Income Tax on Foreign Shares

If a person resident in India has invested into shares listed in foreign countries, profit or loss on the sale of such shares should be reported in the ITR and the assessee must pay tax on this income. The tax treatment varies based on whether the shares are listed on a recognized stock exchange in India and whether STT on such shares is paid.

ITR for Residents with Foreign Income
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Income Heads for Trading in Foreign Shares

Capital Gains Income from Foreign Shares

Income from the sale of foreign shares is a Capital Gains Income as per the Income Tax Act. Foreign Shares is not listed on any recognized stock exchange in India. The period of holding is 24 months.

  • Long Term Capital Gain (LTCG): If an investor sells an unlisted stock held for more than 24 months, gain or loss on such sales is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).
  • Short Term Capital Gain (STCG): If an investor sells an unlisted stock held for up to 24 months, gain or loss on such sale is a Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL).

Other Income from Foreign Shares

  • Dividend Income – Dividend received from a Foreign Company is taxable income under the head Income From Other Sources at slab rates. If the assessee incurs the expense of remuneration or commission for the purpose of earning the dividend, he/she can claim it as an expense from dividend income.

Income Tax on Foreign Shares

Income Tax on Trading in shares of foreign countries is similar to the tax treatment of other capital assets. The following are the income tax rates on the sale of listed and unlisted foreign shares.

Type of Security Period of Holding Long Term Capital Gain

Short Term Capital Gain

Listed Foreign Share 24 months 20% with Indexation Slab Rates
Unlisted Foreign Share 24 months 20% with Indexation Slab Rates
  • Dividend Income on Foreign Shares is taxable at slab rates under the head ‘Income from Other Sources’.

Sale of Foreign Shares

  • Due Date
    • Up to FY 2019-20
      31st July – for traders to whom Tax Audit is not applicable
      30th September – for traders to whom Tax Audit is applicable
    • FY 2020-21 Onwards
      31st July – for traders to whom Tax Audit is not applicable
      31st October – for traders to whom Tax Audit is applicable
  • Tax Audit: Since the income on the sale of foreign shares is Capital Gains, the applicability of tax audit under Section 44AB need not be determined.
Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Carry Forward Loss for Sale of Foreign Shares

  • The investor can set off Short Term Capital Loss (STCL) against both Short Term Capital Gain (STCG) and Long Term Capital Gain (LTCG). They can carry forward the remaining loss for 8 years and set off against STCG and LTCG only.
  • The investor can set off Long Term Capital Loss (LTCL) against Long Term Capital Gain (LTCG) only. They can carry forward the remaining loss for 8 years and set off against LTCG only.

FAQs

How do I report income from sale of shares of Foreign Company in the Income Tax Return?

The investor should file ITR-2 and report income from the sale of Foreign Shares as Capital Gains.
(a) Listed Foreign Shares
LTCG – 20% without indexation
STCG – slab rates
(b) Unlisted Foreign Shares
LTCG – 20% with indexation
STCG – slab rates
The details of Foreign Shares should be reported in Schedule FA i.e. Schedule Foreign Assets of the ITR. The assessee can set off LTCL with LTCG and STCL with both STCG and LTCG. The remaining loss can be carried forward for 8 years.

I am an Indian Resident. Do I need to pay Income Tax on income from the sale of foreign shares?

A Resident as per the Income Tax Act should pay tax on global income i.e. income in India and outside India. Thus, you must report income from the sale of foreign shares as Capital Gains Income and pay income tax on it as per rates below:
– Long Term Capital Gain – 10% without Indexation on sale of listed foreign shares and 20% with indexation on sale of unlisted foreign shares
– Short Term Capital Gain – pay tax at slab rates

Got Questions? Ask Away!

  1. Hey @Nihal ,

    Since you hold the status of a resident, your global income is taxable. Thus, you must report the income on sale of foreign shares and pay tax on it at applicable rates. Check out our Learn Center resource for more information about NRO and NRE Accounts- Guide: Income Tax for NRO and NRE Accounts

  2. Hey @Nireka

    Indian investors can invest in US stocks from India subject to RBI’s LRS guidelines. There may some RBI restrictions to hedge the foreign stock positions. For tax implications, any dividends income from foreign stock will be taxed in India subject to India- USA DTAA, as dividend is taxed @25% in USA.

    Any capital gain from sale of foreign stocks are also taxed in India. When foreign stocks are sold within 24 months then it will be treated as short term, other wise long term. In case of short term gain, slab rates will apply and in case of long term gain, 20% rate with indexation or 10% without indexation will apply. Moreover, investors can claim foreign tax credits to avoid double taxation.