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Income tax for foreign market trading

03 March 2018

I want to know income tax structure which one needs to pay for any gains and loss which occured in foreign market trading e.g NASDAQ. Most of time primary source of this traging is RSU allotment. Generally MNC's cut 30% income tax while RSU get vested to employee. If there is any Gain or Loss after the period of vested and till stock sell then how much tax one needs to pay for it

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178298 Points)
Replied 03 March 2018

Tax impact on RSUs arise when these vest. At the time of vesting your gains are not capital in nature and the income earned by you has to be disclosed under other income in your income tax return. When you sell these vested stocks and have a gain, at this moment your gains are taxed as capital gains.

The RSU which were allotted to you in India are the non-monetary benefits received in course of your employment and are hence considered has perquisites and a tax at source is deducted in India (TDS) on the market value of the RSU on the date they become vested in your hands say for eg the market price on that day in Indian rupees as 100 so the TDS @ 30%

If the shares are listed on an Indian stock exchange – on sale you may earn a short term capital gain if these are sold within 1 year of vesting or a long term capital gain when sold after more than a year of vesting. Short term gains are taxed at 15% while long term gains are exempt from tax.

If share are listed on a foreign stock exchange – Since no STT is paid, such securities are considered unlisted securites for Indian tax returns. Unlisted securities are considered long term after 36 months. Short term gains shall be added to your total income and long term gains shall be taxed @ 20% after indexation

The amount of taxes paid in US can be added to your cost of the shares. Any tax paid in US can be claimed under double taxation avoidance agreement.

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