Selling US-listed shares after returning to India? Here's how they are taxed

If an individual classified as a Resident and Ordinarily Resident (ROR) in India sells shares listed on a foreign stock exchange that were acquired while living in the United States, the tax treatment of the gains will be governed by the provisions of the Income Tax Act, 2025, which came into force on 1 April 2026.

Tax treatment of gains from foreign-listed shares

Even if the taxpayer chooses not to bring the sale proceeds back to India, the capital gains remain taxable in India and must be calculated in Indian rupees (INR).

The tax law does not provide any special exemption or relief for losses or gains arising solely due to depreciation of the Indian rupee against the foreign currency during the investment period.

Under the prescribed computation method, the capital gain should first be determined in the foreign currency in which the transaction took place, such as US dollars. This involves calculating the difference between the sale proceeds and the cost of acquisition, after accounting for any transfer-related expenses, all in the same foreign currency.

Once the capital gain has been calculated in US dollars, it must be converted into Indian rupees using the State Bank of India (SBI) Telegraphic Transfer (TT) buying rate prevailing on the last day of the month immediately preceding the month in which the shares are sold.

If the foreign-listed shares have been held for more than 24 months, they are treated as long-term capital assets. The resulting long-term capital gains are taxable in India at 12.5%, along with the applicable surcharge and cess.

In addition, if the taxpayer held foreign shares at any time during the calendar year 2026, the details of those holdings and the income earned from them must be reported in Schedule FA of the income tax return (ITR) for the tax year 2026–27.

From a foreign exchange perspective, Indian regulations also permit an individual to retain the sale proceeds outside India, provided the shares were originally acquired while the person was a resident of the United States.

Disclosure of foreign assets in ITR

Taxpayers who qualify as residents under India's income tax laws are required to disclose their foreign income and overseas assets while filing their Income Tax Returns (ITR). Details of foreign assets must be reported in Schedule FA, while income earned from foreign sources is required to be disclosed in Schedule FSI.

Failure to furnish the required information can result in a penalty of up to ₹10 lakh under the applicable provisions of the tax law.

The Income Tax Department has observed that a section of taxpayers, particularly those with relatively small foreign holdings—such as former students who studied overseas and employees holding ESOPs of foreign companies—have not fully complied with the reporting requirements relating to foreign assets.

To encourage voluntary compliance, the Central Board of Direct Taxes (CBDT) has introduced a one-time compliance window, allowing eligible taxpayers to declare previously undisclosed foreign income and assets. Taxpayers opting for the scheme will be required to pay any applicable taxes, interest and prescribed fees.

The government has also provided relief for taxpayers with relatively small foreign movable assets. Non-disclosure of such assets with an aggregate value of up to ₹20 lakh will not attract any penalty. Additionally, with effect from 1 October 2026, eligible taxpayers covered under this relaxation will also receive immunity from prosecution for such non-disclosures.