For many tech professionals in Bengaluru, Hyderabad, or Pune, the workday often follows a dual rhythm. You spend your mornings collaborating with local teams and your evenings on Zoom calls with HQ in San Francisco or Austin. This global lifestyle usually comes with a specific perk: Restricted Stock Units (RSUs).
There’s a certain thrill in watching your US company’s stock price climb on the NASDAQ. But markets are fickle. You might find yourself in a situation where your US tech stocks are booming, while your local portfolio of Indian mid-cap stocks is currently “in the red.”
Usually, we view these as two separate worlds. However, when tax season rolls around, these two worlds can actually shake hands to save you money.
The Secret Handshake Between Portfolios
Most investors assume that because the stocks are in different currencies and different countries, they live in different tax silos. The “irony” you might feel when your US gains are taxed heavily while your Indian losses sit uselessly in your demat account is actually a misunderstanding of the rules.
In the eyes of the Indian Income Tax Act, a capital loss is a capital loss. If you sell your Indian shares at a loss, that “financial dent” can be used to rub out the tax you would otherwise owe on the gains from selling your US company shares.
Understanding The “Like-for-Like” Rule
To make this work, you have to understand how the tax department categorizes these investments. Even though they are both “stocks,” they are treated differently based on how long you hold them:
US Stocks (Unlisted in India): These are considered “Long Term” only if held for more than 24 months. If sold before that, they are “Short Term.”
Indian Stocks (Listed): These become “Long Term” after just 12 months.
The rule of thumb is simple: You can set off a Short-Term Capital Loss against any capital gain (Short-Term or Long-Term). However, a Long-Term Capital Loss can only be set off against a Long-Term Capital Gain.
A Tale of Two Trades
Imagine you sold your RSUs this year and made a handsome profit of ₹5 Lakhs. Ordinarily, you’d be looking at a significant tax payout.
Now, imagine you also held some Indian stocks that didn’t perform well, and you decided to exit those positions, resulting in a loss of ₹3 Lakhs. Instead of paying tax on the full ₹5 Lakhs from your US gains, you can “set off” that Indian loss. Your taxable income from stocks drops to just ₹2 Lakhs. You’ve essentially used your “bad” investment to protect the profits from your “good” one.
The “Carry Forward” Safety Net
What if your Indian losses are much bigger than your US gains this year? You don’t lose those “tax credits.” You can carry forward these losses for up to eight consecutive years. This means if you have a bad year in the Indian market today, those losses can sit in your tax records like a shield, waiting to offset the gains from your US RSUs five or six years down the line.
Staying on The Right Side of The Law
While this is a perfectly legal and smart way to manage your wealth, accuracy is key. You must ensure you are reporting your foreign assets correctly in the Schedule FA (Foreign Assets) section of your ITR. Failing to disclose that you own US stocks can lead to heavy penalties, even if you aren’t selling them yet.
For more detailed technical breakdowns on the specific tax slabs applicable this year, ClearTax provides an excellent roadmap for Indian employees dealing with foreign equity. Managing a global portfolio is about more than just picking the right companies; it’s about making sure your gains and losses are working together, rather than against each other.
