Filing Your ITR When You Own US Stocks or Foreign Shares

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Indian investors can now buy US stocks and global ETFs in a few taps through the LRS route or an international broker. The tax and disclosure rules, however, are stricter than for Indian shares. If you are a resident and ordinarily resident (ROR), your worldwide income and assets are within the Indian net — here is how to report them cleanly.

Step 1: know your residential status

Your duties depend entirely on residential status. An ROR must report global income and all foreign assets. A non-resident (NR) or not ordinarily resident (RNOR) is generally taxed only on Indian income and need not fill Schedule FA for foreign assets. Most salaried people living and working in India full-time are ROR, so the rest of this guide assumes that.

Step 2: Schedule FA — the disclosure that trips everyone

Schedule FA (Foreign Assets) in ITR-2/ITR-3 must list every foreign holding you owned at any time during the relevant period — shares, ETFs, vested RSUs/ESPP, foreign bank accounts and more. Crucially, this applies even if you did not sell and made no income. It asks for the country, entity, acquisition date, peak value and closing value in rupees. Non-disclosure can attract severe penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, so treat Schedule FA as mandatory, not optional.

Step 3: capital gains on foreign shares

Foreign shares are not eligible for the concessional Indian-equity rates (Sections 111A/112A) or the ₹1.25 lakh exemption. Instead:

• Long-term (held > 24 months): taxed at 12.5% without indexation for transfers on or after 23 July 2024.
• Short-term (held ≤ 24 months): the gain is added to your total income and taxed at your slab rate.

Convert each buy and sell using the correct exchange rate (the SBI TT buying rate on the last day of the month before the transaction is the commonly used reference). Report the gains in Schedule CG. Remember that a foreign-currency movement can create a rupee gain even when the dollar price barely moved.

Step 4: dividends and the DTAA

US-listed shares typically deduct 25% withholding tax on dividends before they reach you (the India-US treaty rate for Indian residents). In India, that gross dividend is taxable as "income from other sources" at your slab rate. To avoid paying tax twice, claim a foreign tax credit (FTC) under the DTAA:

1. File Form 67 online, giving the foreign income and tax paid, before you submit your ITR.
2. Report the gross dividend as income in Schedule OS.
3. Claim the US tax withheld as a credit against your Indian tax on that income (capped at the Indian tax on the same income).

Your broker's year-end statement (Form 1042-S for US dividends) is the source document for the tax withheld.

Step 5: put it together in the right form

Foreign shares mean you cannot use ITR-1. Use ITR-2 (salaried, no business) or ITR-3 (with business income). A typical filing therefore includes salary (Schedule S), foreign capital gains (Schedule CG), foreign dividends (Schedule OS), the Schedule FA disclosure, and Form 67 for the FTC. See which ITR form to file and reconcile everything with your AIS/TIS before submitting.

Common mistakes to avoid

• Assuming the 12.5%/₹1.25L equity exemption applies — it does not for foreign shares.
• Skipping Schedule FA because "I didn't sell anything".
• Filing the ITR before Form 67, which can jeopardise the foreign tax credit.
• Using the wrong exchange rate, or forgetting that currency movement itself creates a gain.