Learn how to claim foreign equity losses in Indian ITR, set-off rules, capital gains tax on U.S. stocks, ITR forms to use, and carry forward provisions. Updated for AY 2025–26.
💼 How to Claim Foreign Equity Losses in Indian ITR (AY 2025–26)
If you’re an Indian resident investing in U.S. stocks or other foreign equities, your income (or losses) from those investments must be reported in your Income Tax Return (ITR). India taxes residents on global income, so yes — you can claim foreign equity losses when filing your Indian ITR.
🧾 Income Nature: Capital Gains vs. Business Income
1. How is Income from Foreign Stocks Classified?
| Scenario | Classification |
|---|---|
| Long-term investor (holding for appreciation) | Capital Gains |
| Frequent trading with profit motive | Business Income (Speculative or Non-Speculative) |
🧮 Capital Gains Tax on Foreign Equities
| Type | Holding Period | Tax Rate |
|---|---|---|
| Short-Term Capital Gains (STCG) | ≤ 24 months | Taxed at slab rate |
| Long-Term Capital Gains (LTCG) | > 24 months | 20% with indexation (u/s 112) |
🔁 Can Foreign Equity Losses Be Set Off or Carried Forward?
A. Capital Losses
| Loss Type | Set-Off Allowed Against | Carry Forward |
|---|---|---|
| Short-Term Capital Loss (STCL) | STCG & LTCG | Up to 8 years |
| Long-Term Capital Loss (LTCL) | LTCG only | Up to 8 years |
Note: Capital losses cannot be set off against salary, interest income, or business profits.
B. Business Losses
- Non-Speculative Business Loss: Set off against any income (except salary), carried forward for 8 years.
- Speculative Loss: Carried forward for 4 years.
🧪 Real Example: Claiming U.S. Equity Losses
Mr. Raj (Resident Indian)
Traded U.S. stocks via Interactive Brokers. In FY 2024–25:
- 📉 STCL from U.S. shares: ₹2,50,000
- 📈 LTCG from Indian mutual funds: ₹1,00,000
He Can:
- ✅ Set off ₹1,00,000 STCL against LTCG
- 🔁 Carry forward remaining ₹1,50,000 for future years (up to 8 years)
📌 Tax Compliance Checklist for Foreign Equity Reporting
✅ 1. Choose the Correct ITR Form
| Income Type | Form |
|---|---|
| Capital Gains + Foreign Assets | ITR-2 |
| Business Income (trading in stocks) + Foreign Income | ITR-3 |
✅ 2. Disclose Foreign Assets (Schedule FA)
- Broker account details
- Country of investment (e.g., USA)
- Peak balance, account number, etc.
- Mandatory for residents with foreign holdings
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✅ 3. Convert to INR Correctly
Use SBI TT Buying Rate (Rule 115A) on the date of transaction for:
- Sale price
- Purchase price
- Expenses
✅ 4. File ITR on Time
- 🗓️ Due date: 31st July 2025 (non-audit cases)
- For FY 2024–25: 15th September 2025 (if books audited)
- 📌 Late filing disqualifies loss carry-forward
✅ 5. FEMA & LRS Limits
- If investing > USD 2,50,000/year, ensure LRS compliance
- Transactions over this limit may need RBI approval
⚠️ Common Mistakes to Avoid
- ❌ Not declaring foreign stock trades
- ❌ Filing ITR-1 or ITR-4 with foreign income
- ❌ Ignoring Schedule FA disclosure
- ❌ Reporting USD figures directly without INR conversion
💡 Pro Tip:
Download capital gains report or trading statement from platforms like Interactive Brokers, TD Ameritrade, or Vested. Always consult a CA for accurate classification and declaration in ITR.
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