International investments are taxed in India based on asset type and holding period. Foreign stocks held over 24 months are taxed at 12.5% LTCG; shares sold within 24 months are taxed at slab rate. International mutual funds are treated as debt funds—held over 36 months for 20% LTCG with indexation, or slab rate for shorter holdings. Dividends from foreign stocks are taxable at slab rate, and a Foreign Tax Credit can be claimed for taxes paid abroad. Reporting requires ITR-2 or ITR-3 with mandatory Schedules FA (foreign assets), FSI (foreign income), and TR (tax relief), plus Form 67 for claiming Foreign Tax Credit. Non-disclosure can attract penalties of up to ₹10 lakh under the Black Money Act.
indian residents investing abroad must understand the tax rules. they are different from domestic investments. the holding periods are longer. the reporting requirements are stricter.
ignoring them can lead to penalties.
tax on foreign stocks
foreign stocks are taxed based on the holding period.
short-term capital gains. held for 24 months or less. gains are added to total income. taxed at the income tax slab rate. someone in the 30% bracket pays 30% on short-term gains.
long-term capital gains. held for more than 24 months. taxed at a flat rate of 12.5%. no indexation benefit. the first ₹1.25 lakh exemption for equity does not apply to foreign stocks.
reporting. gains must be reported in Schedule CG. the holding period and cost of acquisition in rupee terms must be calculated. currency conversion matters. the exchange rate on the day of purchase and sale determines the gain or loss.
tax on international mutual funds
international mutual funds are treated as debt funds for tax purposes. this is because they invest in foreign stocks, which are not listed on indian stock exchanges.
short-term capital gains. held for 36 months or less. gains are taxed at the income tax slab rate.
long-term capital gains. held for more than 36 months. gains are taxed at 20% with indexation benefit.
reporting. gains are reported in Schedule CG under the debt funds section.
tax on foreign dividends
dividends from foreign stocks are taxable in india at the income tax slab rate. the gross dividend amount must be reported. not the post-tax amount.
foreign tax credit. most countries withhold tax on dividends paid to non-residents. the us withholds 25%. this tax is not lost. it can be claimed as a credit against indian tax liability.
to claim the credit, file form 67 online. report the foreign income in schedule fsi. claim relief in schedule tr. retain foreign tax withholding certificates, broker statements, and dividend statements.
filing steps
step 1. check the residential status.
the rules apply to resident and ordinarily resident (ror) individuals. non-residents have different obligations.
step 2. choose the correct itr form.
foreign investments cannot be reported in itr-1 or itr-4.
- itr-2. for individuals with salary, capital gains, or foreign assets. no business income.
- itr-3. for individuals with business or professional income.
step 3. fill schedule fa (foreign assets).
schedule fa is mandatory for resident taxpayers holding foreign assets. the reporting period is the calendar year (january to december). the details required include:
- foreign bank and custodial accounts
- equity or debt interest in foreign entities
- immovable property abroad
- other capital assets held outside india
- signing authority in foreign accounts
- interest in foreign trusts
schedule fa must be filled even if there is no income from the asset. even a small holding must be disclosed.
the penalty for not reporting foreign assets can be ₹10 lakh per assessment year under the black money act. the penalty does not apply if the aggregate value of foreign assets (other than immovable property) does not exceed ₹20 lakh.
step 4. fill schedule fsi (foreign source income).
schedule fsi is for foreign income earned or received during the financial year (april to march). this includes:
- dividends from foreign companies
- interest from foreign bank accounts
- foreign salary
- any other foreign income
step 5. fill schedule tr (tax relief).
schedule tr is where the foreign tax credit is claimed. it draws from the data in schedule fsi.
step 6. file form 67 for foreign tax credit.
form 67 is mandatory for claiming foreign tax credit. it must be filed online before the end of the relevant assessment year. for ay 2026-27, it should be filed by march 31, 2027.
the form requires details of foreign income, taxes paid abroad, and the foreign tax credit being claimed. supporting documents must be uploaded.
step 7. check dtaa benefits.
if india has a double taxation avoidance agreement with the country of investment, a lower tax rate or credit may be available. under section 90, the provision more beneficial to the taxpayer can be applied—either the income tax act or the dtaa.
to claim treaty benefits, a tax residency certificate (trc) from the foreign country and form 10f are required.
reporting calendar
| schedule | period | description |
|---|---|---|
| schedule fa | calendar year (january-december) | foreign assets held at year-end |
| schedule fsi | financial year (april-march) | foreign income earned or received |
| schedule tr | financial year (april-march) | tax relief claimed |
frequently asked questions
1. what is the holding period for ltcg on foreign stocks?
more than 24 months. held for 24 months or less is short-term and taxed at slab rate. held for more than 24 months is long-term at 12.5%.
2. how are international mutual funds taxed?
as debt funds. held for 36 months or less: slab rate. held for more than 36 months: 20% with indexation.
3. what is schedule fa and who needs to file it?
schedule fa is for reporting foreign assets. mandatory for resident taxpayers holding foreign bank accounts, shares, property, or any foreign financial interest.
4. what is the penalty for not reporting foreign assets?
₹10 lakh per assessment year under the black money act. the penalty does not apply if the aggregate value of foreign assets (other than immovable property) does not exceed ₹20 lakh.
