Looking to invest in Facebook, Amazon and Apple shares from India -- These are the taxes you may have to pay (2024)

FAQs

Do I have to pay tax on US stocks in India? ›

Capital Gains

If your Residential Status as per the Income Tax Act is 'Resident', your worldwide income is taxable in India. This would mean that Capital Gains earned on US stocks will also be taxable in India.

Generally, any profit you make on the sale of a stock is taxable at either 0%, 15% or 20% if you held the shares for more than a year, or at your ordinary tax rate if you held the shares for a year or less. Any dividends you receive from a stock are also usually taxable.

Indian investors are subject to a flat tax rate of 25% on dividends from US stocks, with the tax withheld by US companies. Reinvested dividends are added to the investor's income and taxed accordingly. Capital gains from selling stocks are taxed as either long-term or short-term gains.

Dividend Yield

Apple's annual dividend in 2021 was $0.88 ($0.22 paid quarterly). Based on Apple's stock price as of March 1, 2022 of around $163 per share, the dividend yield is approximately 0.50%.

For taxation purposes, Index and Sectoral ETFs are treated the same as Equity-oriented investments. So, for holding periods exceeding 12 months, LTCG tax at 10% is applicable on aggregate gains exceeding Rs. 1 lakh in a financial year., Whereas STCG tax at 15% is applicable for a holding period shorter than 12 months.

According to Article 15 of the DTAA, a person who is a particular country's resident but has income from a foreign country source, his income would be taxed 'only' in the residential country. This means if an NRI works in the US and his income comes from an Indian source, he has to pay only US taxes.

The IRS has the authority to impose fines and penalties for your negligence, and they often do. If they can demonstrate that the act was intentional, fraudulent, or designed to evade payment of rightful taxes, they can seek criminal prosecution.

The tax rate you pay on dividends that exceed the allowance depends on your income tax band, which you can work out by adding your total dividend income to your other income. In April 2022, the dividend tax rates increased by 1.25%. Here are the current rates: 8.75% for basic rate taxpayers (from 7.5%)

Indian investors can open an overseas trading account with a domestic broker like HDFC Securities, ICICI Direct, or Kotak Securities. By opening an overseas trading account with a domestic broker, investors can invest in US stocks, just like they would invest in Indian stocks.

How can I avoid tax on stocks in India? ›

Exemptions for Long-Term Capital Gains

First, under section 112A, any capital gains under the value of ₹1lakh is not taxable. So one of the best ways to avoid paying capital gains tax when you sell your stock is to make sure that you keep your capital gains within the exemption bracket.

Here is how: Open a trading and Demat account with a broker registered with the IFSC. Get in touch with your existing broker affiliated with NSE IFSC to find out if there are any requirements you need to satisfy before you can begin trading US equities on the global exchange.

As a result, $10,000 in AAPL stock purchased 20 years ago would be worth about $7.51 million today, assuming reinvested dividends.

One can easily invest in Apple Inc shares from India by: Direct Investment - Opening an international trading account with Groww which includes KYC verification in the US. Your account gets activated in a few minutes to a few hours, after which you can start adding funds in USD balance to buy Apple Inc shares.

It was projected that Apple's share price would reach $220 by the end of 2023, $250 in 2024, $315 in 2025, $370 in 2026, $425 in 2027, $465 in 2028, and $480 in 2029. In 2030, analysts anticipate Apple shares will be worth $510.

Investment income may also be subject to an additional 3.8% tax if you're above a certain income threshold. In general, if your modified adjusted gross income is more than $200,000 (single filers) or $250,000 (married filing jointly), you may owe the tax. (These limits aren't currently indexed for inflation.)

However, capital gains will be taxed only if these exceed Rs 1 lakh in a financial year. In other words, as long as capital gains from equity shares and equity mutual funds do not exceed Rs 1 lakh in a financial year, no tax has to be paid.

No, the money transferred to US from India is not taxable. But, if it exceeds US $100,000 for any current year, you must report it to the IRS by filing Form 3520. This is just an informational form with no taxes payable.

DTAA between India and USA – Reporting in ITR

Non-residents in India must disclose and pay tax on any income generated outside of India, sometimes known as foreign income. Foreign income and foreign assets earned by Indian residents should be reported in the Income Tax Return.

Do I have to pay tax in India if I live abroad? ›

In case of resident taxpayer all his income would be taxable in India, irrespective of the fact that income is earned or has accrued to taxpayer outside India. However, in case of non-resident all income which accrues or arises outside India would not be taxable in India.

Whether the IRS can enforce a regular levy served on the Taxpayer by seizing and selling executive stock options held by the Taxpayer. The IRS can seize and sell executive stock options held by the Taxpayer regardless of restrictions on the transferability of the options.

Missing capital gains

If you fail to report the gain, the IRS will become immediately suspicious. While the IRS may simply identify and correct a small loss and ding you for the difference, a larger missing capital gain could set off the alarms.

To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term. Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

You'll have to file a Schedule D form if you realized any capital gains or losses from your investments in taxable accounts. That is, if you sold an asset in a taxable account, you'll need to file. Investments include stocks, ETFs, mutual funds, bonds, options, real estate, futures, cryptocurrency and more.

Your 401(k) account offers tax-deferred growth, meaning you won't owe levies on yearly income, such as dividends and capital gains.

Tax-Efficient Investments

Among stock funds, for example, tax-managed funds and exchange traded funds (ETFs) tend to be more tax-efficient because they trigger fewer capital gains.

Capital Gains Tax (CGT) is normally charged at a simple flat rate of 20% when you sell shares unless they are in a CGT free investment such as an ISA or qualifying pension. If you only pay basic rate tax and make a small capital gain, you may only be subject to a reduced CGT rate of 10%.

The tax doesn't apply to unsold investments or "unrealized capital gains." Stock shares will not incur taxes until they are sold, no matter how long the shares are held or how much they increase in value. Most taxpayers pay a higher rate on their income than on any long-term capital gains they may have realized.

Generally speaking, if you held your shares for one year or less, then profits from the sale will be taxed as short-term capital gains. If you held your shares for more than one year before selling them, the profits will be taxed at the lower long-term capital gains rate.

Can USA NRI invest in Indian stocks? ›

While trading in equities can be down through NRE or NRO accounts, F&O trading can be done by NRIs only through NRO accounts that are non-Repatriable. Also, NRIs will have to get a Custodial Participant (CP) code before trading in F&O. NRIs can only trade on delivery basis in Indian equities.

US based NRIs can invest in real estate in India. They can invest in both residential and commercial properties in India. However, NRIs are not allowed to buy any agricultural land/ farm house/ plantation property.

In Indian shares, NRIs can only trade on a delivery basis. NRIs cannot engage in intraday trading, BTST trading, STBT trading, or perhaps trading. NRIs are currently allowed to change Indian equities and F&O, however they're not allowed to deal in currency derivatives or commodities.

Residential Indians of 80 years of age or above will be exempted if their Annual Income is below Rs. 5,00,000. Residential Indians between 60 to 80 years of age will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum.

Resident Indian can open an overseas trading account with an Indian broker having tie-up with international brokers such as ICICI Direct, HDFC Securities, Kotak Securities, and Axis Securities etc. or directly open an account with a foreign broker having presence in India like Charles Schwab, Ameritrade, Interactive ...

Few companies have created more wealth for their long-term investors than Apple (AAPL -0.76%). The iPhone maker is one of the most profitable businesses in history, with a staggering $100 billion in net income in fiscal 2022 alone.

Since Apple stock trades at $126.36 today, that translates to a return of 126,360%. In other words, that $1,000 investment in 1980 would be worth more than $1.26 million today! But that's not all, because Apple has paid a dividend in several years since 1987.

What stocks will boom in 2023? ›

Brokerage Apps

This is the direct method of buying FB stock from India. There are several US brokerage apps like Cube that allow you to add FB stock to your portfolio. You'll have to go through a KYC process and the LRS process to transfer money to your US brokerage account and buy FB stock.

Indirect Investment

Various mutual funds in India allow individuals to invest in the US equity market indirectly. This is a cost-effective way of investing in shares of Apple, Amazon and Google. This is because investors do not need to open a trading account or pay an amount as a deposit.

Amazon stock currently trades for just 2.3 times its projected sales for 2023, so if it's still trading for about 2 times forward sales in 2030, it could be worth a lot more than $2 trillion.

Dividend Yield

Apple's annual dividend in 2021 was $0.88 ($0.22 paid quarterly). Based on Apple's stock price as of March 1, 2022 of around $163 per share, the dividend yield is approximately 0.50%.

Five Year Stock Price Total Return for Apple is calculated as follows: Last Close Price [ 186.68 ] / Adj Prior Close Price [ 43.52 ] (-) 1 (=) Total Return [ 328.9% ] Prior price dividend adjustment factor is 0.96.

Yes, Indians can invest in the US stock market. There is more than one way to buy and hold US stocks in your portfolio. Direct equities, ETFs, and mutual funds are just one of the few popular options. You can invest in US stocks in two ways from India – indirect and direct.

Effectively, LTCG on the sale of foreign shares is taxed at 20% tax with the benefit of indexation, while the STCG on the sale of foreign shares is taxed at 15% when securities transaction tax is applicable. Get live Share Market updates and latest India News and business news on Financial Express.

Volatility. When compared to Indian markets, the US markets have been less volatile in the long run. Indian equities have shown great volatility, with bigger swings in returns over the years. This is another reason experts recommend diversification when it comes to investing, since risks are spread out and diminished.

How much income is tax free in stock market in India? ›

Long-term capital gains (LTCG) of up to Rs 1 lakh are exempted from income tax in a fiscal year if equity shares and equity mutual funds (MFs) are sold after being held for one year or more. Your total LTCG after exemption is now Rs 2 lakh.

By investing in eligible low-income and distressed communities, you can defer taxes and potentially avoid capital gains tax on stocks altogether. To qualify, you must invest unrealized gains within 180 days of a stock sale into an eligible opportunity fund, then hold the investment for at least 10 years.

INDmoney makes it easy for anyone wanting to start investing in US stocks from India. Our zero-cost structure allows you to start trading without any account opening fees or commission on buying and selling. It takes less than 3 minutes to open a US stocks account with INDmoney.

Section 115AD of the Income Tax Act, 1961, deals with Tax on income of Foreign Institutional Investors from securities [excluding income from units of mutual fund which are taxed u/s 115AB] or capital gains arising from the transfer of such securities.

Earlier, the Finance Act 2023 had announced that all outbound remittances, irrespective of the amount, will be liable to tax. Effective July 1, 2023, the Indian government has increased the tax on outbound remittances from five percent to 20 percent, as per the amended Income-tax Act, 1961.

In India, foreign mutual funds are taxed at a higher rate compared to domestic mutual funds. The tax rate for long-term capital gains on equity-oriented foreign mutual funds is currently 20%, while the tax rate for short-term capital gains is 30%.