How does Taxation work for OCI - Overseas Citizen of India ?

#1
I am a naturalised foreign citizen of Indian origin. I don't file my taxes in India, but only abroad.

So if I open a DEMAT account for NRI and buy and sell stocks.

Does the broker or bank deduct - TDS - Tax Deducted At Source on whatever gains I make ?

In general do you only have to pay tax, when you file your IT return. Or does the bank or broker with hold taxes ?

Say I buy stocks in my NRI - DEMAT account and make a profit. And I don't file Indian taxes, can I just keep the profit without paying any tax ?
 

mastermind007

Well-Known Member
#2
DISCLAIMER: Please understand that my response to this query is not to be construed as a legal advise I do not hold any such qualifications or certifications. I am sharing my understanding of rules from general layman perspective.

If you are citizen of United States, you are liable to pay taxes to the US IRS for all your gainful income in any corner of the world. How exactly was that income earned constitutes second but neverthless important aspect of tax declaration made by you . Your source of income needs to be legal (meaning that you should not be dealing in products or services that are declared illegal by the US State you are domiciled in and also by the Federal US Authorities). Also, you also need to steer clear of any countries or foreign state entities (recognised sovereign or unrecognised) against which US Govt has declared embargo or imposed trade restrictions.

In order to avoid having to pay taxes on same income twice, US IRS would allow you to seek exemption equivalent to the tax that you may have already paid to a Foriegn tax authority For e.g. if your annual income renders you in 35% tax slab in US and you had paid 15% of tax liability off your earnings by trading in Indian market, you will have to pay equivalent of 20% remainder to the US IRS.

For citizen of any other country, general rule of thumb is that you pay taxes on your income in the country in which it was earned and you are free to repatriate it to your domicile country. There are certain restrictions on how what can be and what cannot be repatriated out of India. Unlike USA, most of the other countries do not require you to pay taxes on your foreign income and rules as to their declaration also vary from country to country.
 

canikhil

Well-Known Member
#3
I am a naturalised foreign citizen of Indian origin. I don't file my taxes in India, but only abroad.

So if I open a DEMAT account for NRI and buy and sell stocks.

Does the broker or bank deduct - TDS - Tax Deducted At Source on whatever gains I make ?

In general do you only have to pay tax, when you file your IT return. Or does the bank or broker with hold taxes ?

Say I buy stocks in my NRI - DEMAT account and make a profit. And I don't file Indian taxes, can I just keep the profit without paying any tax ?
won't go the US taxes part (you can easily claim exemption foreign income for upto USD 95K annually). So unless you are planning to go really big on Indian market, you need not worry about the US taxes.

For Indian taxes:

1. Yes the banker/broker will deduct taxes on the gains

2. In case the overall tax deducted is higher than your actual tax liability in India, you can easily claim refund of excess tax credit by filing your tax return in India

3. As stated earlier taxes are deducted by the broker itself. So no question of you being able to keep profits without paying taxes.

4. You are not allowed to short sell or enter into currency derivatives.
 

wisp

Well-Known Member
#4
It will depend on whether you are resident in India for more than 180 days. If yes, then Indian tax return has to be filed.
 

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