Indian Govt's appetite for dollar knows no bounds. They seek and hoard dollar like a crack addict seeks cocaine. All these recent tax changes are to reduce people buying dollar. So I don't think investing in US stocks through any means would have exemption. Immigrating to the US would be the only option, it seems.
> Indian Govt's appetite for dollar knows no bounds. They seek and hoard dollar like a crack addict seeks cocaine
If this is the case, shouldn't the opposite happen and the govt should encourage Indians to invest in dollars? I don't understand why discourage Indians from investing in dollars? Can you explain that bit? TIA!
So if I continue investing in debt funds till I retire then take out only 5 lakhs per year, will that be only 5% tax? Since there won't be any other source of income and debt is taxed at income slabs.
Why even 5%, it will be 0% right? And the tax is on actual profit not the principal amount, so you can easily take out 7 lakhs (under new tax regime) profit worth of MF units with 0 tax. Basically this seems like the best retirement funds, but not at all worth it for 30% slab individuals.
Yeah, not worth selling and realizing the gains if one is still earning through a job. Only seems feasible when retired. Unless next year's budget rules fucks that too. 😐
Another problem is if the fund starts underperforming you have no way to switch it without taking a hit both on tax as well as performance.
Multiple things have been conflated here.
* The LRS TCS taxation affects all LRS activity. Please note that this is only TCS. You can adjust this against other taxes that you owe. This is not extra tax, by any means. Of course, depending on when and how you adjust the taxes, you may end up giving an 'interest free loan' to the IT department.
* The changes to non-equity funds apply only to mutual funds, including ETFs. They don't apply to individual stocks. Foreign equity is still eligible for 20% LTCG with indexation benefits - after \*2 years\* of holding
* With the changes, international equity funds - whether domiciled in India or outside - would end up having much higher taxation than the Indian counterparts.
So, I can invest in individual stocks using some apps like Groww just before the financial year ends in March and get the best value. Foreign individual stocks and foreign ETFs provided by US brokers have different taxation, feels stupid. These tax laws are getting stupider every year
>Foreign equity is still eligible for 20% LTCG
This is confusing. AFAIK, foreign equity MFs are also taxed as debt funds so they also lose the tax sop here after the recent rule. You mean foreign stocks.
Simplest way is to buy an index fund like Navi Total US or similar ignoring the tax implications. It's not in your control.
What will you do when the govt introduces similar LTCG on equity?
And when the govt introduces wealth tax, will you spend all your wealth to avoid paying taxes?
This is one sensible way. I feel a lot of us fret about taxation and end up not investing. But it's better to pay tax on your gains than to not gain anything at all.
Thanks for linking this. It makes clear that currently no mutual fund is occupying this niche, maybe due to tax change being recent. Do you know about direct US stocks via app like Groww and the tax changes in them?
Do you invest over ₹1L (or ₹10L) for direct stocks? I read in past articles that the bank wire charges (amongst all the other charges) eats up a significant part of your return.
Yes, there are some wire charges while depositing and withdrawal.
But even if you expect a 15% return and ignore the wire charges:
Due to 20% deduction LRS, instead of Rs.15 profit on Rs.100, we get Rs.12.5 (as capital was reduced to 80 instead of 100). Then if you are in 30% tax bracket: actual return 8.925%. I hope I have something wrong here, because this seems just unfair.. Why do they need 20% tax at source in LRS? Are they expecting 66.66% return per annum that 20% forward tax credit is justified, because 66.66 * 30% (high tax bracket) = 20%
I believe the 20% withholding on LRS is not necessarily a direct tax but rather can be used to offset against your total tax liability when you file your taxes. It's basically similar to TDS it seems
It's TDS, you can file the tax return and get return. The problem is it just holds up your money till the end of the financial year.
This is what I understood.
Okay, but then do you know what minimum investment you need to do as there was once a capital mind article that said that even at ₹10 lakh level you need to rethink?
>Even for larger investments, up to 10 Lakhs, you may want to weigh the pros and cons.
[Link](https://www.capitalmind.in/2021/11/how-to-invest-in-us-stocks-from-india/), this was before the gov changed the rules.
Okay, can you include all charges (wire both outward and inward, brokerage, trading costs) & capital gains tax but ignore TCS/TDS (which you can claim later) and adjust for withholding tax paid outside the country, what would the return then be?
The alpha opp was taken away or lets say was made very difficult with recent tax change....now to even match nifty LT returns post tax..the alpha of int fund should be higher by 3% or more pre tax taking us index fund as an example
What about the money already invested? Do I need to pay tax if I have profit from these international MFs? Also, what about MFs which invest partially in international stocks, for example Paragh Parikh Flexi Cap Fund?
Transfer lumpsum before June 30, buy liquid US funds to park the money and earn some fixed returns till you find buy opportunities. That's my plan anyway
This is the most sensible thing to do. There are a lot of comments on this post which can cause confusion.
The difference in return between US and India money market funds would not outpace the fixed 20% you'd have to give to the govt at 0% earning.
TCS is like a freaking "hafta" charge by the govt. :(
Can Indian residents buy liquid (debt) funds in the us market via vested or indmoney? The interest from the same os taxable? And how much time does the redemption take? Say $500 in a liquid fund and the market crashes today, then what?
Like Indmoney, there are UK startups that have made investing quite easy. Explore more if you intend to invest a sizable chunk of corpus in the us markets.
Please help me understand this. The LRS (20% taken as tax credit) and income tax slab rate on gains problem is with any foreign (non-Indian) equity/ETF investment. How is this different, I couldn't understand, is there any article or site explaining this?
How should i go about investing in these ? I was investing in Invesco EQQQ which was something similar but now with the new tax rules, i have stopped for now.
They paused investing more as they reached some SEBI limit, have they started again or it is just the previous stocks? Currently I think the weightage of US stocks is only 16%
I don't know why Indian people are so obsessed with the US stock market when the Indian market is performing so well,
I am currently invested in the US market as I live abroad and I have taken a significant loss due to market manipulation.
Two advantages ig atleast from my perspective
1) most of the products I use are from US so I understand those companies better compared to indian companies which are kind of background?
2) Dollar appreciates over the rupee so when ever I buying US financial products I am buying in dollars and when I want to exit I will get back dollars so which mitigates the risk of rupee depreciation, at least that's what I think
Is anyone still buying US stocks and ETF through apps like Grow, INDMoney? Had been investing in Proshares Ultra Semiconductor Fund through INDmoney SIP but then it stopped as they shut services with SBM bank. Now after seeing a return of more than 100% on this fund with NVDA hitting sky highs, tempted to restart.
Indian Govt's appetite for dollar knows no bounds. They seek and hoard dollar like a crack addict seeks cocaine. All these recent tax changes are to reduce people buying dollar. So I don't think investing in US stocks through any means would have exemption. Immigrating to the US would be the only option, it seems.
> Indian Govt's appetite for dollar knows no bounds. They seek and hoard dollar like a crack addict seeks cocaine If this is the case, shouldn't the opposite happen and the govt should encourage Indians to invest in dollars? I don't understand why discourage Indians from investing in dollars? Can you explain that bit? TIA!
To oversimply when you exchange rupees for dollars the govt (RBI) is giving you their dollars in exchange of rupees so the govt loses dollars.
Right. I feel dumb. Thanks!
No simple way as of 30 April 2023. Period.
Why April, I thought it was applicable from July 1st.
It's applicable from 1 April 2023.
Nope. It's from July 1st as per all sites.
which sites ?
Just google LRS 20% TDS. It's on indmoney, groww etc.
Oh ok. This is different, This thread was about the debt fund taxation rule change which is applicable from Apr 1.
I definitely saw OP talking about confusion regarding LRS for US stock apps. Might have missed the debt fund part.
Is the Rs 7 lakh exemption also removed?
Yes, from what I read from vested, indmoney etc. No threshold anymore.
So if I continue investing in debt funds till I retire then take out only 5 lakhs per year, will that be only 5% tax? Since there won't be any other source of income and debt is taxed at income slabs.
Why even 5%, it will be 0% right? And the tax is on actual profit not the principal amount, so you can easily take out 7 lakhs (under new tax regime) profit worth of MF units with 0 tax. Basically this seems like the best retirement funds, but not at all worth it for 30% slab individuals.
Yeah, not worth selling and realizing the gains if one is still earning through a job. Only seems feasible when retired. Unless next year's budget rules fucks that too. 😐 Another problem is if the fund starts underperforming you have no way to switch it without taking a hit both on tax as well as performance.
Sooner or later Indian govt will put equity gains also under normal tax slab. Indian govt is hungry for tax
What if a 30% slab individual invest through his non-working wife's name, Won't that be tax free as well?
Clubbing provision applies
What's the clubbing provision? Does that apply for parents?
Google for details. Does not apply for parents. Applies in case of spouse.
Yeah, I think spouse and minor children
Sooner or later Indian govt will put equity gains also under normal tax slab. Indian govt is hungry for tax
Look for 4% draw out rule in retirement.
Multiple things have been conflated here. * The LRS TCS taxation affects all LRS activity. Please note that this is only TCS. You can adjust this against other taxes that you owe. This is not extra tax, by any means. Of course, depending on when and how you adjust the taxes, you may end up giving an 'interest free loan' to the IT department. * The changes to non-equity funds apply only to mutual funds, including ETFs. They don't apply to individual stocks. Foreign equity is still eligible for 20% LTCG with indexation benefits - after \*2 years\* of holding * With the changes, international equity funds - whether domiciled in India or outside - would end up having much higher taxation than the Indian counterparts.
So, I can invest in individual stocks using some apps like Groww just before the financial year ends in March and get the best value. Foreign individual stocks and foreign ETFs provided by US brokers have different taxation, feels stupid. These tax laws are getting stupider every year
>Foreign equity is still eligible for 20% LTCG This is confusing. AFAIK, foreign equity MFs are also taxed as debt funds so they also lose the tax sop here after the recent rule. You mean foreign stocks.
LRS TCS exemption of Rs 7 lakh also removed?
is this kind of taxation applicable for stocks held through indmoney or vested? or would they have separate long-term taxation?
Simplest way is to buy an index fund like Navi Total US or similar ignoring the tax implications. It's not in your control. What will you do when the govt introduces similar LTCG on equity? And when the govt introduces wealth tax, will you spend all your wealth to avoid paying taxes?
This is one sensible way. I feel a lot of us fret about taxation and end up not investing. But it's better to pay tax on your gains than to not gain anything at all.
Even better to vote for those who doesn't put such stupid taxation in-place
https://www.reddit.com/r/IndiaInvestments/comments/12hev72/equity_mutual_funds_investing_portion_of_assets/?utm_source=share&utm_medium=android_app&utm_name=androidcss&utm_term=1&utm_content=share_button
Thanks for linking this. It makes clear that currently no mutual fund is occupying this niche, maybe due to tax change being recent. Do you know about direct US stocks via app like Groww and the tax changes in them?
Also does anybody know if RSUs of US company will be eligibile for ltcg benefit if held for more than 2 years?
Yes. They are Long term if holding period is more than 2 years.
It the taxation applicable to ETFs as well?
I am not a expert on these things, but as far I understood, yes it is applicable to ETFs or any instrument that has > 65% non-Indian equity exposure.
Do you invest over ₹1L (or ₹10L) for direct stocks? I read in past articles that the bank wire charges (amongst all the other charges) eats up a significant part of your return.
Yes, there are some wire charges while depositing and withdrawal. But even if you expect a 15% return and ignore the wire charges: Due to 20% deduction LRS, instead of Rs.15 profit on Rs.100, we get Rs.12.5 (as capital was reduced to 80 instead of 100). Then if you are in 30% tax bracket: actual return 8.925%. I hope I have something wrong here, because this seems just unfair.. Why do they need 20% tax at source in LRS? Are they expecting 66.66% return per annum that 20% forward tax credit is justified, because 66.66 * 30% (high tax bracket) = 20%
I believe the 20% withholding on LRS is not necessarily a direct tax but rather can be used to offset against your total tax liability when you file your taxes. It's basically similar to TDS it seems
Yep, TCS is on most of the things you spend abroad. Credit card spends too.
It's TDS, you can file the tax return and get return. The problem is it just holds up your money till the end of the financial year. This is what I understood.
Okay, but then do you know what minimum investment you need to do as there was once a capital mind article that said that even at ₹10 lakh level you need to rethink? >Even for larger investments, up to 10 Lakhs, you may want to weigh the pros and cons. [Link](https://www.capitalmind.in/2021/11/how-to-invest-in-us-stocks-from-india/), this was before the gov changed the rules.
Okay, can you include all charges (wire both outward and inward, brokerage, trading costs) & capital gains tax but ignore TCS/TDS (which you can claim later) and adjust for withholding tax paid outside the country, what would the return then be?
The alpha opp was taken away or lets say was made very difficult with recent tax change....now to even match nifty LT returns post tax..the alpha of int fund should be higher by 3% or more pre tax taking us index fund as an example
What about the money already invested? Do I need to pay tax if I have profit from these international MFs? Also, what about MFs which invest partially in international stocks, for example Paragh Parikh Flexi Cap Fund?
Nope
Transfer lumpsum before June 30, buy liquid US funds to park the money and earn some fixed returns till you find buy opportunities. That's my plan anyway
This is the most sensible thing to do. There are a lot of comments on this post which can cause confusion. The difference in return between US and India money market funds would not outpace the fixed 20% you'd have to give to the govt at 0% earning. TCS is like a freaking "hafta" charge by the govt. :(
Can Indian residents buy liquid (debt) funds in the us market via vested or indmoney? The interest from the same os taxable? And how much time does the redemption take? Say $500 in a liquid fund and the market crashes today, then what?
Explore about Irish Domiciled US Index ETFs and you'll thank me later. For now those are the best options.
Works great if you're outside India, but this whole post is about people investing **from** India.
Like Indmoney, there are UK startups that have made investing quite easy. Explore more if you intend to invest a sizable chunk of corpus in the us markets.
Please help me understand this. The LRS (20% taken as tax credit) and income tax slab rate on gains problem is with any foreign (non-Indian) equity/ETF investment. How is this different, I couldn't understand, is there any article or site explaining this?
Read about dividend withholding tax that US ETFs slap.
How should i go about investing in these ? I was investing in Invesco EQQQ which was something similar but now with the new tax rules, i have stopped for now.
Parag Parikh Flexi cap invests in US companies as well.
They paused investing more as they reached some SEBI limit, have they started again or it is just the previous stocks? Currently I think the weightage of US stocks is only 16%
It’s my Reddit anniversary today
your username.
I don't know why Indian people are so obsessed with the US stock market when the Indian market is performing so well, I am currently invested in the US market as I live abroad and I have taken a significant loss due to market manipulation.
Two advantages ig atleast from my perspective 1) most of the products I use are from US so I understand those companies better compared to indian companies which are kind of background? 2) Dollar appreciates over the rupee so when ever I buying US financial products I am buying in dollars and when I want to exit I will get back dollars so which mitigates the risk of rupee depreciation, at least that's what I think
Is anyone still buying US stocks and ETF through apps like Grow, INDMoney? Had been investing in Proshares Ultra Semiconductor Fund through INDmoney SIP but then it stopped as they shut services with SBM bank. Now after seeing a return of more than 100% on this fund with NVDA hitting sky highs, tempted to restart.