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Thanks to the fintech sector, which has made Wall Street accessible to Dalal Street investors. With a large number of investors punting on the US stock markets, it becomes more important than ever to discuss the compliance requirements in India. This article attempts to enlist all the tax implications and how to use ClearTax to fill the required details in your ITR if you have invested in US stocks.
Any resident individual who has invested in US stocks, i.e. holding equity shares or debt instruments of a US entity, must disclose the details of their holdings in the income tax return in India. The disclosure must be made irrespective of whether they made gains from such investments. Income tax return filing is mandatory for such investors even if their income is below the basic exemption limit of Rs 2.5 lakhs, Rs. 3 lakhs (60 years or above) and Rs. 5 lakhs (80 years or above).
If you invest in US stocks, the taxability of dividends and capital gains are summarised here. You can read this for a detailed explanation.
in the US?
|Dividend||Yes||25%||Yes||Slab Rate||Tax paid in the US can be adjusted against the tax payable in India by filling Form 67.|
|No||–||Yes||20%||Plus surcharge and cess|
ITR-2 or ITR-3 will be applicable, depending on your other income details.
The following schedules must be filled in the ITR:
Note: If you have received dividend income from US stocks, it is mandatory to file form 67 before filing ITR.
Step 1: Enter all the Indian income (refer to this guide for help). If you have sold the US stocks/ETFs, fill up the ‘Capital Gains’ section. Add the dividend and the interest amount received on such stocks in the ‘Other Income’ section in Indian rupees.
Step 2: Select the ‘Tax Saving’ tab and scroll all the way down to access the ‘Other Disclosures’ section. Click on the button ‘One of these conditions applies to me’ as the 4th condition applies to you.
Step 3: Navigate to the 4th section-‘Foreign Assets, Income and Taxes’.
On this page, you’ll need to fill all the following schedules
Let’s fill each one in turn.
Step 4: When you enter the FSI schedule, it will have a table like this:
Enter these details in the respective columns:
A sample schedule is shown below. ‘Save and Continue’ to proceed.
Step 5: Now scroll down to enter the Schedule TR details. The tax paid outside India will be allowed as credit and offset against tax payable in India. This reduces your tax liability in India. Have you received any tax refund in the current year which was previously claimed as Tax Relief in India? Then such amount must be entered in Schedule TR. Also, enter the assessment year in which such refund amount was claimed as a tax credit.
Below Schedule TR, you’ll find Schedule FA. All the foreign asset details must be filled in here. For reporting US stock details, select option ‘B Details of Financial Interest in any Entity held’
Fill in the schedule. You will find all the details in the broker’s statement.
Schedule FA interestingly follows the concept of ‘accounting period’. The accounting period is of 3 types:
|Sl. No.||Foreign country’s |
|Period to be considered |
for Schedule FA reporting
|1.||1 January to 31 December||1 January to 31 December|
|2.||1 April to 31 March||1 April to 31 March|
|3.||Any other 12-month period||Any other 12-month period|
Therefore, in the given scenario, consider only the shares acquired and held from 1 January to 31 December (i.e. US financial year) in Schedule FA.
Unlike Schedule FA, the Indian financial year, i.e. 1 April to 31 March must be considered for reporting the foreign income like capital gain/loss/dividend/interest from US stocks.
Yes. You need to report your holdings in US shares and securities even if you haven’t sold them during a particular year.
For e.g. If you bought U.S company stocks of Rs 30,000 (converted price) in August 2021, you must declare it in Schedule FA in FY 2021-22.
Say, you bought additional shares worth Rs 50,000 in July 2022, you will need to report it in the return of 2022-23. If you continue holding the shares bought in August 2021, you will also need to declare them.
The returns of current assessment years can be revised. You may refer to this guide on how to revise returns.
The deadline to revise returns of previous assessment years has lapsed. However, you will be able to update your returns using form ITR-U for the assessment years: AY 2020-21 and AY 2021-22.
Yes, ITR filing is now made mandatory if you have any income from outside India.
Yes, global income is taxable for a resident individual unless specifically exempted. Therefore, such interest received will be subjected to tax. Further, the account with SBM is in the nature of savings account, therefore benefit of section 80TTA/80TTB can be claimed on such interest.
Yes, all the amounts in the ITR shall be in Indian rupees. USD must be converted to INR using TTBR,i.e. ‘telegraphic transfer buying rate’ of the last day of the previous month in which the sale happened.
For e.g., if the sale happened on 28 July 2022, you must consider the TTBR of 30 June 2022.
Note: The conversion rate is usually shared in the broker’s statement which can be used for conversion.
No. The US equity and the bond market are different. However, broker platforms allow the purchase of US treasury bonds through different treasury ETFs.
Failing to report or reporting inaccurately can result in additional taxes and penalties under the Black Money Act. The penalty can be as high as Rs. 10 lakhs annually. For any undisclosed income will bear a tax of 30% and a penalty of up to 90%.