Income tax on foreign gans

507 views 3 replies

ijay

25 Points Posted on 04 March 2012

This is gonna be somewhat difficult, sorry :)

I (Indian citizen residing in India) am investing in my US based employer in the form of Employee Stock purchase plan, where company gives shares at discounted rates. It so happens that there is salary deduction every month that gets converted in dollars and finally purchase of stock.

When this company declares dividend, it appears in the form of cheque in USD. I request the company abroad to send me in INR and they charge me a processing/conversion fee and issue me a cheque from Indian bank in INR which is easily credited in bank account in India. Usually, dividend is declared three times a year but I wait till entire dividend amount accumulates to above 10 USD and then place a conversion request for the amount in a single cheque. Until then the USD cheques keep piling in my drawer, ultimately torn away with replacement cheque.

Hope the above is clear!

1. In such scenario, is the dividend taxable in the year it is declared or the year it is credited in bank account ?

2. How is the dividend tax calculation done ?

3. Do I owe any tax to the US goverment ? They made some deductions (and gave me W8BEN form) in return saying some taxes are withheld.

Thanks

Replies (3)

Rani

None

320 Points Posted on 04 March 2012

The dividend is taxable and should be added to the income . The year is the year in which the dividends got credited in the bank a/c.

ijay

25 Points Posted on 04 March 2012

Originally posted by : Rani
	The dividend is taxable and should be added to the income . The year is the year in which the dividends got credited in the bank a/c.

Thank you for response.

How about the tax that is already withheld by US :-S And what amount from the below will you calculate tax on (a), (d) or (f) ?

(a) Say, my dividend income is 2USD (Rs 100).

(b) US govt has deducted @ 25%= 0.5 USD(Rs 25).

(d) Amount receivable = 1.5 USD (75 Rs)

(e) Charges for currency conversion Flat 0.5 USD per transaction : (25 Rs)

(f) Cheque issued for Rs 50.

Tax payable = 10%of Rs 50 or 10% of Rs 100 or 10% of 75

PS: I understand that dividend from Indian companies is not taxable but from US companies is taxable. I have assumed 1USD = 50 INR.

Rani

None

320 Points Posted on 05 March 2012

The taxable income is Rs.50/-. It is trated as normal income and taxed at the aprropriate tax slab. I understand that we cannot claim deduction for the withholding tax . However Iam not a tax expert, but an ordinary tax payer. If the experts in this forum can throw more light on this it would be helpful