ITR Filing for US Stocks (and Other Foreign Shares): Complete, Step-by-Step Guide — Schedules FA, FSI, TR & Form 67

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by

Himanshu
in

This is a practical, India-focused walkthrough for resident individuals who invest in US stocks (or any foreign shares) via brokerage apps. It covers how those earnings are taxed in India, how to disclose foreign assets, and how to claim foreign tax credit (FTC) correctly.

1) First things first: which ITR form?

  • ITR-2: Use this if you have salary/other income and capital gains (no business income). This form supports Schedules FA, FSI, TR.
  • ITR-3: Use this if you also have business/professional income.

2) How income from foreign shares is taxed in India

A) Dividends (e.g., Apple, Microsoft, ETFs)

  • Taxable in India at your slab rate under “Income from Other Sources.”
  • US withholding: By default the US withholds 30% on dividends; if you submit Form W-8BEN, the India–US treaty rate of 25% generally applies (brokers usually deduct 25% for Indian residents). You can claim FTC in India for this tax.

B) Capital gains on sale of foreign shares

  • Holding period: Foreign shares are not listed on a “recognized stock exchange in India,” so they’re treated like unlisted shares.
    • Long-term if held > 24 months; otherwise short-term.
  • Tax rates (from 23 Jul 2024): India simplified capital gains—most long-term gains are taxed at 12.5% (plus surcharge & cess). Short-term gains on such shares are taxed at normal slab rates. (The special 15%/10% equity rates apply only to Indian listed equity covered by STT.)

Tip: Keep a scrip-wise ledger (FIFO), with trade dates, quantities, cost, sale proceeds and INR conversion.

3) Double Taxation Relief: Form 67 + Schedules FSI & TR (how FTC works)

When you pay tax abroad (example: US dividend withholding), India lets you claim credit up to the Indian tax on that same income. To do this:

  1. Form 67 (FTC declaration)
    • File online on the e-filing portal on or before the end of the relevant Assessment Year (Rule 128(9) as amended in 2022). Attaching proof of foreign tax (e.g., broker dividend statement/1042-S) is required.
  2. Schedule FSI (Foreign Source Income)
    • Report each foreign income item (e.g., US dividends, US capital gains) with country code, your foreign TIN (or passport if no TIN), gross income, foreign tax paid, and DTAA article (for US dividends, Article 10).
  3. Schedule TR (Tax Relief)
    • This summarizes your FTC country-wise, pulling totals from FSI. Select Section 90 (India–US DTAA) for the US.

4) Disclosing foreign assets: Schedule FA (don’t skip this!)

If you are Resident in India, you must disclose foreign assets held at any time during the calendar year (Jan–Dec) related to the FY for which you’re filing. This includes foreign brokerage/custody accounts and your investments. Key points:

  • Calendar year basis: For AY filing, FA uses the calendar year ending 31 Dec (e.g., for AY 2025-26 you report 1 Jan–31 Dec 2024).
  • What to report (common for US stock investors):
    • A2 – Foreign Custodian Accounts: your brokerage account (peak/closing balances; total amounts credited like dividends/sale proceeds).
    • A3 – Foreign Equity & Debt Interest: the investments (initial, peak and closing values; income and sale/redemption proceeds).
    • Convert to INR using SBI TT buying rate (TTBR) on the relevant date (as specified in the FA instructions).
  • Non-disclosure consequences: The Black Money Act has stringent penalties/prosecution; however, from 1 Oct 2024 the ₹10-lakh penalty under sections 42/43 won’t apply if undisclosed foreign assets other than immovable property are ≤ ₹20 lakh in aggregate (still, you must disclose correctly—this is a penalty carve-out, not a filing waiver).

5) Step-by-step: filing your ITR for US stocks

Step A — Prepare documents

  • Annual broker statement showing trades, dividends, and US tax withheld (e.g., 1042-S/annual activity report).
  • INR conversion working (see Step D).
  • DTAA references (US dividends = Article 10; W-8BEN ensures 25% rate instead of 30%).

Step B — Choose the right form and start return

  • Pick ITR-2 (or ITR-3 if you have business income). Fill your personal data and heads of income.

Step C — Report income

  • Dividends from US stocks → Schedule OS (Other Sources) → enter gross dividend (before US tax).
  • Capital gains → Schedule CG:
    • Mark unlisted shares; >24 months as LTCG (12.5%), otherwise STCG (slab).

Step D — INR conversion (practical approach)

  • For Schedules FSI/TR/FA, follow the portal note: use SBI TTBR on the specified dates (peak/closing/income dates).
  • For capital gains computation, consistently convert buy and sell legs using a reasonable, documented method (e.g., RBI ref or SBI TTBR on trade dates) if your broker doesn’t provide INR. Keep working papers.

Step E — Claim FTC

  1. File Form 67 on the portal, uploading proof of foreign tax paid. (Rule 128 allows filing up to end of the AY.)
  2. Fill Schedule FSI: Enter each foreign income item with gross income and foreign tax paid; mention Article 10 for US dividends and select Sec 90.
  3. Schedule TR auto-summarizes relief by country. Verify totals.

Step F — Schedule FA (Foreign Assets)

  • A2 (Custodian): your US brokerage account — peak & closing balances, total credits (interest/dividends/sale proceeds).
  • A3 (Equity & Debt Interest): investments — initial/peak/closing values, income, proceeds.
  • Use calendar year data and SBI TTBR for INR conversion, as specified.

Step G — Review loss set-off/carry-forward

  • STCL can be set off against both STCG and LTCG; LTCL only against LTCG. Carry forward up to 8 AYs, only if you file on/before the due date u/s 139(1).

6) Worked example (numbers simplified)

Facts (FY 2024-25):

  • US dividends received: $1,000; $250 (25%) withheld in the US (W-8BEN in place).
  • You’re in the 30% Indian slab.
  • Sold a US stock held >24 months: Long-term gain ₹2,00,000 (computed in INR).

In your ITR:

  1. Schedule OS: Report ₹(1,000 × applicable INR rate) as gross dividend.
  2. Form 67 + FSI:
    • Country: USA; Gross income = same INR value as in OS; Foreign tax paid = ₹(250 × INR rate); Article 10, Section 90.
    • FTC allowed = lower of (foreign tax paid) or (Indian tax on this dividend).
  3. Schedule CG:
    • Report LTCG ₹2,00,000 under unlisted shares → tax @ 12.5% (+ cess/surcharge).
  4. Schedule TR: Auto-picks up the US totals from FSI and shows the FTC you can set off against your Indian tax.
  5. Schedule FA (calendar year): Report your brokerage account in A2 and equity holdings in A3 with peak/closing balances and proceeds converted using SBI TTBR.

7) Common mistakes to avoid

  • Reporting only “net dividends” after US tax — in India, report gross and claim FTC via Form 67 + FSI/TR.
  • Skipping Schedule FA (even if there’s no income) — disclosure is mandatory for residents.
  • Using equity-share special rates (15%/10%) for foreign shares — these apply to Indian listed/STT-paid equities; foreign shares are unlisted for Indian tax.
  • Not filing on time and losing loss carry-forward rights.
  • Not submitting W-8BEN with your US broker (leads to 30% withholding instead of treaty 25%).

8) Useful references (official & authoritative)

  • India–US dividend withholding: IRS Treaty Table (India row shows 25%; 30% default without W-8BEN).
  • Schedules FA/FSI/TR user guidance (calendar-year basis; SBI TTBR conversion; how to fill): Income Tax Department PDF.
  • Form 67 timing: Rule 128(9) amended—allowable up to end of AY. (KPMG summary; see also ITD manuals.)
  • Capital-gains simplification (12.5% LTCG from 23 Jul 2024): PIB FAQ / Gazette.
  • Black Money Act—₹20-lakh penalty carve-out (effective 1 Oct 2024; still disclose): Finance (No. 2) Bill, 2024 + news explainer.

9) Quick checklist

  • Broker trade statement (with USD amounts)
  • Dividend statement / 1042-S or equivalent showing US tax deducted
  • W-8BEN on file with broker (treaty rate)
  • INR conversion working (prefer SBI TTBR dates for FA/FSI; consistent method for CG)
  • Form 67 filed (FTC) + Schedules FSI & TR completed
  • Schedule FA filled for calendar-year details
  • Verify loss set-off/carry-forward and file within due date to preserve carry-forward

Final note

This is general information; tax positions can vary case-to-case (e.g., RSUs/ESPPs, PFIC/US funds, corporate actions). If you’d like, tell me your scenario (salary slab, broker, FY, dividend/gain figures), and I’ll map it line-by-line to ITR-2 with an example Form 67/FSI/TR filled-out template.

⚠️ Disclaimer

This article is for educational and informational purposes only. Tax laws are subject to change, and the actual tax treatment may vary depending on your personal circumstances. Please consult a qualified tax professional or chartered accountant before filing your Income Tax Return (ITR) or making any financial decisions. The author is not responsible for any errors, omissions, or outcomes resulting from the use of this information.