Income tax

2022-23 Tax Return for Foreign Equity Investors: How to Display Dividends, Capital Gains Taxation

Trends in ITR repository extensions: The final filing date for Income Tax Return (ITR) 2022-23 is approaching. The ITR filing deadline for tax year 2022-23 is July 31, 2022. Unless the government extends the ITR filing deadline, taxpayers should file on time to avoid filing fees. late.

If taxpayers have foreign investments such as US stocks in their portfolio, they will need to disclose this in their ITR. Foreign investments must be reported in Annex FA of RIR-2.

Investment in US stocks is subject to tax for Indian residents and foreign income must be declared when filing the tax return. You may have earned dividend income or capital gains or suffered a capital loss by investing in US stocks. There are specific rules for dealing with them and must be properly reported in ITR to avoid any income tax notices.

It is important to note that in order for the ITR to be filed for AY 2022-23 with all foreign assets, there is a change in the ITR form. In the new RTI forms, the term accounting period has been replaced with a calendar year ending December 31, 2021. An assessee is required to provide details of all foreign assets held between April 1, 2021 and December 31, 2021, in the RTI file to be submitted for AY 2022-23.

Dividend income from US stocks is taxable in the US at 25%. This tax is withheld at source in the United States and investors receive a dividend amount net of tax. When filing ITR 2, this dividend income is taxed as “income from other sources according to the investor’s tax slab rate after conversion into Indian Rupees”. Thereafter, tax paid in the United States can be claimed as a foreign tax credit under Article 25 of the Double Taxation Avoidance Agreement between India and the United States ( DTAA). Indeed, this ensures that you do not pay tax twice on the same income.

In the event of a long-term capital gain (more than 24 months), the tax rate on foreign shares is 20% and the long-term capital gain (STCG) is at the prevailing slab rate. Since there is no capital gains tax in the United States, there is no need for a foreign tax credit. For losses on the sale of US stocks, the short-term capital loss can be allocated to LTCG, but the long-term capital loss can only be allocated to LTCG.