I’m planning to invest in US stocks in my mother’s and wife’s names. The primary reason, of course, is taxation. Since gains on investments held for less than 24 months are taxed at the applicable slab rate, my own slab is already exhausted, whereas neither my mother nor my wife currently has any income.
To execute this, I’m considering opening a separate bank and demat/brokerage accounts in their names and investing through those accounts.
My question is: Could this arrangement create any tax-related issues for me or for them? If yes, how would the tax authorities potentially view such an arrangement? For example, could the income/gains still be attributed to me under any clubbing, beneficial ownership, gift, or other provisions?
I’d really appreciate it if someone could explain the implications in detail, including any potential pitfalls I should be aware of.
P.S. I’ve done some basic research using AI, and my initial understanding is that there shouldn’t be a problem, but I’d like to hear from someone knowledgeable before proceeding.
I don’t think investing in US stocks purely for short-term tax benefits is a good idea. US stocks are already near all-time highs, and investing successfully in them requires a good understanding of the US market and individual companies.
Instead, you could consider investing in Indian stocks and mutual funds. We have a basic exemption limit of ₹4 lakh, so, broadly, you could have up to ₹4 lakh of taxable profit each, i.e. ₹8 lakh combined in your case, without any tax. Also, our market is at a decent valuation.
There are also other investment options where short-term gains are taxed at the applicable slab rate, such as FDs, corporate bonds, gold mutual funds, gold ETFs, and certain debt-oriented investments. These may be worth considering depending on your risk appetite and investment horizon.
Hey @Abhijit Thanks for replying. Well it could be either us stocks/ FoF/debt. The emphasis is more on the taxation part. Would there be any problems from the taxman?
Don’t think there will be any problem as such.
Note that it is mandatory to disclose Foreign Asset (Schedule FA) and the taxation is a little complicated. There can be a problem only if you miss to declare it in the ITR.
Foreign Asset has to be declared even if you have not sold it.