How to file your income tax return on ClearTax if you invest in US stocks?

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.

Tax Implications 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.

Income Type	Taxable in the US?	Rate	Taxable in India?	Rate	Remark
Dividend	Yes	25%	Yes	Slab Rate	Tax paid in the US can be adjusted against the tax payable in India by filling Form 67.
Long-Term Capital Gain	No	–	Yes	20%	Plus surcharge and cess
Short-Term Capital Gain	No	–	Yes	Slab Rate	–

ITR and schedules to be filed if you have invested in US stocks

ITR-2 or ITR-3 will be applicable, depending on your other income details.

Particulars	ITR-2	ITR-3
Salary	✔	✔
Business Income	X	✔
Capital Gains	✔	✔

The following schedules must be filled in the ITR:

• Capital Gains: If shares were transferred or sold during the year.
• Other Income: If you have received dividend or interest income.
• Form 67: For claiming the tax credit
• Schedule FA:  Details of holding of foreign shares/securities whether sold or not (applies to ‘Resident and Ordinarily Resident)
• Schedule AL: Details of assets and liabilities (if total income is more than Rs. 50 lakhs)
• Schedule FSI: Details of income from outside India, i.e. gains from shares, dividends or interest, for claiming credit
• Schedule TR: Details of tax refunds in respect of tax claimed as a credit in earlier years.   

How to file ITR on ClearTax if you invest in US Stocks?

Note: If you have received dividend income from US stocks, it is mandatory to file form 67 before filing ITR.

Documents required for tax filing if you have invested in US stocks

• PAN Card
• Bank statement
• Capital Gains statement
• Foreign Asset filing statement
• Foreign Source of Income Summary
• Form 67 filings summary
• Schedule TR summary
• Other broker statements, if any

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

• Schedule FSI (Foreign Source Income)
• Schedule TR (Tax Relief) and 
• Schedule FA (Foreign Assets)

Let’s fill each one in turn.

How to fill Schedule FSI (Foreign Source Income)?

Step 4: When you enter the FSI schedule, it will have a table like this:

Enter these details in the respective columns:

• Country (2nd Column): ‘United States of America’
• Tax Identification Number (3rd Column): Passport number 
• Income Head (4th Column): 
  • For capital gains, select ‘Capital gains’ from the dropdown and 
  • For reporting dividend and interest income, select ‘Other sources’ in two different rows.
• Income Outside India (5th column): Enter the capital gains, dividend and interest amount from your broker’s statement in the respective rows
• Tax Paid Outside India (6th Column): 
  • For capital gains, enter ‘0’ and 
  • For dividend and interest income, enter the tax paid amount from your broker’s statement.
• Tax Payable in India (7th Column): Based on the nature of income enter the following:
  • Long-term capital gain: 20% of the amount in the 5th column.
  • Short-term capital gain/Dividend/Interest: Applicable slab rate*Amount in 5th column
• Section under which tax relief is claimed (8th Column): Select ‘90- DTAA with country’
• If DTAA, mention relevant article (9th Column): Based on the nature of income enter the following:
  • Capital gain: 13
  • Dividend: 10
  • Interest: 11

A sample schedule is shown below. ‘Save and Continue’ to proceed.

How to fill Schedule TR?

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.

How to fill Schedule FA?

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. 

Frequently Asked Questions (FAQs)

1, Do we need to consider the financial year 1st April to 31st March period for Schedule FA reporting or should the US financial year be considered?

Schedule FA interestingly follows the concept of ‘accounting period’. The accounting period is of 3 types:

Sl. No.	Foreign country’s accounting period	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.

2. Should we consider 1st April to 31st March period for reporting Capital gains/losses/dividends/interest or the US financial year (1 January to 31 December)?

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.

3. If I hold US stocks and don’t have any capital gains, do I still need to file ITR and report my holdings in the FA schedule?

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.

4. I was not aware that my holdings in US Stocks needed to be declared even if there are 0 capital gains. So do I need to rectify it for the previous assessment years? How can I do so?

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. 

5. If I have some US stock gains/losses but my income is less than the taxable limit. Am I still required to file the return?

Yes, ITR filing is now made mandatory if you have any income from outside India.

3. For the purpose of investing in US Stocks seamlessly, I’m using a 3rd party app that allows me to load my US wallet whenever needed. This wallet is maintained by SBM and they credit interest in USD periodically. Do I need to pay taxes for the same?

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.

4. In the P&L statement shared by my broker, the gains are all in USD. Do I need to convert them to INR to disclose CG? If so, how can I convert?

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.

5. Are equity and debt considered similar in the context of US Stocks?

No. The US equity and the bond market are different. However, broker platforms allow the purchase of US treasury bonds through different treasury ETFs.

6. Are there any consequences if I do not report my US shareholdings?

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%.