Common mistakes when filing ITR for US stocks

A foreign brokerage account is not complicated to report. It is, however, easy to report wrongly, because almost every instinct carried over from Indian equities is subtly incorrect — the form, the holding period, the year, the exchange rate. These are the mistakes that recur most, roughly in order of how much they cost.

1. Filing ITR-1 or ITR-4

Neither form contains Schedule FA. If you hold any foreign asset you cannot use them, however simple the rest of your return is. Salaried filers with a foreign brokerage account generally move to ITR-2, or ITR-3 if they also have business income. Filing the wrong form is not a technicality — the disclosure you were required to make is simply absent from it.

2. Treating foreign shares as "listed"

Indian listed equity turns long-term after twelve months, and everyone knows it. Shares listed only on a foreign exchange are not listed securities under Indian tax law, so the longer unlisted-share holding period applies instead. A sale you confidently booked as long-term can be short-term and taxed at your slab rate. This one changes the tax outright, not just the paperwork.

3. Skipping Schedule FA because nothing was sold

Schedule FA is disclosure, not taxation. Holding the asset is the trigger. Omitting it is treated far more seriously than an ordinary computational error — the Black Money Act regime attaches penalties, and potentially prosecution, to undisclosed foreign assets. The threshold below which the criminal consequence is relaxed is far lower than most people assume. Disclose the account and the holdings even in a year where nothing happened.

4. Reporting the shares but not the account

Schedule FA has more than one table. The holdings go in Table A3, but the brokerage account itself — custodian name and address, account number, opening date, peak and closing cash balance — is a separate disclosure in Table A2. Filers routinely complete one and forget the other. See the Schedule FA walkthrough.

5. Using one period for everything

This is the error that produces plausible, entirely wrong numbers. Schedule FA runs on the calendar year, January to December. Schedules CG and OS run on India's financial year, April to March. They are different windows over the same account, and a dividend in February belongs to a different year in each. Pull one export per period rather than reusing a single file for both.

6. Filing Form 67 after the return

Your US dividends arrive already taxed — the broker withholds before paying you — and India taxes the same income again. The DTAA credit exists to prevent that double taxation, but the claim depends on Form 67, which is generally expected before the return itself is filed. File it afterwards and you risk losing the credit entirely. The mechanics are in the foreign tax credit guide.

7. Getting the exchange rate convention wrong

Not every rupee figure uses the same rate, and using one convenient year-end rate for everything is wrong in both directions. Under Rule 115, foreign income is converted at the SBI telegraphic transfer buying rate on the last day of the month preceding the month the income arose. Balances and asset values follow their own dates instead. Peak value compounds this: the highest rupee value need not fall on the highest dollar day, because the rate moves too. Both are unpacked in Rule 115 explained and how peak value is computed.

8. Leaving your TCS credit on the table

Remittances abroad under the Liberalised Remittance Scheme attract tax collected at source above an annual threshold. That TCS is deposited against your PAN and shows up in your AIS and Form 26AS — it is prepaid tax, not a fee. Claim it against your liability or take it as a refund. And do not make the mirror-image mistake of treating the remittance itself as income; see why your AIS won't match your broker.

One more worth knowing

If your total income crosses the threshold at which Schedule AL applies, your foreign holdings are reported there as well as in Schedule FA. That is deliberate duplication across two different disclosures, not double counting — and it surprises people the first time.

None of these are hard once you know they exist. They are expensive precisely because each one looks correct while you are making it — the return validates, the numbers look sensible, and the mistake only surfaces later. Rates, thresholds and form layouts also shift between assessment years, so confirm the current specifics for your year with your CA.