Returning from USA? Reset your cost basis!
We thought it's time to write about something we do with a lot of our clients who are returning to India from the US.
This is almost always a once in a lifetime opportunity and can save you a ton of tax. Don't miss out!
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We thought it's time to write about something we do with a lot of our clients who are returning to India from the US.
This is almost always a once in a lifetime opportunity and can save you a ton of tax. Don't miss out!
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What benefit can I get from resetting my cost basis?
1. Let's say you purchased stock of Alphabet at a price of USD 2,000 per share while you were in the US.
2. You move back to India and the price of Alphabet share sky rockets to USD 3,000.
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1. Let's say you purchased stock of Alphabet at a price of USD 2,000 per share while you were in the US.
2. You move back to India and the price of Alphabet share sky rockets to USD 3,000.
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3. You could sell these shares at USD 3,000 and pay no capital gains tax.
How? The rest of the article covers this in detail!
You can simply repurchase the shares at the current cost. You would have reset your cost basis to USD 3,000 per share without incurring any tax.
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How? The rest of the article covers this in detail!
You can simply repurchase the shares at the current cost. You would have reset your cost basis to USD 3,000 per share without incurring any tax.
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Residential Status in India
Taxability of income in India depends upon the residential status of an individual which is categorized as:
1. Resident and Ordinarily Resident (ROR)
2. Resident Not Ordinary Resident (RNOR)
3. Non-Resident (NR)
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Taxability of income in India depends upon the residential status of an individual which is categorized as:
1. Resident and Ordinarily Resident (ROR)
2. Resident Not Ordinary Resident (RNOR)
3. Non-Resident (NR)
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Taxability of Income in India
Notice that income earned outside India is not taxable for an NR or RNOR. This is important.
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Notice that income earned outside India is not taxable for an NR or RNOR. This is important.
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Substantial Presence Test in the US
You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year.
If you don't meet the substantial presence test, you are a Non Resident Alien for US tax purposes.
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You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year.
If you don't meet the substantial presence test, you are a Non Resident Alien for US tax purposes.
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Taxability of Capital Gains for Non Resident Aliens in the US
If your days of stay in the US do not exceed 183 days, the US does not tax capital gains for Non Resident Aliens.
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If your days of stay in the US do not exceed 183 days, the US does not tax capital gains for Non Resident Aliens.
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Putting it all together
Here's a quick recap:
1. India does not tax income outside India if you are an RNOR. Capital gains from US shares is considered income outside India.
2. US does not tax capital gains for non-resident aliens (subject to certain conditions).
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Here's a quick recap:
1. India does not tax income outside India if you are an RNOR. Capital gains from US shares is considered income outside India.
2. US does not tax capital gains for non-resident aliens (subject to certain conditions).
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There is a brief period that can be planned where you are an RNOR as per Indian tax laws and a Non Resident Alien as per US tax laws.
During this period, income from capital gains on sale of US shares is not taxable in India as well as the US.
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During this period, income from capital gains on sale of US shares is not taxable in India as well as the US.
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Let's go back to our example now:
1. Let's say you purchased 1000 stock of Alphabet at a price of USD 2,000 per share while you were in the US.
2. You move back to India and the price of Alphabet share sky rockets to USD 3,000.
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1. Let's say you purchased 1000 stock of Alphabet at a price of USD 2,000 per share while you were in the US.
2. You move back to India and the price of Alphabet share sky rockets to USD 3,000.
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3. You sell these shares when you are a Non Resident Alien as per US tax laws and an RNOR as per Indian tax laws.
4. You sell all could sell these shares at USD 3,000 and pay no capital gains tax.
5. You have USD 1,000,000 in tax free income!
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4. You sell all could sell these shares at USD 3,000 and pay no capital gains tax.
5. You have USD 1,000,000 in tax free income!
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What's the catch?
We've actually done this with numerous clients. Only thing you need to ensure is you are extremely precise with your planning. A small mistake might trigger a huge tax liability.
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We've actually done this with numerous clients. Only thing you need to ensure is you are extremely precise with your planning. A small mistake might trigger a huge tax liability.
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Read our full article below
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#tax #incometax #taxplanning
thegalacticadvisors.com/post/returning…
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#tax #incometax #taxplanning
thegalacticadvisors.com/post/returning…
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