- Date : 18/08/2023
- Read: 3 mins
A look at the taxability of all the incomes and gains that can arise from foreign stocks, along with tax relief.
Did you make foreign assets disclosures in ITR during your ITR Filing exercise for the financial year (FY) 2022-23? If you had any capital gain income from foreign shares or dividend income from them, you must have declared them. Let us ensure that we file our income and gains from foreign stocks correctly in our ITR returns for FY 2023-24. You must know about long-term and short-term capital gains from foreign stocks, taxation of dividend income, and tax relief in the case of overseas taxation.
Foreign Stock Taxation in India – Capital Gains
You must know if the capital gain on foreign stocks is taxable in the foreign country. Tax on US Equity & Investments in the USA is favourable as capital gain on stocks is not taxable there.
In India, foreign stocks are regarded as unlisted shares, as they are not listed in Indian stock markets. Therefore, long-term capital gain on such shares is applicable if the period of holding is 24 months. You will see during the FY 2023-24 ITR Filing that it is taxed at 20% with the benefit of indexation.
If the period of holding is less than 24 months, the short-term capital gain is applicable. It is taxed as per the income tax slab rates.
While calculating the capital gain in rupee value, the telegraphic transfer buying rate of the currency on the last day of the month preceding the month of the asset transfer is considered.
Other Income From Foreign Shares
If you invest in US stocks, dividends earned on such stocks will be taxed at the rate of 25% there. It will also be taxed in India, by adding such income under Income from Other Sources in ITR Filing for FY 2023-24 and later years.
You can seek tax credit for the tax paid in the US while paying tax in India. This is possible due to the Double Taxation Avoidance Agreement. To get this tax relief in ITR Filing for FY 2023-24, you must claim the foreign tax credit under Form 67.
Loss On Sale Of Foreign Shares
Short-term capital loss can be set off against both STCG and LTCG. These losses can be carried forward for 8 years.
Long-term capital losses can be carried forward for 8 years as well, but can be set off against LTCG only.
During FY 2023-24 ITR Filing you must use ITR-2 to disclose capital gains from foreign assets. Ensure that you know how to show full and correct information on these incomes and gains in the right ITR schedules and forms.
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