Same Same, But Different: Taxing a Sale of Indian Stock by a U.S. Person

Volume 7 No 1    /    Read Article

By Sanjay Sanghvi and Rahul Jain (guest authors), Neha Rastogi, and Stanley C. Ruchelman

While tax rules generally appear to be similar in India and the U.S., several divergent provisions in the domestic law of each country produce adverse consequences for those who are not well advised. The prime example involves the taxation of gains from the sale of shares of an Indian company by a U.S. person: India sources the gain based on the residence of the target while the U.S. sources the gain based on the residence of the seller. No relief from double taxation is provided, notwithstanding the capital gains and relief from double taxation articles in the U.S.-India income tax treaty. The result is tax that can be as high as 33.8% of the gain. Rahul Jain and Sanjay Sanghvi of Khaitan & Co., Mumbai, India, along with Neha Rastogi and Stanley C. Ruchelman explain the problem and, more importantly, suggest a path forward for U.S. individuals realizing sizable gains.  See more →