Investment in foreign stocks/ETFs

Thanks. pankushri & faisr
So for either Nasdaq 100 or S&P500 it is better to go the Motilal way.
For any other ETFs/Funds or stocks we can go with Zerodha tieup. Right?

ICICI US Bluechip Equity Fund is also an option. It’s an active fund. TER is bit high but no exit load after 1 month. Motilal Oswal has lower TER, and no exit load after 90 days.

Thanks Rupesh. When I search in coin I get about 10 funds that have US/Europe exposure. But TERs are quite high(0.5 to 2%). If Zerodha tieup is able to reduce charges then direct Nasdaq 100 ETF like Vanguard(0.001% TER) might be better than Motilal N100 ETF(~0.5% TER).

What is the taxation for say Motilal N100 ETF? Is it similar to Indian equity(like less than 1yr is STCG(15%) and more than 1yr is LTCG(0% for first Rs 1lk and @10% exceeding Rs 1lk)? Or is it similar to debt(less than 3yrs is STCG(as per slab) and more than 3yrs is LTCG(20% with indexation)?
I assume the taxation for investing in foreign stocks/etfs/funds via zerodha’s tieup will be similar to debt(less than 3yrs is STCG(as per slab) and more than 3yrs is LTCG(20% with indexation) right? Or is it similar but 2yrs instead of 3yrs for stcg-ltcg?

Any comments on these?

@itsadam can i know which platform they tied up , i already open account there today just i want to know

All foreign investment funds, ETFs, FoF are treated as Debt components so the same rules for short/ long term capital gain and loss is calculate.

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oh nice good , thanks

No it’s not, It’s powered by interactive brokers. You open an account with IB and then trade through the Upstox platform.

Btw, I don’t know how many will really be interested in this international investing after the new 5% Tax deduction for foreign remittances.

This is only TCS(tax collection at source) right? Not an actual tax. Tax wise nothing has changed.

U r right

@ rupeshmandal, @Quicko, @TAXIQ.IN and others
If we directly invest in equity in USA stock exchange then the tax treatment is like equity without STT(i.e less than 2 yrs is STCG slab rate. More than 2 yrs is 20% with indexation)?

But if we invest in Motilal N100 ETF or FOF that trades in Indian exchange then it is treated as debt (i.e less than 3 yrs is STCG slab rate. More than 3 yrs is 20% with indexation).

Do correct me if I am wrong.

Yes, it is treated as a non-equity fund. Also, Motilal Oswal S&P 500, ICICI US Bluechip Equity Fund, etc all are treated as debt funds for taxability purposes. Parag Parikh Long Term Equity Fund also invests in US stocks but the majority portion of the portfolio is invested in Indian stocks so it is treated as an Equity fund for taxation purposes. Hope this helps.

@nithin this reminded me, Zerodha Tax P&L wrongly treats ICICI Bluechip US Equity Mutual Fund as an Equity Fund from taxation point of view. Instead of treating it as Debt fund. And hence the tax liability is miscalculated. I had brought this up with Zerodha Support on May 6, 2020 and ticket #20200505437383 is still open and the issue is yet unresolved. Dec 31 is the last date to file ITR. Thus I request you to look into it.

@Quicko you also please take a note of this. Because all investors filing ITR through you, if they are having ICICI Bluechip US Equity Fund in their portfolio and if there is redemption of units, their taxability is wrongly calculated by Zerodha.

Both of you, please talk to each other and resolve things.

Thanks.

@Nakul Can you.

@rupeshmandal this is an interesting one. Equity funds investing in foreign shares have been gaining in popularity. Tax treatment of these funds is similar to debt funds. However, they can not be classified as the same. We believe these funds should be treated as Other Capital Asset, taxable at slab rate in case of short term ( holding period of 36 months or less) & 20% with indexation in case of long term. You are partially right in comparing its tax treatment same as debt funds.

We usually differ to our broker partners to provide the classification of asset classes for the appropriate treatment of capital gains. However, we also give the option to taxpayers to alter the treatment of the same as per their liking.

The AMCs also mention in their product brochure that it is treated as Debt instrument. Even if treated as other capital assets, as you mentioned, it would still lead to the same tax liability. If I am partially correct in calling it tax treatment as Debt Fund, what Zerodha is doing by treating it as Equity for taxation, is deriving to utterly wrong tax liability amount, which is absolutely wrong. And the nimble team of Zerodha (in @nithin’s words only) is not able to solve it in 6 months and still counting.

Sincerely, I would appreciate an opportunity to ask if I can Auto invest in ETFs? What should I know before investing in ETFs? Can you get rich off ETFs?

I think we need to have a blockchain based trading system where one can give cash to agent to buy shares, no taxes to pay

@nithin, @Nakul, @siva Any update whether Zerodha is planning to add foreign equities similar to debt for taxation point of view? Currently we need to manually separate it out from equity for tax filing purpose since we need to add those gains/losses along with debt instruments.

Hey @simhan, we’re launching a new version of Console in the next couple of weeks. The consideration of the P&L in foreign MF is done correctly, as mentioned by you, in our new reports.

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