An overseas holding is not the same as a holding. An overseas holding brings currency into the picture a holding changes the tax treatment and an overseas holding adds a reporting requirement that most investors forget about until they are filling the return.
A review of holdings is not about checking whether overseas holdings beat the Indian ones. A review of holdings is about confirming that overseas holdings are still doing what they were added for and that the paperwork is in order.
the first check: how much is actually abroad
The starting point is the allocation number.
There is no right answer for how much of a portfolio should sit in global assets. A common suggestion is fifteen percent of the equity portfolio as a diversification sleeve while some advisers suggest twenty to twenty‑five percent for aggressive investors. The reasoning for staying below fifty percent is straightforward. India is the fastest‑growing major economy and a large part of the growth opportunity sits at home.
For India‑based families a ten to fifteen percent allocation to global financial assets is considered a reasonable strategic range with the right number depending on how much of the balance sheet is already tied to Indian business, property and equities.
The review question is not whether the allocation is right in the abstract. The review question is whether the allocation matches the purpose. If the global portion was added to reduce dependence on one economy and one currency a five percent holding is not doing that job. If the global portion has drifted to forty percent because of a run in US stocks the original purpose may have been overtaken.
the check: currency exposure
Currency is the part of global investing that Indian investors tend to underestimate.
The rupee has depreciated against the dollar over periods running at roughly two point five percent a year on average over the past decade. When an Indian investor holds a dollar‑denominated asset that depreciation adds to returns in rupee terms on top of whatever the underlying asset delivers.
That has been a tailwind. That is not guaranteed to continue. A review should ask whether the portfolio is built on the assumption that the rupee will continue to weaken and whether the investor would be comfortable if the rupee held steady or strengthened for a stretch.
The currency question also applies at the portfolio level. An Indian investor with a domestic business, property and equity holdings is already heavily exposed to the rupee. The global portion is one of the ways to hold something outside that exposure. The currency angle is a feature, not a side effect.
the third check: the tax and reporting position
This is the part that catches people out.
A Resident and Ordinarily Resident taxpayer must disclose all assets in Schedule FA of the income tax return. The overseas brokerage account counts. Each foreign shareholding counts. The disclosure applies in years when nothing was sold and no dividend was received.
Schedule FA runs on the calendar year from 1 January to 31 December while the rest of the ITR runs on the year from 1 April to 31 March. The two periods do not. The income disclosed in Schedule FA will not always tie out with what appears elsewhere in the return. That is expected,. It needs a working paper to reconcile.
The tax treatment itself follows a set of rules. Foreign shares are treated as securities so the long‑term holding period is twenty‑four months, not twelve. Past that point gains are taxed at twelve point five percent without indexation. Before that the gains are added to income. Taxed at the slab rate.
Dividends face two layers. The US withholds percent if Form W‑8BEN is on file. India then taxes the dividend at the slab rate. Form 67 filed before the return allows a Foreign Tax Credit to offset the US portion, capped at the lower of the two liabilities.
A review should confirm three things. That the Form W‑8BEN is current. That Form 67 was filed for any year in which foreign tax was paid.. That Schedule FA has been filled in every year the account has been open.
the fourth check: the reason the holdings were bought
This is the question that gets skipped.
Global holdings are often added for a reason: to diversify away from markets to get exposure, to sectors that are not well represented in India or to hold assets in a currency that matches future expenses abroad. A review should ask whether that reason still holds.
If the global portion of the portfolio was added to obtain exposure to technology companies. The portfolio now contains a broad global index fund, the exposure to technology companies has become weaker. If the global portion of the portfolio was added to store dollars for an overseas expense the allocation of the portfolio should be sized to that expense not to a general diversification target.
The theme‑chasing trap is worth mentioning. AI and semiconductor‑linked stocks have had a run and many Indian investors have chased this trend through thematic international funds. The problem is that a large part of the re‑rating in these sectors has already happened and valuations in names are high compared to historical standards.
A review of the portfolio should distinguish between a holding that was chosen for a structural reason and a holding that was bought because a theme was in the news.
What retail investors should take from this.
The overseas portion of the portfolio needs a review from the domestic portion. The allocation question of the portfolio is about purpose, not performance. The currency question of the portfolio is about what the portfolio would look like if the rupee behaved differently. The tax question of the portfolio is about whether the reporting has been kept current.. The reason question of the portfolio is about whether the holding still serves the role it was added for.
The review of the portfolio does not need to be complex. Four checks, done a year are enough to catch the drift before it becomes a problem.
Frequently Asked Questions
1. How much of the portfolio should be allocated to investments?
Most advisers suggest allocating 15-25% of the equity portfolio to investments for aggressive investors with the remaining portion staying in Indian assets. The reasoning is that India is the growing major economy and a large part of the growth opportunity is domestic. The correct number depends on the risk appetite of the investor and how much of the balance sheet of the portfolio is already tied to India.
2. Why does the rupee‑dollar rate matter for a portion of the portfolio?
The rupee has depreciated against the dollar over periods, which adds to returns in rupee terms for dollar‑denominated assets. If a global investment returns 8% in dollar terms and the rupee depreciates by 3% the rupee return of the portfolio is higher. That has been a tailwind. It is not guaranteed to continue.
3. What is Schedule FA. Does it apply to me?
Schedule FA is the section of the income tax return where Resident and Ordinarily Resident taxpayers disclose all assets, including foreign brokerage accounts and foreign shareholdings. The disclosure is mandatory in years when no gains were made and no dividends were received by the portfolio.
4. What is the tax treatment on gains from US stocks?
Foreign shares are treated as securities so the long‑term holding period of the portfolio is 24 months. Past that point gains are taxed at 12.5% without indexation. Sell before 24 months. The gain of the portfolio is added to income and taxed at the applicable slab rate.
5. How do I claim a Foreign Tax Credit on US dividends?
The US withholds 25% on dividends if Form W-8BEN is on file. India taxes the dividend at the slab rate. Form 67 filed electronically before the return allows a credit to offset the US tax, capped at the lower of the US tax paid or the Indian tax payable on the income, for the portfolio.
