Income Tax

Resident Indians holding U.S. stocks should disclose details in Indian ITR

Updated on: Jan 13th, 2022 - 4:11:09 AM

5 min read

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Any resident individual holding equity or debt interest in the entity located in the U.S. needs to disclose about the same in the income tax return in India. The Indian income tax law requires mandatory filing of the income tax return for the resident individuals who hold specified foreign assets. The income tax return filing is necessary for such individuals even if their income is below the basic exemption limit. 

The income tax return contains a ‘Schedule FA’ for declaration of the foreign assets or accounts in respect of which you are a legal owner, or a beneficiary, or a beneficial owner. A ‘beneficial owner’ is a person who has provided consideration for the purchase of an asset, for which he or any other person can take the benefit of the asset. ‘beneficiary’ is the person who has not paid for the purchase of an asset, but derives benefit from the asset during the financial year. 

The taxpayer must report the details in an appropriate ITR form, i.e. ITR-2 or ITR-3, whichever ITR form applies to him. 

Disclosure requirements under Schedule FA

The resident taxpayer (resident but ordinarily resident) has to mandatorily give all the information about the foreign assets, account, etc., in Schedule FA of the ITR form in a specified format. Non-resident or resident (but not ordinarily resident) individuals are not required to report in schedule FA. 

If the resident individual holds U.S. equity shares, he must report it under Table A3 of Schedule FA of the income tax return.

In Table A3, you need to report the following details:-

  • Country name and code
  • General information about the foreign entity, such as name, address, zip code, nature of the entity
  • Date of acquisition of equity or debt instrument
  • Initial value of the investment
  • The peak value of the investment during the accounting period 
  • The closing value of the investment as at the end of the accounting period 
  • Gross interest paid 
  • Total gross amount paid/credited to the account during the accounting period 
  • Total gross proceeds from sale or redemption of investment during the accounting period

Such information is required to be disclosed after converting into Indian currency.

You need to report in the said Schedule FA even if you are holding the shares.

For instance, If you bought U.S stocks of Rs 57,000 (converted price) in August 2019, you need to report its details in Schedule FA of ITR-2/ITR-3 of FY 2019-20. Assume that the accounting period of the foreign stocks is the financial year. 

Further, if you bought additional Rs 65,000 worth of shares in August 2020, you have to report these shares in Schedule FA of ITR of FY 2020-21. Also, you have to report the shares bought in August 2019 if they are held in FY 2020-21. 

The taxpayer shall also provide the details for other foreign assets or accounts held at any time during the relevant accounting period. The nature of foreign assets or accounts can be foreign depository accounts, foreign custodian accounts, immovable property outside India, any other capital asset outside India, foreign cash value insurance contract, or an annuity contract any other income derived from a foreign source. It also includes the details of trust created outside India in which the taxpayer is a beneficiary or settlor and financial interest in any entity outside India.

When to Report?

The reporting of foreign currency or assets in the ITR of FY 2020-21 will depend upon the accounting periods of the foreign country as below:

  1. 1st January 2020 – 31st December 2020: If the foreign assets, foreign accounts, etc. are acquired between 1st January 2020 – 31st December 2020, and the assets/accounts belong to the foreign country/jurisdiction where calendar year is considered for the closing of accounts and return filings;
  2. 1st April 2020 – 31st March 2021: If the foreign assets, foreign accounts, etc. are acquired between 1st April 2020 – 31st March 2021, and the assets/accounts belong to the foreign country/jurisdiction where the financial year is considered for the closing of accounts and return filings,
  3. That period of 12 months, ending on any day succeeding 1st April 2020, in respect of foreign assets, accounts held in the foreign country/jurisdictions where the other 12 months accounting or tax filing period is adopted.

For instance, assuming the resident individual acquires a foreign asset in July 2020 from the foreign country. And the said foreign country follows the calendar year for tax filing and closing of accounts. Then the resident individual will be required to report the same in the income tax return of the FY 2020-21. However, for the foreign assets acquired in February 2021, the taxpayer shall report it in the income tax return of FY 2021-22.

Rate of exchange for conversion

For conversion of the foreign asset or foreign-sourced income in Indian currency, the rate of exchange shall be “telegraphic transfer buying rate”.

“Telegraphic transfer buying rate” is the exchange rate adopted by the State Bank of India for buying such currency, where such currency is made available to the bank through a telegraphic transfer.

Other reporting requirements

The resident individuals holding U.S. stocks during the financial year, i.e. as of 31st March 2021, are required to fill the asset-liability schedule, i.e. Schedule AL (if applicable), in addition to Schedule FA.

The taxpayer shall report assets and liabilities in Schedule AL as below:

  • Immovable assets- Land and building 
  • Financial assets- Bank deposits, shares and securities, insurance policies, loans and advances given, cash in hand
  • Movable assets– Jewellery, bullion, vehicles, yachts, boats, aircraft etc.
  • Taxpayer’s interest in the assets of a firm or association of persons (AOP) as a partner or member, respectively

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