How to file income tax return if you invest in US stocks from India?
Income Tax Returns (ITR) filing date
The due date for Income Tax Return (ITR) filing for salaried taxpayers is approaching fast. Therefore, it is advised to file your ITRs on time otherwise you will have to pay a hefty fine or penalty for filing your Income Tax Return after the deadline. The last date for filing the ITR is July 31 for taxpayers whose accounts don't need to be audited.
To know the details of dividend tax, long-term, and short-term tax while investing in US stocks, click here
Which ITR form to use in case you have investments in US stocks?
You should use ITR 2 form in case you have direct US stock investments.
In case you’re wondering how to proceed, we have you covered. Read on this easy guide for finishing your Tax filings for US Stocks investments in 30 minutes.
Some important resources before starting to file the income tax →
Click to Read: How are your US stocks and ETF investments taxed? All You Need to Know
Some important FAQs before starting to file the income tax →
- Do we need to consider the 1st April to 31st march period for gains/loss/dividends/interest reporting or US financial year should be considered (if yes, details of the financial year)? - Yes, from 01 April to 31 March only.
- People only having dividend or interest income and not gains or losses, do they still need to file ITR2 or ITR1 can be filed in this case? - Since they hold foreign assets, ITR 2 is only applicable.
- FA schedule was prepared for up to Dec 31, 2022, so people who have transactions in 2023, do they not need to file details of us stocks in ITR in this Indian FY? - Yes, they do not need to disclose transactions of Jan-Mar 2023
- If I hold us stocks and don’t have any capital gains do I still need to file ITR and report my holdings in the FA schedule? - Yes
- If I have some us stocks gains/losses but my income is less than the taxable limit, shall I still file ITR? - Yes, if you have any foreign source income, ITR filing is compulsory. This was a recent amendment.
How to file Income Tax Return if you invest in US stocks & ETFs from India?
We have prepared step-by-step guidelines to assist you in filing Income Tax:→
ITR Filing If You Invest in US Stocks from India: Step 1
Log in to the Income Tax portal. In the Dashboard, section click on File Now.
ITR Filing If You Invest in US Stocks from India: Step 2
Choose the Assessment Year 2023-24 to file your taxes for the current financial year 2022-23. Press on Continue.
ITR Filing If You Invest in US Stocks from India: Step 3
After selecting the online mode for the filing tax, proceed to select the status as Individual.
ITR Filing If You Invest in US Stocks from India: Step 4
Since you have invested in US Stocks and ETFs, you will have to choose ITR 2.
ITR Filing If You Invest in US Stocks from India: Step 5
Next choose the option: Taxable Income is more than the basic exemption limit.
Note: As a US stocks investor, you will have to file the below schedules while filing your ITR:
You can collect all these details by either writing to support@indmoney.com or visiting here from your mobile application.
ITR Filing If You Invest in US Stocks from India: Step 6
Now, you will have to select the schedules in which the details are to be entered.
Please click on the ‘Income’ section and select Schedule Foreign Source Income and Schedule Tax Relief under sections 90, 90A, or 91.
Please click on the ‘Others’ section and select ‘Schedule Foreign Asset’.
ITR Filing If You Invest in US Stocks from India: Step 7
Select the option ‘No’ if you’re continuing with your existing Tax regime. If you select ‘No’ and retain the old rax regime - you can claim a deduction under Section 80C, Chapter VI-A, House Rent Allowance, etc.
ITR Filing If You Invest in US Stocks from India: Step 8
Answer the questions in the Deduction section of the Salary Schedule. Next, continue to complete the general section. Choose the appropriate residential status and condition for the status. Fill in the relevant details for Part A and the Salary Schedule, and then provide your confirmation.
ITR Filing If You Invest in US Stocks from India: Step 9
Now, click on the Schedule Capital Gains. In case you incurred both short-term capital gains as well as long-term capital gains in the previous financial year, choose the below options and press continue.
- Equity share or unit of equity-oriented Mutual Fund (MF) or unit of a business trust on which STT is paid under section 111A or 115AD(1)(ii) proviso (for FII) (For LTCG)
- Equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under section 112A (For STCG)
In case you’re unclear about whether you had short-term and long-term capital gains you can read our article on ‘What is Capital Gains Tax?’ to get clarity.
Click here to check the detailed guide on ITR filing: How to file income tax if you invest in direct stocks in India
ITR Filing If You Invest in US Stocks from India: Step 10
Please ensure to select ‘From Sale of assets other than all the above-listed items’ to input the details for US Stocks tax filing and select “Continue”
Find the section: Select ‘From Sale of assets other than all the above-listed items’ and click to enter ‘Short-Term Capital Gain’
Once you select ‘‘Short-Term Capital Gain’' - A new window will open up asking for basic details of the short-term capital gains that you have earned by selling US stocks in profit in the last 24 months.
Note: In the below columns, you have to enter the details in INR terms (NOT IN US DOLLAR TERMS).
Please enter the total sales value in INR terms of the shares / ETFs that you have sold in section a(i) and cost of buying those shares /ETFs in section b(i) by scrolling below on the form →
The Income Tax platform will automatically calculate the final gain/loss for you by deducting the losses from the gains.
Post entering the details, a preview of the ‘Schedule Capital Gains’ will be shown as per the below image. Please ‘continue’ and proceed to enter details of dividend and interest income in 'Schedule Income from Other Sources.
ITR Filing If You Invest in US Stocks from India: Step 11
Now, we will enter details of the Dividend and Income received from US Stocks & ETF investments in the 'Schedule Capital Gains'. Select the schedule and proceed as per the image shown below:→
Select ‘Dividend Gross (ai+aii’)' and enter the dividend (Gross) amount in INR term.
Proceed by entering the details in ‘Section i: Dividend Income [other than ii]’
Now, select the checkbox of ‘Interest, Gross’ and edit to enter the details of interest income that you have received from your US Stocks investments.
You can enter the INR amount in the ‘Others’ section as shown in the image below →
As per the Income Tax rule, you have to enter the dividend received details in a quarterly manner in the Row 2 : Dividend Income referred in Sl.no.1 a(i)→
ITR Filing If You Invest in US Stocks from India: Step 12
Post saving the dividend details, you have to enter the details of income from outside India for tax relief purposes in ‘Schedule FSI’
Select the country code as 2 - United States, Enter Passport number in the section of Taxpayer identification number and proceed by entering the capital gains and dividend income.
- Please select ‘Capital Gains’ from the dropdown and enter the Income from outside India offered for Tax in India. Please enter ‘0’ in the section of Tax paid outside India since the tax will be paid in India for the capital gains that you make in the US. Tax payable on such income under normal provisions in India could be as per your income tax slab - if you are in the 30% tax slab, then enter 30% of the amount entered in the Income from outside India offered for the Tax in India section.
- Please select ‘Other Sources’ from the dropdown and enter the Income from outside India offered for Tax in India. This is your total dividend and interest income earned from US stocks. Please enter the Tax paid outside India as per data shared by INDmoney (You can collect all these details by either writing to support@indmoney.com or visiting here from your mobile application.) Please enter Sections 10, and 25 in the section where Relevant articles of DTAA is being asked.
Please proceed as shown in the image below→
Post finishing it, a summary page will pop up for confirmation of the details that have been entered in Schedule FSI.
Post confirming the details, the final schedule for TR showing the summary of tax relief claimed for taxes paid outside India will be shown for verification →
If you have not received any tax refund during the year with regards to any other investments outside, then select ‘No’ in Section 4 of Schedule TR.
Please ‘Confirm’ and proceed to enter the details in ‘Schedule FA’→
ITR Filing If You Invest in US Stocks from India: Step 13
Open the ‘Schedule FA’ and select the ‘Nature of financial asset’ as A3 from the dropdown. You have to enter ‘Details of Foreign Equity and Debt Interest held (including any beneficial interest) in any entity at any time during the calendar year ending as on 31st December 2021' as per the image below:→
You can collect all these details by either writing to support@indmoney.com or visiting here from your INDmoney mobile application.
Post saving the details, a summary of ‘Schedule FA’ will be shown for confirmation. Please proceed by confirming.
Congratulations, Schedule FA entry is finished. Now, you can review the ITR details that have been entered as of now to validate.
Note: To claim back your tax refund (for the taxes paid outside India), you will have to file ‘Form 67’. You have to compulsorily fill this form 67 before filing the income tax.
You have to declare proof of the dividend income by manually entering the details and submitting a proof form 1042-S.
ITR Filing If You Invest in US Stocks from India: Step 14
If you have not received any dividend income and interest income for your US stocks account - you do not need to fill out form 67.
If you have earned dividend income from your US Stocks, and since there has been a 25% withholding tax already paid on that dividend income, there is a provision in Income Tax where you can claim the deducted tax back in India. For this tax credit, you have to file Form 67. Form 67 is to be filed PRIOR to submitting your ITR form.
Here is a guide for it →
Step 1: Click on e-File → Income Tax Forms → File Income Tax Forms as per the image shown below:→
Step 2: Search for 'form 67' after clicking on 'Person not dependent on any source of income (3rd Tab)
Step 3: Click on ‘Let’s Get Started' and fill the form no. 67 to claim your tax paid on dividends outside India
Step 4: Select ‘Assessment Year’ and continue
Step 5: Add detail of the dividend received as shown in the image below→
Note: You need to mention articles 10, and 25 of the Double Taxation Avoidance Agreement to claim the tax credit. The final claim amount will be the lowest between ‘Tax paid outside India’ and ‘Tax payable on such income under a normal provision in India’ sections.
Step 6: Save and continue to 'Part B'. Provide the answers to existing tax credit input questions. If you are claiming for the first time, the answer will be ‘NO’ to both of the questions.
Step 7: Once you save the forms, a summary view will pop up of the details entered.
Step 8: Posting saving the Form 67, an attachment form - a proof of your dividend income (Form 1042-S) will be asked. You can connect at support@indmoney.com to get your form 1042-S.
Step 9: Post uploading the 1042-S form, you have to ‘Save’ the form, and Congrats - you have filled out form 67 to claim your tax on dividend income.
Now, you have e-verify your returns, pay taxes and submit details of challan to finish the activity of income tax filing if you have invested in US stocks from India.
Please consult your CA if you have any confusion while filing the income tax return.
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