• Advice regarding US shares, NRI bank account and Income tax returns

Hello Sir/Madam,
I'm an NRI, currently a resident in Oman. I am investing in US shares through Interactive Brokers (IBKR - an international online stock broker) from my bank account in Oman. The source for my investment is my salary in Oman. Now, here are my queries:
1. Will I be able to withdraw from my Online Broker to directly my NRE account in India (I have an NRE account in HDFC bank)? IBKR allows withdrawal to any bank account provided it is under my name. However, I am not able to figure out the applicable laws in India.
2. In the event the withdrawal can be made, what will be amount of money that will be subject to Capital Gains Tax? Will the full amount of my principal + gains be taxed in India or only my gains will be taxed? 
3. Also, what will be the tax percentage assuming I hold the stocks for more than 24 months? 
4. When I am filing my ITR in India, should I hold any document (like my bank account statement/salary certificate) to show proof of my 'principal in investments' as salary income from Oman? 
5. If I return to India in 2 years, but still hold positions in the same stocks for the next 10 to 15 years, how will I be taxed in India when I withdraw my US stock investments to a bank account in India?

Thanks in advance.
Asked 13 days ago in Capital Gains Tax

Hello taxpayer,

Going by the facts your case, you are a NRI whose primary income source is salary which is earned outside India and therefore not taxable in India until you remain a NRI. 

Now when you invest a portion of this income in US stocks, any potential income tax implications in India needs to be viewed at the time of sale of those stocks.

1. In case you are a resident in India at the time of sale, then your global income for the year will become taxable. The default capital gains tax rate for a resident Indian if you hold those stocks for more than 24 months is 20% and the gains would be computed after deducting indexed cost of purchase from net sale proceeds. If holding period is less than 24 months, it would be charged as per your normal slab rates. Moreover, this income may be taxed in US on the basis of source rule and you need to resort to beneficial provisions of DTAA to reduce double taxation and claim credit of taxes paid outside India.

2. If you are still a NRI at the time of sale of those stocks, then as per DTAA (which will override due to its  beneficial provisions over domestic law) just the receipt of withdrawal proceeds in India shouldn't make it taxable here as it is neither the source nor residence country for income & assessee in question.  However going by the past experience the department can still try to raise query over this. Therefore, if possible, I would suggest you to provide your Oman bank account details to stock broker for receipt of such sale proceeds and then further remit it to your NRE account to avoid potential issues from department. 

Second, its good to keep your bank statements and salary certificates saved as they can help explain the source of funds and trail of transaction at the time of responding to any potential query.

For detailed discussion and end to end tax planning in this regard, I would advice you to take a telephonic consultation.

 

Best Regards,

Vikram Aggarwal
CA, Gurgaon
46 Answers
6 Consultations

5.0 on 5.0

1. If the investment was made out of NRE account then only proceeds are allowed to be credited in NRE account. If in any case, bank allows you to credit it then it would be treated as income taxable in India.

2&3. It would be treated as capital gain income. If the shares were retained for more than two years then it would be long term capital gain otherwise short term capital gain. Long term capital is taxable @20% with benefit of indexation of cost. Tax would be applicable on gain and not on sale consideration. It would be better to get the proceeds in the country of residence.

4. Retain all documents in respect to source of investment and sale contracts.

5. Same as point no.2&3. 

 

For detailed discussion, you may consult telephonically

Vivek Kumar Arora
CA, Delhi
4135 Answers
365 Consultations

5.0 on 5.0

Yes I think you can do that and it won't be an issue in India.

In India you won't have to pay any tax just for repatriation of income when you are not a resident in India.

 I think we should discuss this over call in detail to have a better understanding of your questions.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3829 Answers
47 Consultations

5.0 on 5.0

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