Taxation and Regulatory FAQs

1. How much can I invest in U.S. stocks from India? Currently, you can invest up to USD 250,000 every year in foreign stocks from India. This amount can change, subject to RBI guidelines. Your investments in US securities are also governed by the same limit. Foreign investments fall under clearly defined RBI guidelines. The remittance of money for foreign investments comes under the Liberalized Remittance Scheme (LRS). Under LRS an Individual can remit up to USD 250,000 per financial year to invest in foreign equities done through an authorized dealer (commonly, your bank). As per RBI policy, having a PAN card is required to purchase shares in foreign countries. For more information on LRS on RBI website, you can click here.
2. Is there any tax implication on transfer / remittance of funds into Stockal platform for making investment in foreign securities? Transfer of funds into an external platform would not result in any profit/gain as it involves only transfer of funds to self. Further no transaction has been undertaken / executed resulting in any transfer of any asset. However, w.e.f. 1st October 2020, any foreign remittance by resident individuals under Liberalised Remittance Scheme framed by RBI may trigger TCS (Tax Collection at Source) provisions which requires collection of tax by an authorised dealer @5% (10% in case of non-PAN / Aadhar cases) where the total foreign remittance including transfer of funds exceeds INR 7,00,000 per annum. In this regard, transfer of funds into Stockal platform by way of foreign remittance may attract TCS. However, it is pertinent to note that AD would be liable to collect TCS @ 5% on the amount exceeding INR 7,00,000
3. What is the definition of Long-term Capital Asset (LTCA) and Short-term Capital Asset (STCA) w.r.t foreign listed securities? What are the tax rates if any capital gain (Long term or Short term) is accrued on sale of such Capital Assets / Securities? The time period for which a particular capital asset is held by its owner decides whether that asset is a short-term capital asset or a long term capital asset. Shares of a company listed on foreign stock exchanges (unlisted securities for Income Tax purposes) shall be considered as LTCA if the same is held for more than 24 months while those held for 24 months or less shall be considered as STCA. Tax rate with respect to LTCG and STCG applicable on Indian resident has been provided below Capital Gains Tax Rate

4. Am I liable to pay tax when I remit the funds back to India?

No, the tax incidence is on the event of transfer of securities by the Client on Stockal platform. The remittance of any funds lying outside India has no connection with the tax incidence.

5. Can I set off the losses incurred on transfer of foreign listed securities with my other income in India?

All Short-term capital losses arising on sale of foreign listed securities can be set off against both short term and long-term capital gains in India. However, any long term capital loss arising on sale of foreign listed securities can only be set off against long term capital gains in India. (Assuming there is no intraday trading)

6. Can I carry forward the losses incurred from dealing in foreign listed securities under Income Tax Act?

The losses arising from the sale of foreign listed securities can be carried forward up to eight consecutive years while losses from speculative business can be carried forward for a period of 4 years.

Indexation is a benefit given to adjust the cost of capital asset held for long term with respect to inflation. Since foreign securities are considered as unlisted, they must be held for at least 24 months to qualify as Long Term Capital Asset and avail indexation.
8. Is there a limit on maximum number of foreign securities to be held by an Indian Resident?

There is no maximum limit on the number of foreign securities that can be held by an Indian resident. However, under the LRS (‘Liberalized Remittance Scheme) an amount up to USD 2,50,000 per resident individual can only be remitted outside India in one financial year (April – March).
9. Can a Resident Indian utilize more than the amount specified (USD 2,50,000) under LRS for buying foreign listed securities?

An Individual cannot remit more than USD 2,50,000 in one financial year under LRS scheme however, a resident individual investor who is not permanently resident in India after having remitted their entire earnings and salary, wish to further remit other income over and above the limit of USD 2,50,000, may approach RBI with documents through their AD bank for approval.
10. What is the tax on dividend received from foreign listed securities?

For Residents other than an Indian Company:
Dividend received from foreign listed securities is taxable in India under the head Income from Other Sources. The dividend will be subject to tax at normal slab rates prescribed for the individual.

11. Do I need to pay tax on foreign dividend both in US and India? Can I claim credit for the taxes paid on such dividend in India?

Yes, tax needs to be paid on Foreign dividend both in US and India. However, an Indian Resident individual can claim Tax credit of taxes paid in US by virtue of Double Taxation Avoidance Agreement (DTAA) entered into between India and US by filing a return of income in India. Maximum credit that can be availed is the amount of tax that should have been paid in India on the transaction if there is no DTAA.
12. Am I expected to report my holdings or gains in India an annual basis - even if I don't have a tax liability? If yes, under what section and what forms do I need to report the same in India?

Where a person is a ROR he/she is required to file his/her income tax return if the person has any kind of foreign assets.

The reporting in this regard would be as follows

1. Details of foreign assets and income from any source outside India –
Schedule FA of the relevant Income Tax Return (ITR)

2. Details of Income from outside India (only in the case of resident and
ordinarily resident) – Schedule FSI of the relevant ITR

13. What are the tax implications in India if I am a Non-Resident Indian (NRI) residing in any country other than USA? It is to be noted that earning Capital Gains on Stockal Platform is not liable to tax in India.

14. Can I claim the fees and brokerage paid as a deduction for computing my capital gains tax in India? Yes, any cost incurred on account of sale or transfer of asset is allowable as a deduction while computing the Capital Gains. However, it is pertinent to note that AUM charges and annual subscription charges incurred cannot be claimed as deduction as they are related to holding of capital asset and not in relation to transfer of capital asset.
15. What are the tax implications in India where my shares get vested with my nominee in case of my death? There is no applicable estate duty in India on vesting of properties with the nominee in the event of death.
16. What are the TCS provisions (including thresholds, if any) in regards to the overseas investment made by an investor? As per Finance Act, 2020, TCS @ 5% is applicable only if and when the foreign remittance in a Financial Year exceeds INR 7,00,000. It is pertinent to note here that TCS provisions on foreign remittance are applicable from 01-10-2020.

DISCLAIMER: This document is only for informational purposes. None of the contents of this document should be treated as legal, tax, investment, financial, or other advice. Individual circumstances, preferences and needs may vary  and  also  change with time. Investors are strongly urged to undertake their own due diligence, with the help of an Independent Financial Advisor. Please consult a qualified tax consultant or expert with your specific taxation situation  for  appropriate  advice.  Neither Stockal  nor its advisors are responsible for  the    decisions taken by the investors