Filing ITR 2025: Step-by-Step for Indian Investors in US Markets

Missed the ITR Deadline? Here’s Your Complete Guide to Filing Returns on US Stock Investments

So, you missed the September 16 deadline for filing your income tax return. Take a deep breath—you’re not alone, and more importantly, it’s not the end of the world. The Income Tax Act has your back with provisions for belated returns.

But here’s the thing: if you’ve been dabbling in US stocks through platforms like INDmoney or international brokers, filing your ITR isn’t just about ticking a box. It’s about staying compliant with both Indian and international tax laws while avoiding hefty penalties.

Let’s break down everything you need to know, step by step.

Why Your US Stock Holdings Can’t Be Ignored

The moment you bought that Apple or Tesla share, you created something important in tax terms: foreign income and foreign assets. This isn’t just regular investment income anymore—it triggers additional disclosure requirements under Indian tax law.

Skip filing or file incorrectly, and you’re looking at:

• Late fees that add up quickly
• Interest on unpaid taxes
• Penalties for non-disclosure of foreign assets
• Potential scrutiny from tax authorities

Not exactly the returns you were hoping for, right?

The Tax Breakdown: What Gets Taxed Where?

Here’s where it gets interesting. Your US investments create a tax trail across two countries. Let’s decode this:

Dividends: The Double-Tax Scenario

When you receive dividends from US companies, both Uncle Sam and the Indian tax authorities want their share:

• In the US: 25% withholding tax (thanks to the India-US tax treaty)
• In India: Taxed at your applicable income tax slab rate

The silver lining? You can claim Foreign Tax Credit (FTC) in India for the US tax already deducted. So you won’t be taxed twice on the same income.

Capital Gains: It’s All About Timing

Long-Term Capital Gains (LTCG)

• Holding period: More than 24 months
• Taxed in US? Nope
• Taxed in India? Yes, at 12.5% flat (for sales after July 23, 2024)
• Important note: The old 20% with indexation benefit is gone for transfers after July 2024

Short-Term Capital Gains (STCG)

• Holding period: Up to 24 months
• Taxed in US? No
• Taxed in India? Yes, at your applicable slab rates

Choosing the Right ITR Form: Your First Critical Decision

This is where many investors trip up. The form you choose matters—a lot.

Go with ITR-2 if:

• You have salary income
• You’ve earned capital gains from stocks
• You hold foreign assets (this covers most US stock investors)

Switch to ITR-3 only if:

• You also have business or professional income
• You trade in F&O (Futures & Options), which is treated as business income

Your Document Checklist: Don’t File Without These

Think of these documents as your armor against tax notices:

What You NeedWhy It MattersBroker transaction statements/contract notesProves your buy/sell prices and dates for capital gains calculationsDividend statementsShows every dollar you received from US companiesForm 1042-S (or broker tax certificate)Your proof that US tax was withheld—crucial for claiming FTCBank statementsTracks your foreign remittances and incoming proceedsForex conversion ratesConverts your USD gains into INR (use SBI TT buying rates)Form 26ASShows TDS/TCS credits you can claimAIS/TIS statementsCross-verifies all your reported incomeYear-end brokerage statementsNeeded for Schedule FA disclosures

The Step-by-Step Filing Process: Let’s Get This Done

Step 1: Log In and Choose Your Form

Head to the Income Tax e-filing portal with your PAN. Select ITR-2 (or ITR-3 if you have business income).

Step 2: Report Your Dividend Income

Navigate to Schedule OS (Other Sources). Convert your USD dividends to INR using the SBI TT buying rate from the date you received them. Every. Single. Dividend.

Step 3: Declare Capital Gains

Use Schedule CG (Capital Gains)—not FSI. Calculate your gains carefully, remembering the 24-month holding period rule that separates LTCG from STCG.

Step 4: Disclose Foreign Assets

This is non-negotiable. In Schedule FA, declare your US brokerage account details, closing balance, and peak balance during the year.

Step 5: Claim Your Foreign Tax Credit

Here’s a critical step many miss: File Form 67 first to claim FTC for that 25% US tax withheld on dividends. You need to file this before or along with your ITR.

Pro tip: TCS on foreign remittances (if you sent over ₹10 lakh abroad) is already in your Form 26AS. You can claim it directly in your ITR—no Form 67 needed for that.

Step 6: Review, Pay, Submit

Double-check everything. If you owe tax, pay your self-assessment tax. Submit your return and e-verify it immediately. Then file away all your documents safely—you might need them later.

The Mistakes That Cost People Money (Don’t Be That Person)

1. Using ITR-1: The simplified form doesn’t cover foreign income. Period.
2. Ignoring Schedule FA: Not disclosing foreign assets invites penalties and scrutiny.
3. Skipping Form 67: Want that FTC? File Form 67. No shortcuts here.
4. Using old LTCG rates: The 20% with indexation is history. Apply the new 12.5% flat rate for post-July 2024 transfers.
5. Forex conversion errors: Using random exchange rates instead of official SBI rates can get your return rejected.

You Still Have Time: Understanding Your Options

Belated Return (for FY 2024-25):

• Deadline: December 31, 2025
• What you’ll pay: Late fees (₹1,000 to ₹5,000 based on income) plus interest on unpaid tax
• Catch: Some losses can’t be carried forward

Updated Return (ITR-U):

• Timeframe: Up to 48 months from the end of the assessment year (March 2030 for AY 2025-26)
• Use case: If you discover errors or forgot to report income in your original return

The Bottom Line: File Right, Sleep Tight

Missing the September deadline isn’t ideal, but it’s fixable. What’s not fixable? Ignoring your foreign investments and hoping they’ll fly under the radar. They won’t.

The Indian tax authorities are increasingly vigilant about foreign asset disclosures, thanks to automatic information exchange agreements with other countries. Your US broker is likely reporting your holdings to Indian authorities already.

By filing correctly—even if late—you’re not just staying compliant. You’re also ensuring you don’t pay tax twice on the same income (thanks to FTC) and avoiding penalties that could cost far more than any late fees.

Your US investment journey shouldn’t end with a tax nightmare. Get your ITR filed, claim what’s rightfully yours, and invest with confidence knowing you’re on the right side of the law.

Need help? Consider consulting a CA who specializes in international taxation. The peace of mind is worth every rupee.