How can I report foreign stock investments on my tax returns?

You must report your foreign stock investments in India by disclosing them under the ‘Schedule FA (Foreign Assets)’ section of your Income Tax Return (ITR). Capital gains, dividends, and interest from these investments must also be reported and taxed accordingly.

Let’s explore how to accurately report foreign stock investments on your tax returns in India and avoid penalties.

1. Declare Foreign Stocks in ‘Schedule FA’

The Indian government requires all residents to disclose foreign assets in their Income Tax Returns (ITR), even if they don't generate income.

• Disclose All Foreign Stocks: Mention the name of the foreign company, country, and investment details.
• Report Holding Period: The date of acquisition and value must be specified.
• Mandatory for All Residents: If you hold foreign stocks, you must report them—even if there’s no income.

Failure to report foreign holdings can result in penalties under the Black Money Act.

2. Report Capital Gains on Foreign Stocks

Any profit from selling foreign stocks is subject to capital gains tax.

• Short-Term Capital Gains (STCG): Taxed at your applicable income tax slab rate if held for less than 24 months.
• Long-Term Capital Gains (LTCG): Taxed at 20% with indexation benefits if held for over 24 months.
• Foreign Tax Credit (FTC): Claim credit for taxes paid abroad to avoid double taxation.

Ensure you declare your capital gains in the correct ITR form.

3. Report Dividend Income from Foreign Stocks

Dividends from foreign stocks are fully taxable in India as per your tax slab.

• Taxed as ‘Income from Other Sources’: Report dividend earnings in your ITR.
• Foreign Withholding Tax: Some countries deduct tax at source, but you can claim relief under the DTAA (Double Taxation Avoidance Agreement).
• Use Form 67: File Form 67 to claim the Foreign Tax Credit (FTC).

Always report foreign dividend income to avoid scrutiny from tax authorities.

4. File the Correct Income Tax Return (ITR) Form

Choose the correct ITR form to accurately report foreign stock investments.

• ITR-2: For individuals with capital gains from foreign stocks.
• ITR-3: For those earning income from trading foreign stocks.
• Keep Records: Maintain brokerage statements and Form 26AS.

Filing the correct ITR ensures compliance and avoids penalties.