USA stock market news

Indian investors are now proactively looking to diversify their portfolios overseas. We have seen the resilience and the outperformance of the US markets and we want in. However, many of us are unaware or confused about the tax implications of investing in US stocks. The good news is that in most cases, the tax implications are actually quite straight forward.

Tax liability on the earnings from the US stock by Indian investors depends upon two factors. One is the nature of earning and the second is the residential status in India.

Indian investors are now proactively looking to diversify their portfolios overseas. We have seen the resilience and the outperformance of the US markets and we want in. However, many of us are unaware or confused about the tax implications of investing in US stocks. The good news is that in most cases, the tax implications are actually quite straight forward.

Tax liability on the earnings from the US stock by Indian investors depends upon two factors. One is the nature of earning and the second is the residential status in India.

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The good news is that you will be able to offset the US tax withheld against your tax liability in India as US and India have a Double Taxation Avoidance Agreement (DTAA). This allows you to take credit for the tax withheld in the US and adjust it with the tax liability in India.

● Capital Gains: When you sell any holdings in the US, you earn capital gains. The gain amount will be the 'Sale Price - Acquisition Cost' of the security. Fortunately, there is no capital gain tax in the US for foreigners. However, you will still be liable to pay tax on the capital gains in India and your tax liability depends upon the category that the capital gains fall in.

  • Long Term Capital Gain: If you hold the shares for more than 24 months before selling them, the gain will be categorized as long term capital gains and will be taxed at 20% (plus applicable cess and surcharge) after indexation of cost.
  • Short Term Capital Gain: If you hold the shares for up to 24 months before selling them, the gain will be categorized as short term capital gains and will be added to your normal income to be taxed at the slab rate applicable to you.