USA H1B Employee - Capital gains in India from selling selling stocks
"My tax preparing agent is suggesting that since the stock brokers in   India does not have any US state ITINS, it becomes complicated to file   that income along with US taxes Why? Nothing to do with each other. You need to have ITIN (or, SSN more likely, since you're on H1b). What brokers have have nothing to do with you. You must report these gains on your US tax return, and beware of the PFIC rules when you do it. He says, I can file those taxes separately in India. You file Indian tax return in India, but it has nothing to do with the US. You'll have to deal with the tax treaty/foreign tax credits to co-ordinate. How complicated is it to include Indian capital gains along with US   taxes? ""How complicated"" is really irrelevant. But in any case - there's no difference between Indian capital gains and American capital gains, unless PFIC/Trusts/Mutual funds are involved. Then it becomes complicated, but being complicated is not enough to not report it. If PIFC/Trusts/Mutual funds aren't involved, you just report this on Schedule D as usual. Did anybody face similar situation More or less every American living abroad. Also the financial years are different in India and US Irrelevant." the demat account that I have in India is not an NRI account. Since I was not sure how long I would be in the US, I never converted my account to NRI account. Is it required to convert my account to NRI account? Yes it is very much required by law. One should not buy or sell shares in the Resident account. One has to close and open a new account NRO Demat account and transfer the shares / units into it. Sell from this account. If you need to buy shares when one is NRI, an Demat PINS account is required to be opened.
How you are taxed will depend on what kind of stock awards they are. The value will be determined by the company that issues it, and appropriate tax forms will be sent to you to include with your taxes. The way the value is determined is an accounting question that is off-topic here, but the value will be stated on your stock award paperwork. If you are awarded the stock directly then that value will be taxed as ordinary income. If you are awarded options, then you can purchase the stock to start the clock on long-term capital gains, but you will not incur any tax liability through the initial purchase.  If the company is sold privately and you have held the stock for over 1 year, then yes, it will be taxed as a long-term capital gain. If you receive/exercise the stock less than 1 year before such an acquisition, then it will be considered a short-term capital gain and will be taxed as ordinary income. Yes and H1B is NOT CHEAPER for companies to employ.  Companies end up paying the H1B salary, the H1B holder, the lawyers, and so on.  H1B's have a skillset that the locals do not. If people do not like it then just get the skillset. This isn't that hard to understand...but the mainstream media just wont explain it.  Great post btw. non-resident aliens to the US do not pay capital gains on US products. You pay tax in your home country if you have done a taxable event in your country. http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp#axzz1mQDut9Ru but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though. "You should contact the company and the broker about the ownership. Do you remember ever selling your position? When you look back at your tax returns/1099-B forms - can you identify the sale? It should have been reported to you, and you should have reported it to the IRS. If not - then you're probably still the owner. As to K-1 - the income reported doesn't have to be distributed to you. Partnership is a pass-through entity, and cannot ""accumulate"" earnings for tax purposes, everything is deemed distributed. If, however, it is not actually distributed - you're still taxed on the income, but it is added to your basis in the partnership and you get the tax ""back"" when you sell your position. However, you pay income tax on the income based on the kind of the income, and on the sale - at capital gains rates. So the amounts added to your position will reduce your capital gains tax, but may be taxed at ordinary rates. Get a professional advice on the issue and what to do next, talk to a EA/CPA licensed in New York." Under what section do I declare my profits when I pay tax? You have to declare this as income from other source and pay tax as per tax brackets. I'm from India and have been trading in binary options for a while now Trading in India on binary options is illegal. If you are using Forex from India for trading, this is not allowed as per Foreign Exchange Management Act. Does my prior answer here to a slightly different question help at all? Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country? A non-resident alien is only allowed for deductions connected to producing a US-sourced income (See IRC Sec. 873). Thus you can only deduct things that qualify as business expenses, and State taxes on your wages. In addition you can deduct a bunch of stuff explicitly allowed (like tax preparation, charitable contributions, casualty losses, etc) but sales tax is not in that list. The US will let you keep as much money as you want to within its borders regardless of your citizenship. You'll owe capital gains tax in the US unless you're subject to a tax treaty (which you would probably make as an election in the year of the transaction). I don't know if India has any rules about how it governs its citizens' foreign assets, but the US requires citizens to file a form annually declaring foreign accounts over $10,000. You may be subject to additional Indian taxes if India taxes global income like the US does. Its not H1-B visa, its the L1 Visa. L1 Visa have no minimum wage and people working on L1 can get Green Card faster. Some guys I know make around 40k/year in Silicon Valley @ Apple.   H1-B scare is little bit overhyped in comparison to L1 visa. Anyway, people dont do their research and believe only these news channel say. H1-B is really helping US, atleast 60-65% are useful. Even if you a person is hired by H1-B, company has to invest more in HR and lawyer fees as a company by itself would not be able to apply. L1 Visa on other hand has no limit on salary so you can keep a worker at a drastically low rate which would for sure increase your profits. There are no year limit on L1. While H1-B have a max limit of 6 years. (Source: my collegues and USCIS website). Let me know if anything is wrong here .. still researching on this.. I believe I have to pay taxes in US since it is a US broker. No, not at all. The fact that the broker is a US broker has nothing to do with your tax liabilities. You should update the banks and the broker with your change of status submitting form W8-BEN to them. Consult a tax professional proficient with Indo-US tax treaty as to what you should put in part II. The broker might withhold some of your income and remit it as taxes to the IRS based on what you put in W8-BEN and the type of income, but you can have it refunded (if it exceeds your liability) by submitting a tax return (form 1040-NR). You do have to pay tax in India, based on the Indian tax law, for your profits in the US. Consult with an Indian tax accountant on that. If I'm not mistaken, there are also currency transfer restrictions in India that you should be aware of. Lets just get to the point...Ordinary income (gains) earned from S-Corp operations (i.e. income earned after all expenses for providing services or selling products) is passed through to the owners/shareholders and taxed at the owner's personal tax rate. Separately, if an S-Corp earns capital gains (i.e. the S-Corp buys and sells stock, earns dividends from investments, etc), those gains are passed through to the owners and taxed at a capital gains rate Capital gains are not the same as ordinary income (gains). Don't get the two confused, they are as different for S-Corp taxation as they are for personal taxation. In some cases an exception occurs, but only when the S-Corp was formally a C-Corp and the C-Corp had non-distributed earnings or losses. This is a separate issue whereas the undistributed C-Corp gains/losses are treated differently than the S-Corp gains/losses. It takes years of college coursework and work experience to grasp the vast arena of tax. It should not be so complex, but it is this complex. It is not within the scope of the non-tax professional to make sense of this stuff. The CPA exams, although very difficult and thorough, only scrape the surface of tax and accounting. I hope this provides some perspective on any questions regarding business tax for S-Corps and any other entity type. Hire a good CPA... if you can find one. "The real question you're asking is how you can work for your business. You cannot. Whether your ""friend"" pays you or not is entirely irrelevant. Claiming your work-related earnings as interest/dividend will make it also a tax fraud, in addition to the immigration violation (i.e.: not only deportation but also potentially jail time)." The IRS' primary reference Pub 519 Tax Guide for Aliens -- current year online (current and previous years downloadable in PDF from the Forms&Pubs section of the website) says NO: Students and business apprentices from India.   A special rule applies .... You can claim the standard deduction .... Use Worksheet 5-1 to figure your standard deduction. If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. Note the last sentence, which is clearly an exception to the 'India rule', which is already an exception to the general rule that nonresident filers never get the standard deduction. Of course this is the IRS' interpretation of the law (which is defined to include ratified treaties); if you think they are wrong, you could claim the deduction anyway and when they assess the additional tax (and demand payment) take it to US Tax Court -- but I suspect the legal fees will cost you more than the marginal tax on $6300, even under Tax Court's simplified procedures for small cases. Yes, you can still file a 1040nr. You are a nonresident alien and were:  engaged in a trade or business in the United States Normally, assuming your withholding was correct, you would get a minimal amount back. Income earned in the US is definitely Effectively Connected Income and is   taxed at the graduated rates that apply to U.S. citizens and resident aliens. However, there is a tax treaty between US and India, and it suggests that you would be taxed on the entirety of the income by India. This suggests to me that you would get everything that was withheld back. Quite a few stock broker in India offer to trade in US markets via tie-up brokers in US. As an Indian citizen, there are limits as to how much FX you can buy, generally very large, should be an issue. The profits will be taxed in US as well as India [you can claim relief under DTAA]