TogglIcon
ToolsLearnBytesTax Q&AGet Started
Banner

Foreign Income and Taxes

Investments, stocks, portfolios-these seem to be quite the buzzwords on social media these days. And now the option of being able to invest in foreign stocks has made investment an even more alluring choice. Investment in foreign stocks could be a good option to diversify an individual’s portfolio and to get better returns. Keep in mind that RBI guidelines are applicable to individuals if they plan to invest in foreign stocks.

How to buy foreign stocks?

Individuals can acquire foreign stocks either by direct investment or via purchase. You can purchase foreign stocks under the

  • Liberalised Remittance Scheme (LRS).
    It allows all resident individuals to freely remit up to USD 2,50,000 per financial year, subject to RBI and FEMA Guidelines.
  • Investments under the Overseas Direct Investment (ODI) route.
  • Additionally, individuals can also acquire foreign stocks via the Employee Stock Options Plan (ESOP) of the employer.

Taxes on Income from foreign stocks

For ordinary Indian residents, the total income you earn from investing in foreign stocks or your global income so to speak is taxable in India subject to DTAA. However, for NRIs income earned and received outside India is generally not taxable.

A little confused about your Residential status? You can check out the Residential status calculator.

When it comes to Indians investing in foreign stocks, the US clearly wins the race. So let’s talk a bit about the taxability of US stocks in India. An investor gets generally two types of income from foreign stocks:

  1. Dividends
    When an resident individual receives dividend from an US stock, it will be taxed at the rate of 25% , the rest will be given to the shareholder. Now that earning will also be taxed by the Indian government according to the prevailing tax rates. However, owing to the DTAA signed between India and the US, the tax that has been deducted in the US can be claimed as foreign tax credits against the tax liability in India.
  2. Capital Gains
    However, when it comes to capital gain from US shares, no taxes are levied on profit or gain incurred at time of selling stocks in US. But contrary in India, capital gain income will be taxable as per Indian tax laws.

Taxation of Shares Purchased under ESOP

An increasing number of companies are giving stock options to their employees.  Apple, Netflix, Spotify are a few of the companies offering ESOPs

When it comes to ESOP, things are a little bit more nuanced as the taxation happens at two stages:

  1. At the time of allotment of shares
    The income is determined based on the difference of the fair market value (FMV) of shares on the date of allotment and the amount paid to acquire such shares. This income is treated as perquisite and taxed as part of salary income at the applicable slab rates.
  2. At the time of sale of shares
    During the time of sale of shares, the income is taken as the difference between the sale proceeds and the cost of acquisition of shares (i.e. FMV). The individual would need to pay tax on such capital gain.

However, there are other considerations too when it comes to taxation on ESOPs

  • Tax residency of the individual at the time of allotment of shares
  • Tax residency of the individual during the vesting period i.e. grant to vest dates
  • Cost of acquisition
  • Challenges in claiming double-taxation relief/foreign tax credit under a Tax Treaty owing to the differentiation in nature of income from ESOP i.e. as employment income or capital gain

Mode of Tax payment

Tax on salary income in the case of ESOP shares is subject to tax withholding by the employer. For capital gain on foreign shares, the tax needs to be submitted by the individual by way of Advance Tax or Self-assessment Tax.
However, under the LRS scheme, if the amount transferred abroad exceeds INR 7 lakh then TCS @5% on the excess amount is applicable and individuals can get the refund on filing the income tax return in India.

Reporting of foreign incomes

In case of capital gain income during FY 2020-21, individuals need to file Form ITR-2 or ITR-3.
The reporting it in your ITR would be as below for foreign stocks:

  • Schedule CG for Capital gain
  • Schedule OS for Dividend income
  • Schedule FSI and Schedule TR for claiming foreign tax credit in case of double taxation relief
  • Schedule Foreign Assets: Details of holding of foreign shares/securities 

Investing in foreign stocks is a comparatively new phenomenon in India. The taxability when it comes to income from foreign shares often gets complicated. India has different DTAA with different countries and the clauses of the DTAA may also get updated from time to time. To put in other words, not only will taxability on foreign income differ from country to country but it may also differ for the same country from one time period to the other.

Tweet Us--Like Us--Join Us

0 Likes

Share
facebook twitter

Update: The New IT Portal & Infosys

The New IT portal has been in the news constantly for a lot of reasons. The responsibility to build this portal was given to Infosys through an open tender published on Central Public Procurement.


The New IT Portal was launched on 7th June 2021 and the main promise of this portal was a better and smoother user experience. However, the road to achieving this aim had quite a lot of hiccups  on its way


What were the hiccups?

Right from its launch, taxpayers were witnessing certain difficulties on the portal. While some said they were unable to log in, other faced difficulties while trying to update their personal details on the portal. Taxpayers took to social media platforms to express their grievances. This did not go unnoticed by The Finance Minister who time and again urged Infosys to work on the glitches to provide a smooth user experience to the taxpayers.

On 21st August 2021, the portal went under emergency maintenance and wasn’t accessible to taxpayers for two days. . The Finance Minister summoned Mr Salil Parekh, CEO of Infosys on 23rd August to discuss the glitches on the portal. Post the meeting, Infosys was given a deadline of 15th September to fix all the ongoing glitches.

Considering the fact that this would leave a relatively narrow window for taxpayers to file their ITR, the government has extended the ITR filing due dates. Take a look at the revised dates

What’s the status now?

Infosys has been continually working to bring the New Portal up to pace and there has been a sustained improvement in the portal. Infosys said that over 3 crore users have successfully used the portal to carry out various transactions. Further, ITR filing has also picked up pace with the portal facilitating over 2.5 lakh returns daily. 

Infosys has also stated that several important statutory forms like 15G, 15H, 10IE along with TDS returns are also being filed in large numbers. And as the portal’s capacity continues to increase, these numbers are expected to go up

Infosys has acknowledged that some taxpayers may continue to face glitches on the portal. However, they are actively working to make the portal fully functional for everyone.

With the new IT Portal, ITD has given enhanced capabilities to ERIs as well.

Where do ERIs come in?

ERIs are authorized intermediaries who are eligible to file income tax returns and perform other tax-related services on behalf of taxpayers.
 

What can ERIs do?

Create and manage your Income Tax Profile: You can create and manage your IT profile via ERIs like changing or updating your address, link documents, and so on.

Submit Statutory Forms: You can submit statutory forms like Form 10 IE & more via ERIs.


Manage Refund Bank accounts: You can add and select your bank accounts for receiving refunds through ERIs.

Track IT refund: ERIs make it simple for you to track your IT refund.

Submit refund reissue request: ERIs also helps you submit refund reissue request to the ITD.

E-file and E-verify: Most importantly, ERIs makes it super simple for you to file and verify your ITR.

We at Quicko are committed to making taxes simple for you. So, we are coming up with something exciting that will not only offer these services but much more. So stay tuned!

Tweet Us--Like Us--Join Us

0 Likes

Share
facebook twitter

Understanding IIFL Tax P&L Report

You can download the IIFL Tax P&L Report from Quicko’s tax planner on the tax P&L tab. The report includes details of segment wise trading – scrip name, buy value, sell value, and trading expenses. Segments included are – Equity Shares, Mutual Funds, Equity Intraday, Futures and Options.

IIFL Banner

Income Head

Capital gain covers gain or loss from the selling of Equity Shares (except intraday transactions), Mutual Funds (MF), Restricted Stock Units (RSU), Equity Traded Funds (ETFs), and Employee Stock Option Plans (ESOPs).

Business Income Head covers Equity Intraday transactions, Futures and Options. This Tax P&L Report can be used to prepare P&L A/C to report it in the Income Tax Return.

However, the trader must take care of the following things where the treatment as per Income Tax may differ.

Expenses

In the case of Intraday and F&O, you can also claim other expenses – such as internet expense, legal fee, subscription expenses, depreciation, etc which are not covered in the Tax P&L Report.

Calculation of Long Term Capital Gains under Section 112A

LTCG on the sale of securities (on which STT is paid), bought on or before 31st Jan 2018 should be calculated using the Grandfathering Rule. As per this rule, the Cost of Acquisition is computed after considering the FMV as on 31st Jan 2018 as per Section 112A.

For equity and mutual funds transactions, long term capital gain is computed after taking into FMV as on 31st Jan,2018. 

  • Corporate Actions: 
    • Buy back Gains: When a company buys back shares issued by it from an existing shareholder, it results in capital gains for the shareholder. Such buyback gains would not be included in the Tax P&L Report.
    • As per a recent amendment in Budget 2019, the gains from buy-back are exempt in the hands of the individual since the company is now liable to pay the buyback tax under Section 115QA. This amendment is applicable to all the buybacks after 5th July 2019. Therefore, buyback gains before 5th July 2019 are taxable for the trader and the ones after 5th July 2019 are exempt
  • Dividend: Dividend transactions would not be included under the Equity segment in the Tax P&L.
  • Transfer In/Out: If you moved your portfolio from another broker to Angel Broking or vice versa, your brokers will have partial data (either buy-side or sell-side depending on transfer in or out). Most of the brokers let traders enter such missing data. However, there are high chances of missing out Capital Gains arising out of such transfers. 
  • Calculation of Trading Turnover:
    • There are two different methods to calculate turnover for Intraday and Futures & Options:
  • Scripwise Method:
    • You calculate the turnover by collating all trades on the particular scrip for the financial year, find the average buy/sell value, and then determine the turnover.
  • Tradewise Method:
    • You calculate the turnover by summing up the absolute value of profit and loss of every trade done during the year.

You can learn more about scripwise and tradewise trading turnover calculation

Intraday

Trading in the stock market on a same-day basis. Thus, it would mean buying and selling on the same day itself.

Turnover 

For all intraday transactions, the aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover.

Profit/Loss

Gross P&L is generally calculated by summing up overall sales amount reduced by buy amount.

Net P&L = Gross P&L – Transfer expenses.

Futures & Options

In the Tax P&L report, F&O turnover and P&L is computed by considering the following trade segments:

  • Equity Futures & Options
  • Commodity Futures & Options 
  • Currency Futures & Options

Turnover

For Futures transactions, Turnover = abs(sell value – buy value).

For Options transactions, Turnover = abs(sell value – buy value) + sell value.

*abs() stands for absolute value. 

Profit/Loss

Gross P&L is generally calculated by summing up overall sales amount reduced by buy amount.

Net P&L = Gross P&L – Transfer expenses

All of the above conditions are considered when you file your Tax Return using Quicko. However, reporting may vary depending on your specific situation, hence it’s always advisable to consult a tax professional when in doubt.

Tweet Us--Like Us--Join Us

0 Likes

Share
facebook twitter

Pay the 2nd Installment of Advance Tax before 15th September

Have you received a notification from the Income Tax department regarding the payment of Advance Tax? Well, fret not, you are not the only one. The ITD has been sending these notifications as a reminder to taxpayers who have paid Advance Tax in the last Financial Year.

The communication also states that the department is maintaining a database to monitor the compliance of the taxpayers. It also contains the details of the Advance Tax paid by the assessees in the last Financial year. 

What is Advance Tax?

Advance Tax is a “pay-as-you-earn” scheme for the periodical payment of your yearly tax in advance. It needs to be paid if your outstanding Tax Liability is INR 10,000 or more. Advance Tax can be paid in 4 equal instalments at an equal time gap.

The following table shows the due date of paying Advance Tax for each quarter

Due Date of Installment Amount Payable
On or Before 15th June 15% of the Advance Tax
On or Before 15th September 45% of the Advance Tax
On or Before 15th December 75% of the Advance Tax
On of Before 15th March 100% of the Advance Tax

The due date to pay the second instalment of Advance Tax is quite near and the ITD had sent this notification as a reminder for people to pay the second instalment of Advance Tax.
Wondering how to calculate Advance Tax? Check out our Advance Tax Calculator

Who has to pay Advance Tax?

Any individual having an outstanding Tax liability of INR 10,000 or more is liable to pay Advance Tax.

Individuals having only salary income usually don’t have to pay advance tax, since their employers deduct TDS. However, what is often overlooked is the fact that if a salaried individual has income from other sources like trading, investment, rent then that person may be liable to pay Advance Tax as well. In other words, having any sort of non-salaried income may make one eligible for paying Advance Tax. 

Advance Tax for Investors & Traders

Traders are liable to pay Advance Tax for their realised profits & gains. However, given that the income of traders keeps changing every month (every day…actually😅), it can be quite difficult to pay the accurate amount of Advance Tax every quarter. So, they can go for either of the following options

Option 1: Estimate incomes for each quarter

Traders can pay Advance Tax at the end of each quarter by estimating their trading income. If they pay more than their actual liability then they can claim a refund while filing their ITR. If they pay less than the actual Tax Liability, an interest of 1% per month or part thereof on the differential amount has to be paid u/s 234C

Option 2: Pay pending Tax on or before 31st March.

Capital gains can be difficult to estimate. Hence, taxpayers can pay Advance Tax on the realised profit for that quarter. However, later on, if the tax liability is more than what they have paid, they can clear up all their dues on or before 31st March to avoid any interests.

Where does Quicko come in?

Calculating and remembering to pay advance Tax can be quite a task. That’s why our Tax Planner is here to help you out.

  • Log in with your broker
  • Add other Incomes & Tax credits
  • Navigate to Planning & then click on Advance Tax
  • Check out how much Advance Tax to pay, due dates & other details
  • Click on Pay

Yep, that’s it. We have made it that easy for you to calculate and pay Advance Tax😎

Need help with Advance Tax? Well, let our experts guide you through.

Want to know more? We would love to hear you out. Just drop in your contact details & message. We will get back to you with applicable plans, discounts and more in light’s speed (okay that might be an exaggeration, but we promise to get back to you fast enough)

Tweet Us--Like Us--Join Us

0 Likes

Share
facebook twitter

Is the due date for ITR filing getting extended for FY 2020-21?

One of the most prominent murmurs going on among taxpayers and experts alike is, will the due date for ITR filing get extended? Normally, the due date for filing ITR is 31st July of the assessment year. However, taking into account, the havoc wrecked by covid, the due date was extended to 30th September 2021 where tax audit is not applicable & 30th November 2021 where audit is applicable.

So why are there murmurs of the possibility of it getting extended yet again?

Glitches in the new Income Tax Portal

The ITD launched the new Income Tax portal on 7th June 2021 with a lot of fanfare. The portal with its swanky new interface promised a seamless user experience.
However, it has been a rocky road for the new portal ever since its launch. Taxpayers have been facing difficulties while trying to file their returns as well as while using the other services offered by the portal.

Many taxpayers took to various online platforms, to express their dissatisfaction. This did not go unnoticed by the Financial Minister who urged Infosys, the vendor to step up and resolve the glitches on the new portal at the earliest.

Although several glitches on the new portal have been fixed, some of them still persist making it difficult for many taxpayers to file their returns. The portal went under emergency maintenance on 21st August and was completely unavailable for two days. Filing seemed to have picked up after the portal went live again & an average of 400,000 returns are being filed every day since the past week. Despite significant improvements in the portal and in the number of returns being filed, many taxpayers continue to face glitches on the new portal.

Taking this into account The Finance Minister had summoned the CEO of Infosys for a meeting on 23rd August to seek an explanation for the persisting glitches

Post the meeting, the FM had given Infosys a deadline of 15th September to Infosys in order to fix all the glitches on the portal.

Due dates extended for e-filing of various forms under Income Tax Act

The CBDT has already extended the due date for filing various forms, such as:

  • The due date for uploading of the declarations received from recipients in Form No. 15G/15H during the Q1 FY 2021-22 has been extended till November 30, instead of the previous due date of July 15, 2021 & more
  • The application for registration or intimation or approval under Section 10(23C), 12A, 35(1)(ii)/(iia)/(iii) or 80G of the Act in Form No. 10A now can be filed by March 31, 2022, instead of the prior due date of June 30, 2021. Also the due date for application for registration or approval under Section 10(23C), 12A, 35(1)(ii)/(iia)/(iii) or 80G of the Act in Form No. 10A has been extended to 31st March 2022 instead of 30th June 2021.
  • The Equalisation Levy Statement in Form No.1 for the Financial Year 2020- 21 can be filed by December 31, 2021, as against the prior due date of August 31, 2021 & more

So is the due date for ITR filing getting extended too?

Despite the ITR filing picking up pace, many taxpayers are still struggling to file their returns on the new portal. And if we assume that the portal will be fully functional by 15th September, as per the deadline given by the Finance Minister, that leaves a very narrow window for taxpayers to file their returns.

Experts have pointed out that it would be in the best interest of taxpayers to extend the due date for filing since, it would be difficult for them to get accustomed to the new portal and file their returns, all within a span of 15 days. Although the new portal promises a much quicker filing of returns, the narrow window of 2 weeks can prove to be quite uncomfortable for not only ordinary taxpayers but also CAs.

Not to mention that last year the Government had extended the due date for ITR filing 4 times and the final due date was 10th January 2021.

It must be noted that the extension of ITR filing due date will lead to a chain reaction and the due dates for Audits and other formalities may also get extended.

So do you think the due date for ITR filing for FY 2020-21 will get extended? Share your thoughts with us

Tweet Us--Like Us--Join Us

1 Likes

Share
facebook twitter
Older posts
Scroll to Top Quicko