Taxation - Foreign
Salary
- Advance tax calculation under Income tax for freelancers opting for 44ADA.- A how to and why to. : r/IndiaInvestments
- Taxes as a software consultant with a US based firm : r/IndiaTax
- Taxation of Foreign Source Income
Foreign Stocks
ITR Form to disclose foreign investments
You should choose the right ITR form to report these details in order to avoid any Income Tax notice. If a taxpayer has foreign investments, he or she will have to disclose the same in the Schedule of Foreign Assets (FA) using the Form ITR-2 or ITR-3.
Who should declare foreign assets?
Taxpayers need to mandatorily declare all their foreign assets in the ITR, and that also includes investments in US stocks or assets in any other countries. If an individual has taxable income that is below the basic exemption limit of Rs 3 lakh but has stocks in foreign countries, he or she will still need to file the ITR to disclose the stock holdings.
Foreign stocks have to be declared in the ITR every year until the taxpayer has their name on it. In case of failure to declare the foreign stocks or any foreign asset like real estate, bank deposits, accounts, or insurance policies, the taxpayer will be liable to inspection by the tax department under the Black Money and Imposition of Tax Act, 2015. Besides the scrutiny, they can be penalised with up to Rs 10 lakh fine.
Taxation for foreign investments and stocks
In India, when a foreign stock is sold after a term of two years, the profit earned from it is treated as long-term capital gains (LTCG) and is taxed at 20 percent (surcharge extra), with indexation benefit. While short-term capital gains (STCG) are taxed at the income slab rates. There is no tax liability on capital gains for the foreign-born.
Also, the dividend income earned on foreign investments is taxed at the pre-defined tax slab rates in India. In the US, when the dividend is paid, the government withholds a flat 25 percent as tax. India has a Double Taxation Avoidance Agreement (DTAA) with the US, due to which one can claim the tax paid in the US to avoid the tax liability in India while filing the ITR.
Understanding taxation on US stocks in India: A guide for investors
Recent changes in tax regulations
Budget 2024 brought significant changes to benefit investors like you:
- Reduced long-term capital gains tax from 20% to 12.5% for holdings over 24 months
- Removed indexation benefits while maintaining parity with Indian equity taxation
- Added a 20% Tax Collected at Source (TCS) for annual remittances above Rs. 7 lakh (Changed to 10 lakh in budget 2025)
Type of Income | Tax in the US | Tax in India | Holding Period | Tax Rate in India |
---|---|---|---|---|
Short-term capital gains* | N/A | Yes | <24 months | Taxed at applicable income slab rate |
Long-Term capital gains* | N/A | Yes | >24 months | Taxed at 12.5% plus applicable surcharge and cess |
- Tax on US Stocks for Indian Investors: A Complete Guide
- How to claim TCS refund on foreign remittance for education? : r/IndiaTax
- How to claim TCS refund when traveling abroad and filing a return | Personal Finance - Business Standard
- TCS on Foreign Travel Expense Remittance [With Budget 2025 Updates] - Wise
- TCS Refund on Foreign Remittance: Get Your Money Back
Dividend for msft stocks
Basically the only issue will come with dividends (this is missed in 26AS and needs to be declared to avoid discrepancy), and while declaring we give a tax for ~31.2% in the portal afaik. However the US laws state that 25% to be deducted for indians earning dividends in US firms. So form 67 needs to be filled in for taking back the extra 25% we paid for the dividends.
US Estate Tax
Tax on the transfer of assets after someone dies
The threshold above which the 40% tax is triggered depends on the residency status: US citizens and green card holders: The threshold is $13.99 million in 2025. Non-resident Aliens (NRAs) including H1B: The threshold is $60,000 in 2025.
U.S Estate Tax applies to Indians too | Can eat 40% of your savings | Tips to avoid it - YouTube
- Why Ireland & Luxembourg-Domiciled ETFs Are Better
- Replacing VOO, QQQ & VT with CSPX, SXRV & VWRA
- ETFs domicile outside US, but traded in US Market
- Available in IBKR
- Are There Any Downsides to Irish ETFs?
Inward remittances
Inward Remittance Purpose Code
- P1006 - Business and management consultancy and public relations services taxation
- P0802 - Software consultancy implementation other than those covered in SOFTEX form
Outward Remittance Purpose Code
- NEW PURPOSE CODES FOR REPORTING FOREX TRANSACTIONS PAYMENT PURPOSES - 00 Capital Account - S0001 - Indian investment abroad -in equity capital (shares)
Links
- rbi.org.in/upload/notification/pdfs/52220.pdf
- Foreign Inward Remittance Certificate for India (FIRC) - Upwork Customer Service & Support | Upwork Help
- Foreign Remittances | Fees for Technical Services | TDS Requirement
- DTAAs with special reference to DTAA between India and Singapore
- Singapore & India Double Tax Agreement DTA | GuideMeSingapore - by Hawksford
- What Are Telegraphic Transfer (TT) Buying/Selling Rates? - Wise
- Best Foreign Inward Remit Rates : r/IndiaTax
- Which PSU bank is good for inward remittance/forex services? : r/IndiaTax