I’m considering directly investing into QQQ, the NASDAQ-tracking ETF. However, the budget changes last year have created some confusion about the applicable tax treatment.
While studying on Zerodha Varsity, I learned that foreign ETFs held over 3 years should still qualify for a 20% tax rate with indexation benefits. But, I’m hearing conflicting information that it might be taxed at my income tax slab rate.
Can anyone with expertise in Indian tax law please provide a definitive answer and clarify the correct tax implications for long-term foreign equity investments? Any references to official sources would be greatly appreciated.
Max limit of investment over 700000 incurs TCS of 20% . You can invest directly however, I believe the US definition of LTCG is 5-10% above 3 year period and anything below is STCG at 20%. There’s no charges on inwards remittances.
If you do Indian ETFs or MFs that track US index then the tax applicability is similar to the debt funds and taxed per slab.
This was true only for investments made before 31st March 2023. Last full budget changed the provision and now anything which holds less than 35% domestic equity, is taxed at slab rate.
I would say this article is incorrect/incomplete. It mentions
Apart from this, indexation benefit will not be available in the case of LTCG on gold mutual funds, international equity mutual funds, fund of funds and hybrid mutual funds as well.
There’s no mention of foreign stocks and foreign ETFs.
Also this contradicts with what has been mentioned on varsity here regarding indexation benefit still being available on foreign stocks and ETFs. (Section 8.3 – Tax In India)
ETFs are subset of mutual funds. Article clearly mentions international equity mutual fund.
Regardless, budget amendments were pretty clear, anything which is less than 35% domestic equity, is taxed at slab.
looks like an old article. I would let someone from Zerodha / Varsity confirm about it but rules changed post 1 April 2023