How are capital gains on US stocks taxed, and where should foreign asset details be reported in ITR?

Investments made in the US market, like other investments, are treated as capital assets for taxation in India. Shares listed in the US are considered long-term capital assets if held for 24 months or more before sale, and such gains are taxed as long-term capital gains at 12.5%. Shares held for less than 24 months are treated as short-term capital assets, and gains are taxed as per the slab rate applicable to the taxpayer.

You are also required to pay advance tax on your total income, including capital gains from US-listed shares, in four quarterly instalments. For long-term capital gains earned on US stocks, you can claim exemption under Section 54F of the Income Tax Act by reinvesting the net sale proceeds into a residential property in India within the prescribed time limit.

Additionally, you must disclose details of foreign assets held by you, along with income derived from them, in the FA Schedule of ITR-2 or ITR-3. This includes shares in US companies. The disclosure is to be made as of 31st December of the relevant year, even though the ITR is filed for the financial year ending on 31st March.

Failure to disclose foreign assets and income may attract stringent penalties and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Hence, it is advisable to consult a qualified professional who is conversant with tax filings for residents investing abroad.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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