be considered a foreign asset for reporting in the income tax purposes. For taxation, please check the table in the story with the title – \’Tax provisions for investments in international MFs and Foreign ETFs\’.
Thank you
How to calculate sale consideration in case of Capital Gain from Sale of Foreign Shares?
Hi Gurudeo,
If the sale happened on or after July 23, 2024, the formula to calculate capital gains is \’sale value – cost of acquisition = capital gains\’
As mentioned in the chapter above, for tax purposes in India, you need to convert the sale amount into Indian rupees. You must use the exchange rate (telegraphic transfer buying rate provided by the State Bank of India) on the last day of the month prior to the month in which the sale happened.
Cost of acquisition is the amount in Indian rupees you used to buy the stock.
Hope this helps.
A little confused on the 25% tax withholding in US. is it a withholding or a tax?
If it is a withholding, then we can claim a refund by filing US tax returns.
if it is a \”tax\” then its pretty clear.
i hope you can provide clarification on that.
Hi Ajay
Let\’s take an example – Let\’s assume X\’s residential status is \’resident of India\’.
If X bought US stocks that issued a dividend, it is taxed at 25% in the US. In India too, X is liable to pay tax on that dividend income. Having said that, as per the DTAA between US and India, X can claim credit of taxes withheld in the US against tax liability in India by filing Form 67.
If your doubt is why is it called \’withholding\’ tax – I guess because the companies/institutions are required to withhold the taxes before giving the crediting the net amount.
Hi
Thnx for the reply.
What will be implications if proceeds are received in foreign bank account.
Hi Manish,
As checked with Quicko again, they mentioned that if you are an NRI receiving the sale proceeds in a foreign bank, you will not be liable to tax in India.
Having said that, we urge you to check with tax advisor as the full specifications of the situation couldn\’t have been covered in the question.
hi,
Is the US capital gain calculated on each stock separately or on the total transaction.
for e.g
If I make a profit of $100 on stock 1 and loss of $50 on stock 2.
Is tax paid on agregate profit of 50 .
Can I set of the loss on stick 2 against profit on stock 1. Both are held for more than 24 months.
Hi Narendra,
Assuming, both the stocks are sold in the same financial year, yes, intra-head set-off provisions of Income Tax Act allows you to set-off loss from one source with income from another source under the same head – capital gains here. Long-term capital losses can be set off against long-term capital gains.
Hi
Thanks for the reply. I will wait for update on tax implication
Hi Manish,
This is the answer from Quicko, a tax filing platform – As the income is received in an Indian Bank account, the capital gains will be taxable. The tax rate for foreign shares is 12.5% for long term gains and slab rate for short term gains. The holding period to determine the type of gains will be 24 months. Moreover, if any tax was withheld on this income, they can claim a credit for the same while filing ITR in India. –
Hi Satya,
Can you please help with how people that are NRIs invest in Indian Equity? What are taxation rules?
Hi Rajat,
I hope the following articles answer your queries-
How NRIs invest in Indian equity – https://zerodha.com/z-connect/varsity/nre-or-nro-pis-or-non-pis-understanding-nri-accounts
Tax rules for NRIs – https://zerodha.com/z-connect/varsity/new-tax-rules-for-nris-starting-fy24
hi
I bought US stocks when I was resident of India in 2022 from my Indian INR account converting to USD. At the time of sale, I have become Non resident . The sale proceeds will be transferred to same Indian INR account . As I am NRI now, will gain from the sale will be subject to tax liability or it will come under my non – taxable global income.
Hi Manish,
As I check with our NRI team, it is understood that once your status changes to NRI, the onus is on the individual to convert the resident savings account to NRI-specific account (NRO). Will get back to you on the tax rules.
from the statement \”Indian residents cannot trade in the US F&O markets\”
Can you please clarify few things?
I have heard about rules that prohibit remittance of money for FnO trades.
most people construe that as plain FnO trading not allowed.
Can you confirm what amongst this is allowed/not allowed
1 remittance of Indian funds to US and trading US equity
2 using dollar proceeds from salaried RSUs for trading US equity (note there is no remittance here)
3 remittance of Indian funds to US and trading US FnO (I believe most people say this is not allowed)
4 using dollar proceeds from salaried RSUs for trading US FnO (this is the item with max confusion)
All of these questions are for people residing in India, with Indian salary but getting RSUs in US Demat through their employer\’s equity program.
Appreciate your time on this.
Hi Nikhil,
I am afraid I will not be able to answer your queries. We will try to find answers. Nevertheless, we request you to check with your broker/platformfor specific compliance related queries.
Hi Nikhil,
We tried to get answers for your query by talking to those who understand FEMA regulations. Below are the answers we gather –
1. Allowed. 2. Allowed, if money has come in US bank account and investment within 180 days of receipt of funds. 3. Not allowed. 4. RSUs when India Citizen, not allowed. But if RSU\’s when the person was a NRI or working in US at that time, then allowed.
Please note that these answers are subject to interpretation and the rules keep changing too. So, please keep an eye out.
Hi,
In the example given above related to sale of foreign stocks, should the income not be computed as (2500-1500) * 83.7 = 83700. LTCG = 83700*12.5%
Hi Anurag,
As per the Income Tax rules, the sale consideration has to be converted to Indian rupees. What you shared is converting capital gains to Indian currency, which is not mentioned.
Hi team,
can I report income from US stocks as business income?
Hi Nitesh,
It is generally treated as capital gains only.
Even with holding Indian shares, one has to prove the intention when showing gains under the \’business income\’ head instead of capital gains. The frequency of trades and scale at which they are traded would be the key points that will be considered.
Thanks Satya Sontanam for updating this article after tax reforms in 2024.
Sure! Let me know if you have any other further queries, Ajay!
Please help in sharing the information about the reporting of STCG from sale of foreign stocks in ITR.
In which point of Schedule CG we are required to report STCG from sale of foreign stocks.
Hi Ayush,
Once you open schedule CG, click on \’From sale of assets other than all above listed items\’. After that, select short-term capital gains. Here, whether to choose a(i) or a(ii) to fill the sale value is not clear. Different experts have different views; however, in most cases people go for a(ii) option. I urge you to check with your tax planner to confirm the same. Thank you!
Hi, if you have a US stock bought in before 31st Jan 2018, can you claim grandfather law for this stocks as well when filing for ltcg
Thanks
Nikhio
Hi Nikhio,
The grandfathering rule is not applicable to foreign shares.
I want to know post the July 2024 budget, how will indian ETFs or Indian mutual Funds primarily investing in foreign equity ( like motilal oswal Nasdaq 100Etf or fof) be taxed?
Hi Adesh,
Different tax rules are applicable based on the purchase date and the date on which the units are redeemed.
Assuming that the units are bought after April 1, 2023 and capital gains are accrued in this financial year (FY25), both LTCG and STCG are taxed at slab rate irrespective of the holding period. However, new tax rules are applicable for units that will be redeemed from April 1, 2025 – Holding period is 24 months; LTCG is taxed at 12.5% without indexation and STCG is taxed at slab rate.
Hi Team Zerodha,
So if I invest in any Indian ETF investing in US markets say MON100 or MAFANG. Do they count as foreign assets and do I need to separately declare them on ITR forms as such ?
Hi NJ
No, if you are investing in Indian ETFs with foreign ETFs as underlying assets, you don\’t need to declare them as \’foreign assets\’ separately in your ITR.
Hi,
Can I declare foreign stocks purchased in calendar year 2022 in current ITR??
Hi Balaji,
If you held the stock anytime during 2023, irrespective of purchase, you are liable to show the details of the stock in your FY24 return.
Hi,
Can I declare FA of 2022 in AY 2024 – 25?
I missed to declare in AY 2023-24.
If I have long term capital loss in domestic stocks and long term capital gain in foreign stocks, can I offset domestic ltcl with foreign ltcg?
Hi Micron,
They both under the capital gains head of income. Long term capital loss can be adjusted with long term capital gains.
I own shares in a foreign co. This company declares dividends, but reinvests my dividends in additional purchase of their shares. I doot get any remittance into my account. Am I liable for tax on dividend income every year, or only capital gains (long/short depending on duration) tax when I sell these shares?
Hi Ravi,
irrespective of whether you receive the dividend amount in your hands or not, you are liable to pay tax on dividend income from stocks
After budget 2024 , does indexation still applicable for the sale of foreign listed equities? The budget talked about properties when i heard but all over the internet its written for all asset classes . Also on 6 th aug its rolled back . Can you just clarify if its still applicable or not
Hi Debashish,
As per the updates we have currently, there is no indexation benefit for foreign stocks. Long term capital gains, after 24 months will be taxed at a flat rate of 12.5%. This is applicable for sales from July 23, 2024.
The roll back of the indexation benefit, as we understood, is only for land and building.
We may get full clarity once the Finance bill is passed in both the houses of parliament.
Hello – thank you for this article.
I seek some clarification on the point of \”If you do not want to deal with LRS, TCS, tax disclosure and remittance rules, you can also invest through Indian mutual funds investing in select international stocks and ETFs\”
Does this mean that investing in ETFs like \”Motilal Oswal NASDAQ 100 ETF\” which has less than 65% exposure to indian equity, but are still traded in Indian markets, are these classified as non-listed indian equities and as per latest tax rules, considered LTCG after 24 months?
Hi Madhur,
Yes, I am referring to international funds offered by Indian AMCs including the one mentioned by you.
now, coming to the second point on taxation – whether they are considered listed or unlisted is still a grey area. While the Income Tax Department mentioned in an FAQ after budget that all listed assets (which includes all ETFs) will have 12 months as holding period for LTCG, there are other interpretations too.. which suggest it is unlisted and thus 24 months holding period will be applicable. We have to wait and see if there\’s going to be further clarification. Whatever may be the case, the holding period of 36 months has now come down and there\’s no indexation benefit. These rules are applicable from 1st April 2025.
sir can I claim refund of tax deducted by foreign co. and pay total tax on long term or short term capital gain and claim benefit of LTCG 1lakh in India
Hi Venkatesh,
I am assuming that the foreign co withheld taxes on the dividend payment. Such dividends are taxed in India as well.
You need to submit Form 67 to claim credit for the withholding tax paid in the US, which can be used to pay taxes in India.
Hi,
As Satya said \”There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. \”, I have reported STCG in Indian stocks and STCL in foreign stocks ( other than listed shares) in Schedule CG of the ITR and the setoff is allowed. However , when I try to report the capital loss in Schedule FSI, I get a validation error saying that negative values are not allowed . What is to be done in this case please ?
Hi Ran,
I contacted Quicko for this query. Here\’s their response –
\”Under FSI, we need to report details of only income arising from a source outside India and not the losses. And if any taxes were deducted on the income, you can claim a relief for the same. Just like all other capital assets, gains/losses from foreign assets will be reported under schedule CG (capital gains). The subhead will be \’from sale of assets other than above listed items\’.\”
If Foreign (USA) share had a spinoff (demerger), we receive shares of demerged company. In USA, the demerged company shares are considered free and parent company cost of acquisition is not discounted.
In India, Demerged company acquisition cost needs to be based on parent company acquisition cost multiplied by ratio of book valve of demerged company by book value of parent company. And at same time the Parent company acquisition cost is reduced based on ratio of transfer of book value to demerged company.
Foreign company does not declare the book value transfer to demerged company companies so it is not possibel to calculate in the indian taxation method.
So How i should calculate the capital gains for the demerged share and the new parent share.
Thanks
Hi Balaji,
Can you please post this question on Tradingqna.com tagging @Quicko. They might be able to answer your query.
Did anything change in recent budget regarding Taxation on selling Foreign equity shares for LTCG?
I read there was a change regarding Foreign Mutual funds but couldn\’t find info regarding Direct equity shares.
Hi Jasmeet,
yes, Budget proposals altered the capital gains rules for investments in foreign shares as well. Now, there is no indexation benefit. Long term capital gains will be taxed at 12.5% while the short term gains will be taxed at slab rate. Holding period to qualify for LTCG is 24 months.
These rules will come into effect from the Budget day once the Bill becomes an Act, which is going to happen soon
Hi,
I bought shares of a foreign entity in Aug 2019 and sold in Jan 2024. Do I have to report the LTCG in the ITR for the financial year 2023-2024 or 2024-2025.
Thanks
Hi Varun,
Since the sale happened on Jan 2024, you need to report LTCG in FY 23-24, that is AY (Assessment Year) 24-25
Which exchange rate to be considered for cost of acquisition of shares which bought in 1st April 2018? Date on which shares are bought or date on which shares are sold?
Hi Sarang,
You don\’t have to convert your INR to dollars/other currency to calculate capital gains.
In fact the sale proceeds in foreign currency has to be converted to INR using telegraphic transfer buying rate provided by the State Bank of India
Thanks a lot. One more thing to check. If my acquisition dates varies from 2009 to 2014, how can I determine single acquisition date for the selling of 12 shares?
Hi Bhaskar,
you know the combined INR value used to buy all 12 shares. Calculate the indexed cost value separately for all shares since it is bought in different years. Convert the sale proceeds using SBI TTBR rate. You will now have the sale value and the indexed cost in INR which gives you long-term capital gains details.
Note that, if you are yet to sell the shares, new tax rules might be applicable once the Finance Bill 2024 is passed. New tax rules removed indexation benefit.
When will we learn fundamental analysis?
Hello,
I sold IBM USA shares in Sep 2023. Total sale value was INR 1,75,084. Acquisition Date of the shares was Jun 2009 and Cost of Acquisition was INR 54300 without any indexation. I purchased the shares as part of the Employee Stock Purchase Plan. What will be the LTCG tax in India?
Hi Bhaskar,
LTCG at 20% with indexation benefit will be applicable to you. Please refer to segment – 8.3 – Tax In India – for details.
Hi,
Now for FY 2024-25, Long Term Capital Gain Tax from Overseas capital gain is also 12.5% with-out indexation.
To calculate the LTCG, for Resident Indian, after holing the investment for 24 months, which one is correct ?
Option A:
Sell Price in $ – Buy Price in $ = Gain in $ (To be converted to INR)
Option B:
Sell Price in INR – Buy Price in INR = Gain in INR
(To convert in INR SBI-TT buying rate on the last day of the month before transaction month)
Investment was made when I was non-resident and source of investment was overseas salary.
Thanks
Hi Vasan, If you are talking about the financial year FY24-25, rules will be clearer once the Bill is passed.
For previous years, please refer to segment – 8.3 – Tax In India – in this chapter for details. Sale and buy price to be converted to INR.
What is the taxation rate for foreign stocks according to the new budget declared on 23 July 2024 ?
Hi Piyush
As per the proposal, LTCG will be calculated after 24 months of holding at 12.5% tax rate. The indexation benefit will not be available.
Short term gains will be taxed at your slab rate.
Why not calculate the indexed cost in foreign currency and then convert it into INR? Or alternatively, why not calculate the capital gain in foreign currency and then convert it into INR using the current exchange rate?
Hi Singh
The tax rules says so
In continuation of the above query, do I have to declare the 2 cases as holding or can I ignore as I sold them before March, 2023. I am providing the STCG of these transactions.
Hi Sreekar,
You have to disclose if you held \’any\’ time during the calendar year 2023 (even if it is sold) in the ITR for FY 23-24
In above Microsoft example, If I purchase 10 shares in September, 2022 and sold 5 shares in Oct, 2022 and 5 share in Jan, 2023, then how I can declare in ITR. Could you please suggest these 2 scenarios.
Sreekar,
Let\’s divide this into two parts – tax liability and reporting
For FY23
Tax liability – shares bought and sold in 2022 will be part of your FY23 tax liability since tis happened in that particular financial year.
Reporting in FY23 – assets held anytime in 2022 has to be disclosed. So, Microsoft shares to be disclosed even if they were sold.
For FY24
Tax liability – Since no sale happened in FY24, no tax liability
Reporting – Shares bought in Jan 2023 to be reported in FY24 ITR since you held them in 2023 calendar year
Hi Satya,
Thanks for the wonderful write up for educating the tax payers in India w.r.to foreign taxation.
Can you please help clarify on the following .
Can we setoff Foreign STCG and LTCG ( holding > 24 months) w.r.to Indian STCG and LTGC. ie.
1. if losses in foreign and gains in Indian market, can they be setoff in both STCG and LTCG ?
2. if losses in foreign STGC ( holding < 24 months ), as they are directly added to income, can we add these to income from other sources ? With this taxable income will come down by loss in STGC. Can this be done ?
3. can losses in foreign STCG and LTCG can be carry forwarded ? if yes, do we need to show it separately ( ie . without combining with carry forward losses in indian STCG and LTCG ) ? Since taxation % is different, checkingon this.
Hi Hareesh,
I hope the following points answer your queries.
1. There is no restriction on setting off loss from investing in US shares against profit from investing in Indian shares. However, remember that long-term capital losses can only be set off against long-term capital gains. Short-term capital losses can be set off against long-term and short-term capital gains.
2. As per tax rules, loss under head ‘Capital gains’ can only be set off against capital gains.
3. you cannot consolidate your capital gains from foreign shares with listed equity capital gains.
I want to know taxation on foreign ETF (international equity) and SILVER (HDFCSILVER)
I had traded in MAHKTECH and HNGSNGBEES, and SILVER too in Jan 2024(bought and sold both in Jan2024 month.
Please tell me how these two categories will be taxed in ETF.
Hi Vivek,
Since these are considered funds with less than 65% Indian equity, gains on them will be taxed at slab rate – irrespective of the holding period.
USA financial year spans Jan to Dec however in India the financial year spans from April to next year March. I sold my shares in Jan2025 which were baught in last few years. In which FY,I need to file return for it?
Hi Avi,
The calendar year is relevant for reporting, while the financial year matters for taxing the income.
For the return to be filed this year, that is 2025, you have to report all foreign assets held in the calendar year 2024. Assuming, you held the share at least for a day in 2024, you have to disclose it in the return you file this year (though you sold the share and do not hold it anymore).
In terms of taxability, the capital gains are applicable to tax and becomes liable for the FY 2024-2025. Hence, report capital gains in the ITR that will soon file for FY25.
Hope this helps.
May I know which exchange rate from SBI – TTBR or TTSR to be applied on the foreign equity shares purchased when my residential status was NRI for filing schedule FA in INR.
Hi Failsal,
For peak balance, value of investment and foreign sourced income, one must use SBI TTBR rate
Are the tax slabs still valid, if there is minimal income in India and say 30Lakh short term capital gains from foreign stocks? Can the deductions like medical and educational can be still claimed for tax savings? (India citizen, residing in India). Thanks.
Hi Eswar,
Please note that deductions such as medical costs and educations allowances are not allowed as deduction from capital gains – either short term or long term. you can deduct or take exemption from your other income like salary.
Hello,
Thanks for authoring this page. Informative.
Could you please also share information about the taxation on dividends from foreign shares ?
Thanks in advance!
Hi Siva,
Details about how dividend income from foreign stocks is taxed is also mentioned in the article.
If the dividend income if from US stocks, it is treated as ‘income from other sources’ and taxed in India. You need to convert dividend income into Indian rupees using the exchange rate on the last day of the month prior to the month you received the dividend. It will be taxed as per your slab rate.
Note that US deducts 25% tax when the amount is remitted to you. However, investors can claim the tax credit for the amount withheld as tax in the US.
Hey, I am an NRI and investing in stocks from foreign to Indian market from exisiting Indian Saving account. It is safe? If it is not appropriate then what should be the next step.
Hi Azam,
You cannot use your existing savings account in India to invest in the stock market.
You have to route your investments either through the NRE account or the NRO account. You need to convert your demat account to NRI demat account. If you are using Zerodha app, you can raise a ticket with the customer support and they will be able to guide you.
I am and NRI so can i trade in indian market? And if i can so which instrument are allowed and which are not? And can you please aslo share information regarding the taxation for the same.
Hi Akash,
Regarding the restrictions, you can go through the following article – https://support.zerodha.com/category/account-opening/nri-account-opening/trading/articles/are-there-any-stocks-that-are-restricted-for-nris
Coming to the taxation part, your investments in Indian stocks will attract long-term capital gains tax of 10% (gains exceeding Rs 1 lakh) and short-term capital gains tax at 15%, depending on your holding period of more or less than 12 months. Dividend income will be taxed based on your applicable slab rate
Do I need to disclose investments in Indian etfs that track global indices like Mon100, mafang, Masptop50, etc as foreign assets? Or they considered and taxed similar to Indian MFs and etfs?
You will have to while filing your taxes. Your CA will advice you on this, please talk to the CA.
Hari,
Generally, such investments are considered as foreign assets for calculating tax liability. But only those that come under LRS (Liberalised remittance scheme), ESOPs in a foreign company and assets bought when residing in a foreign country are required to be disclosed in schedule FA. Please check with your tax advisor to confirm the same.
Hi,
I heard that retail investors can invest in these specific 8 stocks of us stock exchange. Is this information true ? If so , let me know if the taxation will be similar.
https://www.business-standard.com/article/markets/indian-retail-investors-can-trade-in-select-us-stocks-via-nse-ifsc-platform-122030301342_1.html
I dont think any broker has this facility yet.
The investments will come under the LRS (Liberalised Remittance Scheme) of RBI. As per the IT Act, taxation is as it is applicable to any other foreign stock investments.
Hey, can I offset long-term capital loss on US ETF (after 36 months) against long term capital gains in Indian equity Mutual Funds?
Hi Palkush,
Yes, Intra-head set-off of losses of Income Tax Act allows you to set-off loss from one source with income from another source under the same head.
Hi,
Can you tell me if there will be any changes in taxation rules if I invest through nseix in gift city ?
Hi Abhinav,
Retail investors from India are not allowed to invest in Gift Nifty, FYI.
For foreign investors, capital gains from trading in Gift Nifty are exempt from tax in India.
I wanted to confirm that you said, that Brokerage Paid when Buying/Selling \”US Shares in India\” can be added to that Share\’s Cost Basis/Adjusted with that Share\’s Sale Value.
Thank you Satya.
Hi,
Thank you for the wonderful article. Can you cover or point out to articles about ESPP and RSUs provided to an employee in India but the company is listed in a foreign country. And what declarations need to be done.
Hi Prateek,
Thank you. Sure.
Just for your understanding, ESOPs given by companies headquartered abroad will be taxed same as ESOPs given by domestic entities. The first instance of tax comes when you exercise your option. The diff between the fair value of shares and the amount you paid will be taxed in India. The second instance is at the time of sale. 24 months is the holding period to be considered as long-term capital gain. If you pay taxes on those ESOPs abroad, you can claim refund as per the DTAA agreement of India with that country.
Foreign ETF like Vanguard S&P 500 (VOO) etc. shall be taxed like unlisted shares (long term – 20% after 2 years) or like debt funds (All gains simply added to your income). Thanks in advance.
Hi Dheeraj,
The tax rules are not very clear regarding this. However, most tax experts are taking a conservative stand that they will be treated as debt funds and the gains will be added to one\’s income irrespective of the holding period. Thanks.
In 2023 many brokers (example vested finance, IND money etc.) started charging commission when buying and selling US stocks.
So, for tax purposes is the commission charged part of the share cost basis?
For example, I bought 1 share of xyz company for $100. The broker charged me a commision of $1.
Now, is my cost basis of that 1 share of xyz company $100 or $101?
Thank you.
Hi Harshil,
Generally, brokerage and other charges (except STT that you pay on buying/selling Indian listed shares) that you pay when buying/selling shares on the exchange can be added to the cost of share.
In case we have Long Term Capital Gain in India, then we have an exemption of Rs 100000 per FY in India, is the same applicable for LTCG from sales of Foreign Stocks?
Hi Aravind,
No, that benefit is not available for investments in foreign shares.
Hi, I am a resident in India as per Income Tax Act, 1961.
I incurred long term capital loss by investing in US listed stocks.
Can I set it off against long term capital gain earned in investments done in Indian listed shares while filing my ITR.
And can it be also done for short term capital gain/loss?
Hi Gagan,
No, it cannot be offset by investing the sale proceeds in listed Indian shares in India.
Hi Satya,
Are there any clauses when you plan to take benefit of 54f, like.
1. Can it be availed if I already own 2-3 residential properties.
2. Max amount if any that I can invest in the new property from th e sell of foreign equity.
Thanks
Hello,
Sec 54F tax break doesn\’t apply if the taxpayer already owns more than one residential house at the time of transfer of the shares or ETF. And, where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be considered for the purposes of computing the exemption.
Hi Team,
Thanks for the the great consolidation. Few queries:
1. If I gain profits by investing in stock A & I reinvest both principal + profit in stock B. I should include the profit in my STCG/LTCG in my tax report, even though I reinvested. Please correct me if I\’m wrong here.
2. It was mentioned \”telegraphic transfer buying rate provided by the State Bank of India\” is it mandatory to use the one provided by SBI?
3. Say my dividend income on US stocks is Rs. x, but what I realised was Rs. 0.75x due to 25% taxation from US government. While disclosing my dividend income should I disclose Rs. x (or) Rs. 0.75x?
Hello Joy,
1. Yes, you need to report your capital gains even though it is reinvested.
2. The Income Tax Act department specifies that exchange rate in the instructions to file the income tax return.
3. You need to disclose x. Having said that, you can claim tax credit in India.
Hi team, can we avail section 54F tax exemption for shares held in a foreign listed equity to buy a residential *site/plot* in India or is it only applicable for a residential *house*?
Hi Vinay,
As per our understanding, section 54F is available for investments in a residential house. If the site/plot is bought to construct a residential house, section 54F tax benefit could be available. However, we urge you to consider a tax expert\’s opinion on this case.
\”If you invest in foreign ETFs instead, for investments to be qualified as long-term capital gains, the period of holding will be increased to 36 months (from 24 months).\”
Thank you for the article. Could you kindly point me to the relevant original Income Tax Schedule for the above. Thanks.
Thanks for the detailed post. I have direct investments in foreign etf, and according to this article, the ltcg on it after 36 months is 20%. Can you confirm this? I got contradictory information elsewhere that it will be the slab rate like through indian MFs.
Hello Raj,
Investments through Indian mutual funds in foreign ETFs from April 1, 2023 attracts slab rate taxation irrespective of holding period. But, if you invested in foreign ETFs directly through your broking account, the taxation differs as per my understanding. LTCG is taxed at 20% with indexation benefit. Please check with your Chartered Accountant for their interpretation and what is applicable to your specific situation.
Hi Team,
Can I avail section 54F For foreign shares to save capital gain tax.
https://www.zeebiz.com/personal-finance/income-tax/news-capital-gains-tax-exemption-under-section-54-and-section-54f-income-tax-act-capital-gains-residential-property-eligibility-stst-240147#:~:text=Section%2054%20focuses%20on%20long,tax%20benefits%20can%20be%20claimed.
Hi Utkarsh,
Section 54F of the Income Tax Act allows you to claim tax benefits if long-term capital gains from ‘any’ long-term capital asset (not being a residential house) are reinvested in a residential property in India. It did not specifically exclude foreign stocks.
I am a resident in India as per Income Tax Act, 1961. In case I incur short term capital loss by trading in US listed stocks, can I set it off against short term capital gain earned in trading Indian listed shares while filing my ITR.
Hi Rahul,
There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off
against long-term or short-term capital gain.
But you mentioned \’trading\’ in Indian stocks. In that case, your gains would be either speculative business income or non-speculative business income.
As per tax rules, loss under head \’Capital gains\’ cannot be set off against income under other heads of income.
Hence, I am afraid you cannot set-off loss from US shares against gain from trading in Indian shares.
Can anyone confirm if I can save LTCG (from sale of foreign shares) tax using 54F?
Hello Manish,
I answered the same query in the above comment.
Happy reading!
Thanks for the details. Can you please confirm if section 54F will be applicable on this long term capital gain earned by indian resident from sale of US listed shares.
Hello Manmohan,
Section 54F of the Income Tax Act allows you to claim tax benefits if long-term capital gains from ‘any’ long-term capital asset (not being a residential house) are reinvested in a residential property in India. It did not specifically exclude foreign stocks. Hence, I believe that section 54F benefit will be available on LTCG from the US listed shares as well. You can check with tax experts to confirm the same.
Thank you for the valuable information Satya Sontanam, also please elaborate
1. How does trading FnO and intraday in US markets are taxed?
2.How forex are taxed we know its illegal but we can trade openly and regulators are not taking any actions and also when will cross currency trade will start?
Hello Ashay,
Answering your first question- I cannot comment on how the US taxes the F&O income.
Indian residents cannot trade in the US F&O markets. If you want to know about trading in a few US stocks in Gift City, derivative profits from those securities in foreign currency are exempt from tax.