- Financial experts usually recommend diversifying across several asset classes and geographical locations when building your portfolio, determining your risk tolerance, and selecting the most suitable mix of assets for your investment objectives.
Financial experts usually recommend diversifying across several asset classes and geographical locations when building your portfolio, determining your risk tolerance, and selecting the most suitable mix of assets for your investment objectives. Investment diversification and exposure to emerging industries are ideal for both stock markets and real estate bets. However, real estate investing has minimal risk, tangible ownership of assets, and modest but guaranteed returns, compared to stock investing, which has higher risk and unreliable returns. Investors who wish to invest in stocks and properties overseas should be aware of restrictions and tax regulations because both of these asset classes or sectors are among the finest bets for portfolio diversification. Learn from our sector specialists about the various tax laws that apply to stock investments and real investments made overseas.
Dr. Suresh Surana, Founder, RSM India said “As per the Foreign Exchange Management (Overseas Investment) Rules, 2022, a resident individual can make investment in foreign stocks and immovable properties situated outside India upto the LRS limit of US$ 250,000 per financial year. With regards to the tax implications of investment in stocks and properties abroad, any gains derived by the Indian investors from foreign stocks and/ or immovable property would be subject to capital gains tax depending upon the period of holding of such stocks. In case such shares/ property held for a period of more than 24 months, the gains derived would be categorised as long term capital gains and subject to tax @ 20% u/s 112 of the IT Act after availing the benefit of indexation. On the other hand, gains derived from foreign stocks held for a period of upto 24 months would be categorised as short term capital gains and subject to tax as per the marginal slab rates applicable to the individual investor. In case such investor is subjected to tax on such gains in India as well as the foreign jurisdiction, he may avail foreign tax credit (either unilateral or bilateral depending upon whether India has a treaty with such foreign country) with respect to such double taxation by way of furnishing Form 67 as per the prescribed procedure.”
“Further, section 206C(1G) of the IT Act requires every authorized dealer bank must levy and collect tax at source (TCS) @ 5% in case of an Indian investor making foreign investment under LRS provided the remittance exceeds Rs. 7 lakhs in a particular financial year. In case the Indian investor does not possess PAN or Aadhar then such TCS would be collected at a higher rate of 10%. Even though such TCS can be claimed by the Indian investor as credit at the time of furnishing his income tax return in India, the investor needs to take the TCS amount into consideration for planning their remittances,” said Dr. Suresh Surana.
“Another aspect which the Indian residents should consider and not miss, is the disclosure requirements of Foreign assets (shares / securities, immovable property, etc), while filing their tax return in India in Schedule FA of the ITR. Non-disclosure of such foreign assets would in accordance with “The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015 trigger a penalty exposure for non-disclosure of Rs. 10 lakhs,” further added Dr. Suresh Surana.
Nisha Harchekar, Head – Equity Research at Fintoo said “To diversify the portfolio in International Market there is a need to understand limits and taxation applicable for Indian Residents. Limits- In a financial year, resident Indians can invest upto USD 2,50,000 overseas under the Liberalised Remittance scheme(LRS) be it in real estate or securities. On the taxation front, both equity and real estate will attract Long Term Capital Gains (LTCG) if held over 24 months of around 20% with indexation benefit. It will attract Short Term Capital Gain (STCG) as per slab rate if held less than 24 months.”
“In case of Debt instruments and Mutual funds, LTCG if held over 36 months will attract tax of around 20% with indexation benefit. It will attract Short Term Capital Gain (STCG) as per slab rate if held less than 36 months. For dividend income and rental income, taxation will be as slab rate, holding period is not applicable,” said Nisha Harchekar.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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