As many Indians are starting to do, you can spread your risk not only across asset classes, but geographically as well. But you also have to be careful with tax rates. For example, the tax rate on gains on the sale of shares listed abroad is different from capital gains on Indian shares. Separately, dividends and rental income are taxable as well. Resident (resident and non-resident) Indians must pay tax on income earned anywhere and report it on their income tax returns.
Resident Indians can send abroad up to $2,50,000 annually under the Liberal Remittances Scheme (LRS). Reserve Bank of India (RBI) data show that resident Indians’ investments in overseas equities and debt continue to grow from $422.9 million in 2018-19 to $746.57 million in 2021-22. I’m here.
![How to tax foreign investment in Indians](https://www.bemoneyaware.com/blog/wp-content/uploads/2023/01/how-foreign-investments-are-taxed.jpg?x74955)
How to tax foreign investment in Indians
Tax on International Shares or Shares
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Income from dividends and capital gains earned on international shares is taxable in India.
If you have invested directly in stocks for more than 24 months, the resulting gains will be treated as long-term capital gains (LTCG) and will be taxed at the rate of 20% plus set and surcharges.
If the holding period of the shares is less than 24 months, the profit is considered as short-term profit, Taxable At the slab rate applicable to the individual,
Dividend income from stocks is also taxed at the income tax rateHow are dividends from international or foreign stocks taxed?
Selected in capital gains schedule for sale of shares of MNC not listed on Indian Stock Exchange Sale of assets other than those listed. (in addition to other capital gains)
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Select the Foreign Equity Capital Gains section
Tax on fund of funds investing in foreign stocks
Funds of funds that invest in foreign stocks or international mutual funds are treated like debt funds in India. You can also claim indexing benefits that reduce your taxable LTCG and reduce taxes payable. As is the case with netted LTCG in India, the costs incurred in the sale of such assets are allowed as a deduction from the gross income.
Exchange rates also play a role when calculating taxes on foreign income. “Income earned in foreign currency will be converted to Indian Rupees at the TT buy rate on the specified date
Dividend income from mutual funds is also taxed at a flat rate.
How do I know the tax treatment of a fund that invests in international equities?
Only mutual fund schemes that invest 65% or more of their funds in Indian listed equities are subject to the same tax regime as equities.
property tax
For properties sold after two years, LTCG will be taxed at 20% after indexing, plus applicable taxes and surcharges.
Short-term capital gains are added to the slab rate
If you earn rental income through property outside India, you are liable to pay taxes in India. It is simply added to your taxable income and taxed according to the applicable Slavic tax rate.
However, those making property investments abroad are deprived of certain benefits to which those who own homes in India are entitled.
- If you receive rent in India, you will receive a rebate of 30% of your rental income. But if you get rent from overseas, you won’t get the same thing.
- Tax incentives of up to Rs 1.5 lakh on principal repayment under Section 80C and up to Rs 2 lakh on interest payment under Section 24 are limited to mortgages borrowed from Indian banks for immovable properties located in India. Homes purchased overseas are not tax deductible.
- Capital gains are tax exempt if you sell residential property in India and use the proceeds to buy another house within a year. However, this tax relief is not available if you choose to send money abroad to fund your property purchase.
Reporting income from foreign investment
If you have invested abroad, you must disclose it on your annual income tax return. Details must be entered in the ITR’s Schedule FA.
Failure to report foreign income and assets for making an inaccurate disclosure may result in penalties under the 2015 Black Money (Undisclosed Foreign Income and Assets) and Taxation Act.
These foreign assets must be reported based on the calendar year of the country in which such assets are owned and the taxpayer must provide details of the country name, nature of ownership, details of the assets and the origin of such assets. You must provide your income. ,
Further, if your income during the fiscal year exceeds Rs.
Income tax laws provide relief measures to avoid double taxation if you have already paid tax abroad. Remember to fill out the prescribed Form 67 to take advantage of tax credits paid abroad.
![ITR New Foreign Assets Table A3](https://www.bemoneyaware.com/blog/wp-content/uploads/2018/02/itr-new-foreign-asset-table-a3.jpg?x74955)
ITR New Foreign Assets Table A3
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