NRI Capital Gain Tax - FIFO?

Q&A: Questions & Answers
#1

Dear All,

I am an NRI holding SBI demat/trading account.

Here is the situation:

Let’s say I bought 100 Ajanta shares in on Jan 1, 2014 and then 100 again on Jan 1, 2015.

If I were to place a sell order on 12 Jan 2015 for 100 Ajanta shares, ideally there should be no capital gains tax applicable as the 100 shares bought in 2014 should be sold first. (capital gain tax is not applicable for holding period > 365 days)

It is quite logical for FIFO to be used while calculating capital gain tax (which is deducted at source by Banks).

However, just wanted to verify if other ValuePickr members have faced any issues with this? I don’t want the bank to charge me hefty capital gain tax and go back and forth with the system to claim refund!

Thanks!

#2

Sushil, there is a Departmental circular clarifying that for shares held in demat, the FIFO rule will apply for capital gains tax. Refer link:http://www.moneycontrol.com/news/tax/find-out-how-to-handle-demat-shares-for-tax-calculations_681137.html

I am not sure if this will apply to an NRI. Please check with a tax consultant.

#3

I am an NRI. For shares purchased and sold through my PIS a/c, I have incurred TDS for STCG of ~17% and no TDS for LTCG (even after adjusting for splits). Hope this helps.

#4

When counting LTCG as mentioned above, I used FIFO and yes there were more shares which if sold under FIFO, would incur STCG.

#5

I thought it’s more at the discretion of the investors in India like this…

With FIFO method, we’ll end up paying more taxes.

#6

Thanks

bomi karkaria&Aksh

@ Chintan

Spot on! Thanks, that’s what I needed to know. Thanks to the magnificent returns last year, I was worried about having to pay capital gain tax!

#7

Hi Sushil,

FIFO rule will apply. I am NRI too, and have exactly same concern, got this clarified from my bank

#8

It should be FIFO for the capital gain tax calculations. Even if you try to avoid tax by making your own rules, during scrutiny by income tax, you will have to pay the taxes as per FIFO and it attracts interest and penalty. So go by FIFO rule only.

#9

When buying shares, if one has multiple demat accounts, then splitting the shares across the demat accounts may give flexibility while selling.
Won’t this give taxpayer the flexibility to sell from the demat account of his choice and may help counter the FIFO issues if they were bought under just one DEMAT account?

#10

But you will have to pay taxes in you foreign country of residence. Is it not?

#11

The question is for US based NRIs related to LTCG tax:

Does US based NRIs need to pay LTCG tax in India for gains on NRE demat Account? Is it fine to pay taxes only in US as US tax resident.

If at all paying in India, how are you handling as tax years different (in US Jan-Dec, in India April-March)

#12

@muralimohan001 .Did you find any ways to deal with your situation. I am also in same situation, please let me know if you find any ways.

#13

This is the plan:

Step 1. For 2018 Jan to 2018 March - File taxes in India. (This step is valid for only 2018)
Step 2: For 2018 Jan to 2018 Dec file taxes in USA but show the proof that you already paid in India for 2018 Jan to 2018 March. While filing in US consider India tax filing to calculate amounts.
Step 3. For 2018 April to 2019 March - File taxes in India but show the proof that you already paid in USA for 2018 March to 2018 December. While filing in India consider US tax filing to calculate amounts.
Step 4: For 2019 Jan to 2019 Dec file taxes in USA but show the proof that you already paid in India for 2019 Jan to 2019 March. While filing in US consider India tax filing to calculate amounts.
Step 5: For 2019 April to 2020 March - File taxes in India but show the proof that you already paid in USA for 2019 March to 2019 December. While filing in India consider US tax filing to calculate amounts.