The due date for filing of income tax return, originally due on July 31, 2025, has been extended to September 15, 2025. If you have investments in US stocks and have not filed the ITR yet, you need to hurry up.

Taxpayers with overseas assets and foreign income have to be extra cautious while filing their ITRs. From choosing the right ITR form for filing foreign income to filing the Schedule FA and Schedule CG, to filing Form 67, taxpayers cannot afford to miss out on any disclosures while reporting foreign assets and income to the tax authorities.

Under the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA), India receives detailed information about financial accounts held by its residents in foreign jurisdictions. This includes the account holder’s name, address, and tax identification number (TIN), bank account number and balance, including income details such as interest, dividends, and other financial proceeds.

So, don’t even think the I-T department doesn’t know your global assets. The Income Tax Department knows the global income of its resident taxpayers and FATCA details help them to identify taxpayers who may not have disclosed their foreign assets and income.

If you have investments in US stocks, you need to disclose complete details by filling up the correct ITR form. “Resident and Ordinarily Resident (ROR) individuals in India who hold investments in the US stock market are required to report their foreign income and assets while filing their Income Tax Return (ITR). The appropriate ITR form in such cases is generally ITR-2, provided the individual does not have business income. For those with business or professional income, ITR-3 may be applicable,” says CA (Dr.) Suresh Surana.

Indian investors buying US stocks cannot use Form ITR-1 or ITR-4 for filing their ITRs. They must file their income tax returns in Form ITR-2 or ITR-3, depending on their income or foreign assets.

Both dividends and capital gains are to be disclosed in the ITR form. In India, dividends from foreign stocks are fully taxed under the head ‘Income from Other Sources.’

“If tax has been withheld in the US, the taxpayer may claim foreign tax credit (FTC) under the Double Taxation Avoidance Agreement (DTAA), subject to prescribed conditions. To avail this credit, it is mandatory to file Form 67 before submitting the ITR and to retain proof of taxes paid abroad,” says Dr. Surana.

One of the most important parts for taxpayers while filing ITR with foreign income is to fill out Schedule FA and Schedule CG.

“Capital gains arising from the sale of US stocks must be reported under Schedule CG of the ITR. If the holding period exceeds 24 months, the gain qualifies as long-term capital gain (LTCG) and is taxable at 20% with indexation benefits(12.5% w.e.f. 23rd July 2024).

Gains on stocks held for 24 months or less are treated as short-term capital gains (STCG) and taxed at slab rates. All figures must be converted to INR using the SBI TT Buying Rate on the date of the transaction,” informs Dr. Surana.

Income-tax Act, 1961 require residents to disclose their foreign assets and income in their Income Tax Returns (ITR). Specifically, Schedule FA (Foreign Assets) in the ITR form is meant for reporting foreign assets even if no income has been earned from such holdings and Schedule FSI (Foreign Source Income) is for reporting income from foreign sources. Additionally, taxpayers can claim tax relief on taxes paid abroad by filing Schedule TR (Tax Relief).

Individuals holding US stocks through brokerage accounts must disclose account details, including financial institution, country code, opening date, peak balance, and closing balance as of 31st December.

Indian taxpayers are required to disclose details of foreign assets in Schedule FA of the ITR held
at any time during the relevant calendar year ending on 31st December. “The reporting under Schedule FA is based on the calendar year (i.e., from January 1 to December 31), not the Indian financial year. All figures must be converted into Indian Rupees (INR) using the SBI TT Buying Rate as on 31st December of the relevant calendar year,” says Dr. Surana.

There are strict and severe penalties for non-disclosures of foreign assets that can go up to several lakhs. “Failure to file Form 67 before the ITR submission, incorrect use of the ITR form, and non-disclosure of foreign assets are common compliance issues that can lead to penalties or denial of FTC. It is essential to ensure accurate reporting of all foreign income, proper conversion of currency, and timely submission of supporting documents to remain compliant with Indian tax regulations,” informs Dr. Surana.