Any resident individual who holds debt or equity interests in an entity based in the United States must disclose this information in their Indian income tax return. Under Indian tax laws, resident individuals possessing specific foreign assets, income sources, or signing authority in foreign accounts are required to file a return. This filing is mandatory even if the individual’s total income falls below the basic exemption threshold.

Such declarations are made within ‘Schedule FA’ (Foreign Assets) of the tax return. This applies whether you are a legal owner, a beneficial owner (one who paid for the asset), or a beneficiary (one who derives benefits without having paid for the asset). Taxpayers must utilize the appropriate forms, specifically ITR-2 or ITR-3, depending on their applicability.

When filing returns, the following details regarding foreign assets and income or signing authority held during the relevant accounting period must be provided:

• Foreign Custodial or Depository accounts
• Investments in Foreign Debt or Equity
• Surrender value of Foreign Annuity or Insurance Contracts
• Financial interest in any entity
• Immovable property holdings
• Other capital assets
• Details of accounts where the assessee has signing authority
• Trusts where the assessee acts as a Trustee, Beneficiary, or Settlor

Tax Implications of US Stock Trading

Taxation on Dividends

When calculating taxes on US stocks, dividends received must be factored in. These are typically subject to a flat 25% tax rate in the US. For example, if a company declares a $100 dividend, you would receive $75. Due to the tax treaty between India and the US, this rate is lower than the standard tax rate applied to foreign investors.

In India, dividends (whether reinvested or received in cash) are added to your total income and taxed according to your applicable slab rates. However, the Double Taxation Avoidance Agreement between India and USA (DTAA) allows taxpayers to claim credit for taxes withheld in the US against their Indian tax liability.

Capital Gains on International Shares

Another aspect of taxation involves capital gains tax. The United States generally does not levy capital gains tax on non-residents. Consequently, if you purchase shares for $500 and sell them for $800, the $300 gain is not taxed in the US. However, you are obligated to pay taxes on this gain in India.

Schedule FA Reporting Mandates

Resident and Ordinarily Resident (ROR) taxpayers must mandatorily provide comprehensive details regarding foreign accounts and assets in Schedule FA. This requirement does not apply to Non-Residents (NR) or Residents but Not Ordinarily Residents (RNOR).

If a resident holds US equity shares, these must be reported under Table A3 (Investments in Foreign Equity/Debts) within Schedule FA. The following data points are required:

• Country name and specific code
• General entity details (name, address, zip code, nature of entity)
• Date of acquisition for the debt or equity instrument
• Initial investment value
• Peak value of the investment during the accounting period
• Closing value at the end of the accounting period
• Gross interest earned
• Total gross proceeds from any sale or redemption during the period

All figures must be converted into Indian currency for reporting. This reporting requirement also extends to holdings in US corporate bonds.

For example, if you purchased US stocks worth Rs 57,000 (converted value) in August 2019, these details must appear in Schedule FA of the ITR for FY 2019-20, assuming the foreign stock’s accounting period aligns with the financial year. If additional shares worth Rs 65,000 were bought in August 2023, they must be reported in the FY 2023-24 ITR. Previously acquired shares (e.g., from August 2022) must also be reported if they were held during the relevant financial year.

Reporting Timelines

Reporting foreign assets in the FY 2023-24 ITR depends on the accounting period followed by the foreign jurisdiction:

1. Calendar Year (Jan 1, 2023 – Dec 31, 2023): Applicable if the asset/account is in a jurisdiction that closes accounts and tax filings based on the calendar year.
2. Financial Year (Apr 1, 2023 – Mar 31, 2024): Applicable if the foreign jurisdiction follows a financial year structure.
3. Other Periods: A 12-month period ending on any day after April 1, 2023, if the foreign jurisdiction adopts a different 12-month accounting cycle.

For instance, if a resident acquires an asset in July 2023 from a country following the calendar year, it must be reported in the FY 2023-24 return. Assets acquired in February 2024 in the same country would be reported in the FY 2024-25 return.

Exchange Rate Calculation

To convert foreign assets or income into Indian Rupees, the “Telegraphic Transfer Buying Rate” (TTBR) must be used. This is the exchange rate used by the State Bank of India (SBI) for purchasing the foreign currency via telegraphic transfer.

Additional Reporting Obligations

Residents holding US stocks as of the end of the financial year (March 31st) must also complete the Asset-Liability schedule, known as Schedule AL, if their total income exceeds Rs 50 lakh. This is in addition to Schedule FA.

Under Schedule AL, taxpayers must report:

• Immovable Assets: Land and buildings
• Financial Assets: Shares, securities, bank deposits, insurance policies, loans given, and cash in hand
• Movable Assets: Bullion, jewelry, vehicles, yachts, aircraft, artworks, etc.
• Interest in Assets: Holdings in a firm or Association of Persons (AOP) as a partner or member
• Liabilities: Debts related to the assets mentioned above