Foreign companies with permanent establishment taxable in India: Supreme Court
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The Hindu
7 hours ago
- The Hindu
U.S. stocks and tax implications in India
Investing overseas, especially in the U.S., is not just about opening a broker account, picking a stock, clicking a 'buy now' button and enjoying double-digit returns. It requires a thorough understanding of rules and regulations and tax implications of both the countries, open/hidden costs incurred and logistics behind it. It is crucial to understand how to transact legally, without landing in trouble. Let's check this. Legal framework On February 4, 2004, Liberalised Remittance Scheme (LRS) was introduced with a limit of $25,000. Later, owing to the then prevailing micro- and macro-economic factors, the LRS limit was revised in stages. Currently, as per the LRS, Indian resident individuals, including minors, can remit up to $2,50,000 per financial year for permissible transactions such as education, travel and investments including the U.S. stocks. If your total foreign remittance in a financial year exceeds ₹10 lakh, Tax Collected at Source (TCS) will apply and the rate depends upon the purpose of remittance. Withholding tax If you receive dividend from a U.S. stock, it is treated as foreign income and will be subject to an upfront withholding tax of 25% in the U.S. Further, the balance 75% of the dividend income is taxable in India as per slab rates. However, thanks to the India-U.S. Double Taxation Avoidance Agreement (DTAA), you can offset the dividend tax withheld in the U.S. against your tax liability in India, by claiming a foreign tax credit by filing Form 67. Again, it is easier said than done. Individuals face multiple challenges while claiming DTAA benefits. For instance, exchange rates, time duration etc. viz. the fiscal year in the U.S. is different from that of India's April-March cycle. The DTAA is a treaty between the two countries to avoid double taxation by individuals with financial dealings in both the countries. Capital gains The U.S. does not levy capital gains tax for Indian residents who invest in U.S. stocks, if they are considered Non-resident Aliens (NRAs) for the U.S. tax purposes. But India taxes capital gains on your U.S. stock profit. If you have held U.S. stocks for more than two years (24 months), it is considered long-term capital gains (LTCG) and will be taxed at 20% tax plus surcharge and cess. If you have held the shares for less than 24 months, it is considered short-term capital gains and is taxed according to your income slab rate. Disclosure, compliance As per the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, non-disclosure of foreign assets is considered a violation and attracts a penalty of ₹10 lakh per year of default for an undisclosed foreign asset. In extreme cases, you might have to face imprisonment of up to seven years. All foreign assets, including the U.S. stocks, must be declared in Schedule FA of the Income Tax Return (ITR) portal while filing returns. Any non-disclosure of the U.S. stocks, be it even for a negligible amount of $1, will attract hefty penalties under the Black Money Act, 2015. Further, most people are under the impression that you should disclose details about the U.S. stock holdings only if the stocks are sold and the capital losses/gains are realised. That's not true. It is immaterial whether you sell the stock, or you just keep accumulating stocks for long-term. Even if you buy a single U.S. stock for just $1 or even less, it is advisable to disclose it in under Schedule FA. Further, even if you receive a dividend of $1 or even less than that, it must be disclosed. FA non-disclosure Suppose, let's assume that owing to lack of awareness, you have not disclosed under Schedule FA. Against this backdrop, if your returns are already filed, the first option is voluntary disclosure via revised return (if applicable) and the second option is to file updated return (ITR-U) under Section 139(8A), applicable for the last two assessment years, but with a penalty. In either case, it is advisable to seek the help of an experienced auditor to review past returns, fix errors and stay compliant from thereon. If a mistake of non-disclosure, whether deliberate or unintentional, has happened, early correction is safer than receiving a notice from the IT Department. (The writer is an NISM & CRISIL-certified Wealth Manager and certified in NISM's Research Analyst module)
Hindustan Times
2 days ago
- Hindustan Times
SC takes cognisance of ecological crisis in Himachal Pradesh
The Supreme Court has taken suo motu cognizance of what it said was grave ecological crisis facing Himachal Pradesh, warning that unscientific construction and development could cause the entire hill state to 'vanish into thin air' from India's map. The court partly blamed 'unscientific construction' for recent natural disasters, and said that tourism pressure fuelled by 'human greed and apathy' is undermining the state's ecological fabric. (Shutterstock) The court partly blamed 'unscientific construction' for recent natural disasters, and said that tourism pressure fuelled by 'human greed and apathy' is undermining the state's ecological fabric, an intervention that came during a hearing on a petition by a resort company challenging the state's June 6 notification declaring Tara Mata hill a 'green area' with construction restrictions. While dismissing the resort's plea and lauding the notification, the bench of justices JB Pardiwala and R Mahdevan expanded the case's scope to address the broader environmental emergency gripping the state. 'We want to impress upon the state government and Union of India respectively that earning revenue is not everything. Revenue cannot be earned at the cost of environment and ecology,' the court said. 'If things proceed the way they are as on date, then the day is not far when the entire State of Himachal Pradesh may vanish in thin air from the map of the country.' Hoping this never happens, the court posted the matter for 25 August and sought the state's response on whether it has an action plan, emphasising that time is of essence as 'the situation in the state has gone from bad to worse.' The court's sharp observations came against the backdrop of widespread devastation that struck tourist towns in Kullu, Mandi, Shimla and Chamba districts during the monsoon seasons of 2023 and the one underway at present. 'Nature definitely is annoyed with the activities which are going on in the State of HP,' the bench said, noting that landslides and flash floods have become commonplace in the state, which is prone to natural calamities. Partly attributing the natural calamities to 'unscientific construction,' the court warned that unchecked tourism pressure could 'severely undermine the ecological and social fabric of the state.' The court highlighted how 'human greed and apathy' is driving the construction of four-lane roads to promote tourism, with heavy machinery and explosives weakening mountain slopes. It flagged the depletion of forest cover and receding glaciers as contributors to climate change, alongside unplanned hotel and resort construction that violates zonal plans and environmental clearances. 'Since the state lies in the lap of the Himalayan peaks, it is important to seek the opinion of geologists, environmental experts and local people before any development project is undertaken,' the court said. The bench also noted significant problems including waste generation, traffic congestion, noise pollution, overuse of water resources, and encroachment into ecologically sensitive areas. 'Ecological diversity and growing human demands necessitate immediate sustainable planning and conservation measures,' the court said, directing its registry to issue notice to the Himachal Pradesh government. The court expects the state to file an appropriate reply explaining whether it has an action plan and 'what do they propose to do future.' Looking beyond the state's borders, the court emphasised the need for 'all Himalayan states, pan India to collate resources and expertise so as to ensure that development plans are cognisant of these challenges.'
Economic Times
5 days ago
- Economic Times
Equity over debt: NRIs see Indian markets as long-term wealth builders, says Harsh Gahlaut
In this edition of ETMarkets NRI Talk, we speak with Harsh Gahlaut, Co-founder & CEO of FinEdge, to decode the evolving investment preferences of non-resident Indians. With a growing number of NRIs channeling their money into Indian mutual funds, the trend clearly reflects more than just a quest for returns—it's about long-term conviction in India's economic story. From emotional ties and strategic asset allocation to the increasing ease of digital investing, Harsh shares insights into why equity continues to dominate NRI portfolios, how taxation and regulation shape their decisions, and why India remains a core destination for wealth creation, despite the operational challenges. Edited Excerpts - ADVERTISEMENT Q) NRIs are actively investing in Indian mutual funds. What are some of the key drivers behind this trend?A) Several key emotional and strategic factors are at play here. First, there's a deep sense of familiarity and belonging, a kind of anchoring bias, that drives NRIs to invest in India. Despite living abroad, India remains home, and this emotional connection plays a significant role in financial decision-making and investment beliefs. Second, many NRIs are acutely aware of the Indian growth story. They hear about India's rising global influence and see the potential firsthand, from macroeconomic stability and digital innovation to favourable demographics and long-term GDP prospects. That's something many of them take pretty seriously, and it shows in the way they invest. Third, for a large number of NRIs, there's a long-term view, whether it's the intention to return, support family members, or simply have a solid financial foothold in India. Mutual funds become a natural choice because they offer professional management, diversification, and alignment with long-term goals, such as retirement, education, or legacy planning. Q) How do NRIs navigate the taxation maze, especially under the Double Taxation Avoidance Agreement (DTAA)? Are there common challenges they face? A) Interestingly, tax efficiency is rarely the primary driver behind NRI investments in India. Most NRIs are driven more by long-term value, familiarity, and strategic diversification than tax efficiency alone. That said, the Double Taxation Avoidance Agreement (DTAA) certainly adds a layer of convenience and clarity. Despite the friction, India continues to hold a firm place in NRI investment portfolios, driven more by belief than by convenience. ADVERTISEMENT Depending on the treaty terms, NRIs may be eligible for reduced tax rates or claim a credit for taxes paid in India against their overseas tax liabilities. For instance, interest income or capital gains earned in India might be subject to lower TDS under DTAA provisions, easing the overall tax said, taxation is just one piece of a much larger puzzle. NRIs face a range of other practical challenges, including complex documentation requirements, understanding currency risk, and managing time zone differences when dealing with professionals based in India. In places like the US and Canada, regulatory filters make things even trickier — some mutual funds are simply off the table. ADVERTISEMENT NRIs also rely more heavily on service support, especially when it comes to tasks like KYC, nominee updates, or redemption documentation. For many, a lack of access to a trusted investment expert who can guide them virtually and collaboratively becomes a significant these hurdles, most NRIs continue to look at India as a core part of their long-term investment strategy. The connection to home, coupled with India's long-term economic potential, outweighs these operational complexities for many investors. ADVERTISEMENT Q) You mentioned that NRI inflows come mainly from the US, UAE, UK, and Singapore. How do investor preferences differ across these geographies?A) Interestingly, while these regions differ in culture and regulation, the investment mindset of NRIs across geographies is more similar than different, especially when it comes to long-term wealth of where they are based, NRIs today want intelligent visibility into their portfolios and the confidence that someone has their goals mapped out with clarity. ADVERTISEMENT Across the board, we see a firm conviction in India's growth story. Whether it's an NRI in New York, Dubai, London, or Singapore, there is a shared belief in the long-term potential of the Indian economy, and a preference for staying invested with NRIs are not chasing quick returns. Instead, they're looking for structured, goal-based investing, often with the support of an expert who can offer personalisation and convergence in mindset likely stems from a few common factors. Many NRIs have global market exposure and, as a result, more rational expectations. Their savings potential, especially in rupee terms, tends to be the same time, busy professional lives and time constraints mean they value the presence of a trusted expert who can help them stay on track, manage their portfolios, and navigate life changes without constantly reacting to market noise. That said, we have noticed subtle preferences in how NRIs engage with investment platforms. In digitally mature markets like the US and Singapore, there is a stronger inclination toward platforms that offer complete transparency, real-time portfolio tracking, and guided engagement, not just transactional ease. That's probably why blended models, where people and tech work together, feel more natural to ability to collaborate, plan virtually, and review progress through a single seamless interface is something NRIs increasingly expect as part of their investment experience. Q) What are the most promising sectors in India currently attracting NRI investments, and why are they gaining momentum? A) While there's often curiosity around sectors, we find that most NRIs aren't sector-chasers in the traditional sense. Their approach tends to be long-term and goal-based rather than tactical or said, we do see growing interest in areas that reflect India's structural growth story. Their focus is less on thematic rotations and more on strategies that deliver results quietly over sectors such as financial services, infrastructure, technology, and manufacturing, particularly those aligned with the 'Make in India' and capital expenditure (capex) revival narrative, are gaining investor also seeing some interest in areas like renewable energy and the digital economy, largely thanks to India's momentum in those than making concentrated sectoral bets, most NRIs prefer diversified exposure through mutual funds or broader asset allocation strategies. They're usually more measured than domestic investors in responding to short-term market have experienced the downside of being sold the wrong products in the past, especially insurance bundled as an investment. They are now more focused on transparency, cost efficiency, and long-term alignment with their while promising sectors do exist, NRIs are generally not investing with a thematic focus. Their preference is for long-term, resilient strategies that benefit from India's broader economic momentum, rather than timing individual sectors. Q) How are government initiatives and economic reforms creating new opportunities for NRIs to invest in India? A) The biggest shift we've seen is how digitalisation has made investing in India far more seamless and location-agnostic. NRIs today can transact, track, and review their investments from anywhere in the world, something that wasn't as easy even a few years like Aadhaar-based KYC, digital signatures, and improved online reporting tools have reduced friction and brought said, there are still operational gaps, especially in areas such as NRI onboarding, KYC updates, bank detail changes, or residency status modifications, which often still require offline intervention. But the intent to resolve these issues is clear, and we're seeing steady progress toward end-to-end digital important development is the push around GIFT City, which offers NRIs and foreign investors access to certain investment options under a globally competitive tax and regulatory still early days, but as more product innovation and regulatory clarity evolve around GIFT City, it could become a meaningful channel for NRIs seeking efficient India sum it up, India's direction of reform is making it a lot easier and more future-ready for NRIs to invest back home, and the message to global investors, including NRIs, is clear: India is open, evolving, and becoming easier to engage with. Q) What kind of allocation are NRIs making towards fixed-income instruments like bonds? Are tax-free bonds or government securities gaining traction? A) For most NRIs, the India opportunity is still viewed through the lens of long-term growth, and that naturally draws them more toward equities. Their core motivation is participation in India's economic trajectory, rather than locking into fixed-income instruments for do see fixed-income allocations being made for the purpose of asset diversification or short-term stability. However, tax-free bonds, government securities, or even newer retail products, such as government bonds or T-Bills, have yet to gain widespread traction among tend to be more relevant in specific cases, for instance, after a property sale, when certain capital gains exemptions are available through infrastructure of those instances, NRIs who seek lower-risk exposure often still lean toward traditional options, such as fixed deposits. The familiarity and simplicity appeal to many, even if not the most tax-efficient. Additionally, for many NRIs, the risk of rupee depreciation is a factor, making long-duration, rupee-denominated debt instruments less attractive unless there's a clear tax or regulatory incentive to justify the exposure. Broadly speaking, equity remains the preferred vehicle for long-term wealth creation, while fixed income continues to play a stabilising role, more complementary than core. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
