F-1 Students: Don't Assume Visa Status Determines Investment Options

Indian students studying in the US can invest in both Indian and US equities, but understanding tax and foreign exchange rules is crucial. Nishant Shanker of Navraj Global Advisors notes that simply being an F-1 student does not determine which rules apply to investments.

The FEMA Act, 1999, and Indian income tax laws have separate tests for determining resident or non-resident status, affecting where investment income is taxed and reporting requirements. Indian students need to look at their FEMA and income tax positions separately, as under FEMA they are treated as a person resident outside India for the relevant period.

The position under Indian income tax law is different, with residential status determined independently under Section 6 of the Income Tax Act, 2025. Once an individual is a non-resident, Section 5 broadly limits Indian taxation to income received or accruing in India, subject to specific deeming and source rules.

US tax residency is a separate test, with an F-1 student generally qualifying for the student exception under IRC Section 7701(b) substantial presence test. However, students present in the US for 183 days or more can be subject to special capital gains rules.