What are the tax implications for me?
Taxes on capital gains:
You will be taxed in India for this gain. You will not be
taxed in the US. The amount of taxes you have to pay in India depends on how
long you hold the investment
Taxes on dividends:
qualify as a long term capital asset, the shares must be held for at least 24
months. The gain will then be taxed at a long term capital gains tax rate of
20% (plus applicable surcharge and cess fees), with indexation benefits.
- If you
hold the shares for less than 24 months, the gain qualifies as short-term
capital gain and will be taxed as normal income in India. The tax rate is based
on the tax bracket that you fall under, according to your income
Unlike investment gains, dividends will be taxed in the US
at a flat rate of 25%. For example, if Microsoft gives an investor $100 as
dividend, $25 will be withheld as tax. Subsequently, this post-tax dividend is
included as taxable income in India (as normal income).
Fortunately, the US and India have a Double Taxation
Avoidance Agreement (DTAA), which allows taxpayers to offset income tax already
paid in the US. The 25% tax you already paid in the US is made available as
Foreign Tax Credit and can be used to offset your income tax payable in India.
At the end of fiscal year, we will send you a consolidated
statement of your transactions, capital gains and dividend that will help you
simplify the tax process.