How to disclose income from US stocks in ITR

Amazon, Netflix, Google-these are a few names that not only form part of our daily lives, but also the portfolios of many Indians. As a result, it becomes crucial to properly disclose any income from foreign stocks in your income tax return (ITR) to avoid any nasty tax surprises later. With July 31 marking the last date for filing ITR for salaried individuals, we thought it would be the perfect time to guide you on disclosing income from foreign stocks, particularly US stocks, in your ITR. We offer you a DIY (do it yourself) guide. Types of income from US stocks and their taxation Before we begin, it is important to understand how one can earn income from US stocks. There are primarily two ways: 1. Dividends: Dividends on your US stock holdings are taxed at a flat rate of 25 per cent in the US. The dividend income is also subject to tax in India. The amount you receive as dividends is added to your total income and taxed according to your income tax slab. However, to avoid being taxed twice on the same income, India and the US have a Double Taxation Avoidance Agreement (DTAA). Under this agreement, you can reduce the amount of tax you owe in India by the amount of tax you've already paid in the US. 2. Capital gains: The US does not tax capital gains you earn from selling US stocks if you are a non-resident of the US. However, you will need to pay taxes on these gains in India. The tax treatment depends on how long you held the investments before selling them: Short-term capital gain tax (STCG): If you held the stocks for less than 24 months, the gains will be added to your taxable income and taxed according to the income-tax slab applicable to you. Long-term capital gain tax (LTCG): If you held the stocks for more than 24 months, you will be liable to pay a capital gains tax of 20 per cent with indexation benefit. Steps to disclose US stock investments First up, gather the necessary documents related to your US stock investments from your broker. These are: Capital gain summary statement Schedule TR (Tax relief) Foreign asset schedule Form 1042-S You may refer to our article, 'How to file your ITR' to follow the basic steps of filing your ITR. To disclose foreign income from stocks in your ITR, you'll need to select the following additional schedules: In

This article was originally published on July 18, 2024.