NRI Selling US Stocks While In India - A Complete Guide

For NRIs, global investing has never been easier, thanks to platforms like Vested, INDmoney, Grow, and Webull, among others. Millions of NRIs and Indian residents are now making their investments in the US Stock market, holding ETFs, RSUs, ESOPS, and more. This is also because the US stock market includes some of the world's most popular stocks, such as Apple, General Motors, and Facebook. These stocks help investors grow their investments, allowing NRIs to diversify into the Indian stock market. 

With NRIs holding US stocks, the concern of "NRI selling US stocks while in India" also comes into play, as the confusion begins when an NRI temporarily or permanently stays in India and sells US stocks. Questions like: Will India tax the gains on US shares? Does the US impose a capital gains tax on NRIs? Is the income tax table twice, or which country gets taxed first? Arise in the investor's mind.

Well, this blog answers all such questions. If you are an NRI planning to sell US stocks in India, then this is what you need to know. 

Can an NRI sell U.S. stocks While Staying In India?

Yes, an NRI can sell US stocks while staying in India. It is often seen that NRIs worry that they cannot sell their US securities while residing in India physically. However, that's a myth. 

As an NRI, your physical location has zero influence on your ability to sell the US stocks. If you hold US stock through:

• Global investment platforms such as Vested, Grow
• US brokerage accounts such as eTrade, Fidelity, Charles Schwab, 
• RSUs, ESOPs, or ESPPs from a US employer

You can freely sell your US stock from anywhere in the world, including India. 

Under the Foreign Exchange Management Act FEMA, NRIs are not limited from selling their US shares even if they are physically present in India. This act only restricts how money flows in and out of India and not how you manage your investments. 

Taxation in India When Selling US Stocks

NRIs often believe that their NRI or OCI status contains the taxation rules in India. However, this is not the case. In India, you are taxed based only on your income tax residential status.

The income tax residential status is divided into three types of status, which are: 

• NRI (Non-Resident Indian)
• RNOR ( Resident but not Ordinarily Resident )
• ROR ( Resident & Ordinarily Resident )

This status is determined by the number of days you have spent in India, not by your visa, passport, or OCI card. So, with respect to the number of days you have spent in India, calculate your income tax residential status. This is how each status is taxed in India. 

• NRI- Foreign capital gains earned by selling US stocks are not taxable for NRIs, as India does not tax foreign income for NRIs. 
• RNOR - Same as NRIs. 
• ROR - India taxes global income for ROR, including the US stock gains for NRIs. 

Let's Talk Indian Taxes

Your indian taxes depend on whether the gains are long-term or short-term.

• If the holding period of US securities is less than 24 months, it is considered a short-term capital gain (STCG) and is taxed as part of your income tax slab.
• If the holding period of your US securities is more than 24 months, it is considered a long-term capital gain (LTCG) and is taxed at 20% with indexation. 

Indexation brings significant benefits to long-term investors by adjusting your purchase price for inflation. 

Taxation In The USA When You Sell Stocks In India

The US government does not impose a capital gains tax on foreign investors (NRAs), so if you are not a US tax resident (NRA) and you sell US stocks, you will not be taxed. Meaning: 

• $0 capital gains tax in the USA. 
• No withholding. 
• No reporting of these gains except for certain ones, such as RSUs and ESOPs. 

So what is taxed in the USA?

The US IRS only taxes the dividends that you earn from US stocks. These dividends are subject to a 30% withholding tax, which is then reduced to 25% under the India-US DTAA, as stated by the US stock tax rules in India. 

FEMA Rules - Can NRI Hold & Sell US Stocks?

The movement of NRI money across borders is regulated by the Foreign Exchange Management Act (FEMA). FEMA provides NRIs with complete freedom to own or sell foreign investments, including US stocks and other assets. 

No restrictions on foreign securities: Irrespective of your US securities holding platform, FEMA allows you to retain and manage foreign securities without any limitations. Just ensure that everything happens legitimately. 

NRIs can sell U.S. stocks whenever they want: With respect to FEMA, your location does not affect the sale of your U.S. shares. You can sell it anytime you want, whenever you want, be it in the US or India. Just ensure that you do not violate FEMA guidelines during the process. 

Repatrition is allowed: Post-sale, if you choose to transfer your funds to your NRE/NRO account in India, FEMA has no restrictions on repatriation, provided the funds came from legitimate sources and that the transfer is made in accordance with FEMA.

Real Life Scenarios To Understand NRI Selling US Stocks While In India: Tax Implications.

Scenario A: NRI sells US Stocks while visiting India

When an NRI sells his US stocks while visiting India, the tax implications are as follows:

• USA: No capital gain tax imposed
• India: No taxation on capital gains, as the Indian Income Tax Department does not tax foreign income for NRIs. 

Scenario B: NRI returning to India becomes an ROR and sells US stocks 

Now that, upon returning to India permanently, and based on the number of days he stayed in India, the NRI falls into the ROR category. While being an ROR, he sold his US stocks from India; the tax implications will be as follows. 

• USA: No taxation. 
• India: According to the Indian Income Tax Department, the capital gains will be subject to taxation based on the ROR's holding period.

Scenario C: Employee sells RSUs from a US employer

In this scenario, the US will tax the employee's salary, and India might tax both the salary and any capital gains earned if the employee is an ROR. To avoid being taxed twice on the same income in both countries, the individual can claim a foreign tax credit on Form 67. 

The Bottom Line

When investing in US stocks as an NRI, ensure that dividends from the US stocks are subject to a 25% tax in the US under the India-US DTAA. On the other hand, there is no capital gains tax imposed on nonresident aliens in the US. 

However, as an NRI, if you still want a professional to handle your cross-order taxes and securities, Savetaxs is the name to trust. 

We have been helping NRIs living in the US with their foreign investments in the US and also handling the entire selling process, ensuring you are taxed only on what you deserve. Our experts bring more than 30 years of experience to the table, providing the best NRI portfolio manager for your investments. 

So, connect with us today as we serve our clients 24/7 across all time zones.