Watch: Can You Trade US Stocks & Options After Moving to India? Complete NRI Guide
Complete guide for NRIs on trading US stocks and options after moving to India. Learn about FEMA Section 6(4) rules, LRS restrictions for derivatives, best brokers for non-US residents, dividend and capital gains taxation, and common compliance mistakes to avoid.
The full write-up, with the numbers and the links.
What this conversation covers
- What changes after your India return
- How to keep US stocks after moving to India
- Can I Keep My US Stocks After Moving to India?
- Can I Trade US Options and Derivatives After Moving to India?
- Which US Brokers Allow Non-US Resident Account Holders?
- What's Allowed After Returning to India? Quick Reference
- How Are US Stocks Taxed for Indian Residents?
- What Forms Do I Need to File for US Investments?
- What Are Common Mistakes NRIs Make with US Investments?
- Quick Recap: US Stocks & Options After Moving to India
- Frequently Asked Questions
- Related Articles You'll Find Helpful
Transcript
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0:02 Hey everyone, welcome back to DI return. Lot of you have asked me, I have been trading US stocks or options in the US. So what happens to these accounts when I move back to India for good? Do I have to close them or keep them or what's the information that I need to know so that I can make the right decision? So in today's video I'm going to walk you through how US stocks and derivatives would work when you are no longer a resident of US focusing on legal restrictions, tax consequences and common pitfalls so that you can make the right decision. Let's start with equities. You can still hold and manage your US equities that you have acquired while living abroad as per section 64 of FEMA law which is foreign exchange material act. Returning
1:05 Residents can still retain foreign assets or securities that they have acquired while they were non-residents. Now let's look at the margins and future options. Trading US derivatives is subject to title restrictions. Sending money from India to fund new options or derivatives is prohibited. As per India's LRS liberization remittance scheme, you can't remmit money from India to fund overseas derivative transactions. You can continue to use your pre-existing offshore balance to manage as well as close out positions. But you can't transfer new money from India to abroad for margins or topups. So keep that in mind when you are doing options
2:06 Trading. So what's the best accounts to manage while you are a non US residents? So typically it's Charles Schwab, Fidelity, Interactive Brokers are the brokerage accounts that we recommend that allow people to have Indian address and have the flexibility to manage them while you are a non- US resident. So here is a quick summary of what you can and cannot do after returning to India or when you become a non-resident of US. First with US equities you can still hold and manage them and you can have money sent from India to abroad for purchasing or for you know acquiring new stocks and the new trades are allowed but it's within LRS limits. Now let's look at the derivatives.
3:01 It you can still hold and manage the accounts but this is only through the funds that you have acquired while living abroad. You can't remmit money from India to abroad for a new transaction. So you can't purchase new trades within money coming from India but you can with the money that you have acquired while living abroad. So keep in mind about the LRS restrictions which is $250,000 per year from India that you can remit for funding your accounts and if you wanted to trade any stocks with that remitted money. Now let's look at the tax consequences of holding and managing US equity as well as US derivatives.
Read the full transcript (6 more sections)
3:53 For US stocks and ETFs, there are two primary incomes. First, dividend. US typically hold 25 to 30% of dividends by default. However, with India US tax treaty, you can bring it down to 25%. Or in some cases, it can be brought down to 15% depending on the investment. But please note, you have to file W8BN with your broker to have that lower withholding tax. In India, dividend income is taxed based on your slab rate. And don't forget to claim the credit for the tax that you have already paid in US. Capital gains in US for non-residents there is no capital gains from the stocks or ETFs.
4:53 However, in India, if you have held the stocks or ETFs for less than 24 months, it's considered short-term capital gains and it's taxed at your slab rates. If it is held for more than 24 months, it is considered under long-term capital gains and it is taxed at 20% with indexation. But keep in mind to submit a WAB and form with your custodian or a broker as soon as you become a resident of India to make sure you are complying with the proper tax treatment. Now let's look at the stock options. As an Indian resident and a non-resident alien in US, trades in your personal accounts are generally not taxed in US. Indian taxes may apply per your category of gains and losses but the treatment is very complex. So I
5:53 Would advise to consult with your charted account for your specific case. Sometimes these gains are considered as a business income or it is considered as a capital gains. But one thing to keep in mind, you want to maintain the consistency on how you treat these gains, whether it's a capital gains or a business income from a tax perspective. Now, let's talk about compliance and reporting requirements. Form W8. This is a form that you need to file with your US custodian or a broker to declare that you are a non-resident and to gain the treaty benefits. Indian income tax return. You must report your foreign income and assets every year while filing taxes in India. Fbar and FAC. Once you become a non-resident of US and not a US citizen, you don't have
6:55 To file FBAR. However, if you are a US citizen or a green card holder, the compliance continues. And finally, double taxation avoidance agreement. This treaty between US and India prevents you from paying taxes twice, but you need to file the forms correctly to claim the tax credits. Here are some common mistakes that people make. sending new funds from India for options and derivative trading in US. This violates PEMA and LRS and it could attract penalities. Second, failing to update your tax residential status and KYC's with your banks and brokers. This could lead to account restrictions and tax mismatch.
7:52 Third, failing to update or filing essential forms like W8BN form with your US broker when tax residency status has been changed. And finally, not claiming your foreign tax credits on the Indian income tax return, which could potentially lead to paying more tax than necessary. So let's do a quick recap. You can still maintain and manage your US equities and derivatives account but only with the funds that you earned while living abroad and within FMR rules. Second pile Wen to gain access to DTAA benefits. And for futures and options trading track your gains properly. maintain the records and comply with Indian tax filing. If you have liked this video,
8:54 Please like it and share it with other people who are returning or moving to India and subscribe for more such content. If you want to get your questions answered and you want to mingle with the like-minded people, check out our DIY return inner circle where you can find like-minded people for networking and getting your questions answered. Until next time, take
