NRI with US Stocks? 3 Tax Traps to Avoid

If you bought shares in a foreign company using money saved abroad, India may still tax the gains and require yearly disclosure. Skipping these rules can mean heavy penalties — even if you paid no tax overseas.

Here's what happened: Returning NRIs who invested overseas savings in foreign startups or stocks must disclose these assets every year in their Indian ITR under Schedule FA.. Buying foreign shares at a discount — below fair market value — can itself be treated as taxable income in India under the Income Tax Act.. Capital gains from selling foreign shares are taxed in India at applicable slab rates (short-term) or 20% with indexation (long-term), regardless of where the money originally came from..

What you should do: File Schedule FA in your ITR every year — list all foreign bank accounts, shares, and assets held at any point during the financial year, not just at year-end.. Check if you acquired foreign shares at a discount to fair market value; consult a CA to calculate whether the discount triggers taxable perquisite income in India.. Keep documentary proof of your NRI status during the years you made the investment — residency status at time of purchase determines which tax rules apply to your gains..

Under FEMA, once you become a resident Indian, you can hold previously acquired foreign assets — but you must report them to RBI and in your ITR every single year without exception.