ITR TDS Forex Trading Guide: TD Ameritrade Schwab Tax Compliance 2025

You are ready to trade forex on a powerful platform like TD Ameritrade's thinkorswim. The complexity of Indian tax laws, specifically surrounding ITR and TDS for forex, is a significant hurdle.

This guide will clarify everything you need to know.

TD Ameritrade, now part of Charles Schwab, will not deduct TDS on your profits. You remain fully responsible for declaring this income in your Income Tax Return (ITR).

We will walk you through the entire process. This includes understanding the tax rules, the practical steps for compliance, and how to effectively use the TD Ameritrade forex platform, via Charles Schwab, for your trades.

The Schwab Merger

As of 2024, a major change has occurred: TD Ameritrade has been fully acquired by Charles Schwab. The final migration of TD Ameritrade accounts was completed in late 2023 and early 2024.

This change directly impacts you. You will now be using Charles Schwab Futures and Forex LLC to execute your trades.

The good news is that the highly-praised thinkorswim platform remains available. This ensures your trading experience is consistent with what you expect from a top-tier broker.

Throughout this guide, we will refer to "TD Ameritrade/Schwab" to acknowledge both the legacy brand you searched for and the current operational entity.

Decoding Indian Forex Taxes

Understanding the tax terminology is the first step toward compliance. Let's break down the key concepts for Indian forex traders.

The Income Tax Return (ITR) is the mandatory annual form you file with the Indian Income Tax Department. On this form, you must declare all your income sources, which absolutely includes profits from forex trading.

Tax Deducted at Source (TDS) is a tax that is deducted by the entity paying you.

However, a crucial clarification is needed here. An international broker like Charles Schwab is not required to, and will not, deduct TDS on behalf of the Indian government.

You will receive your profits gross, without any tax deduction from the broker's side. This is a common point of confusion for new traders.

The tax you will encounter is Tax Collected at Source (TCS).

TCS is a tax collected by a seller or service provider when you make a specific transaction. In this context, your authorized dealer bank in India will collect TCS when you remit money from India to your Schwab trading account under the RBI's Liberalized Remittance Scheme (LRS).

To make this distinction perfectly clear, here is a simple breakdown.

Your Tax Compliance Workflow

Here is a clear, actionable guide that bridges the gap between international forex trading and Indian tax compliance. Follow these steps to ensure you remain compliant.

1. Funding Your Account

When you send money from India to your international brokerage account, you use the Liberalized Remittance Scheme (LRS). The current LRS limit is USD 250,000 per person per financial year.

Under the updated rules, a TCS rate of 20% is applied to foreign remittances for investment purposes on the amount exceeding a threshold of ₹7 lakh in a financial year. This is a significant consideration for your capital planning.

For example, if you remit ₹10 lakh for investment, TCS will apply to ₹3 lakh (₹10 lakh - ₹7 lakh). The TCS collected would be 20% of ₹3 lakh, which is ₹60,000.

Your bank will collect this and remit it to the government.

2. Calculating Taxable Income

Your forex trading profits must be correctly classified for tax purposes. In India, profits from forex trading are typically treated as "Profits and Gains from Business or Profession."

More specifically, due to the nature of currency derivatives not involving physical delivery, these gains are classified as "Speculative Business Income."

To calculate your net profit, you must add all your gains and subtract all your losses from forex trading within the financial year. You can also deduct eligible expenses, such as platform data fees or specific charges levied by the broker.

This net speculative income is then added to your other income sources (like salary or other business income). The total amount is then taxed at your applicable personal income tax slab rate.

There is no special flat tax rate for speculative gains; it depends entirely on your income bracket.

3. Filing Your ITR

The correct ITR form is critical. Individuals who have income from business or profession, which includes speculative income from forex trading, must file ITR-3.

Within the ITR-3 form, you will need to report this income accurately. This involves preparing a Profit & Loss (P&L) statement and a Balance Sheet.

The net profit from your forex trading activities should be declared under the "P&L" account and detailed in "Schedule BP" (Business or Profession).

4. Claiming TCS Credit

The TCS that was collected by your bank when you funded your account is not a lost tax. It is an advance tax paid on your behalf.

This amount will automatically appear in your Form 26AS, which is your consolidated annual tax statement.

When you file your ITR-3, you can claim this TCS amount as a credit against your final, total tax liability for the year. This directly reduces the amount of tax you need to pay out of pocket.

If your TCS credit is more than your total tax liability, you will be eligible for a refund.

As an experienced trader, my number one rule is to keep meticulous records of every transaction: every deposit, every trade, every withdrawal, and every fee. However, tax laws are complex and subject to change.

This guide provides information, not professional advice. We strongly recommend you always consult with a qualified Chartered Accountant (CA) to ensure accurate tax filing tailored to your specific financial situation.

Trading on thinkorswim

Now we shift from tax theory to trading practice. The thinkorswim platform is a primary reason traders choose TD Ameritrade/Schwab.

Traders love thinkorswim for its advanced charting capabilities, deep customization options, and a comprehensive suite of analytical tools that few other retail platforms can match.

When you first open the platform for currency trading, you should navigate to the Forex Trader interface. You can typically find this under the main "Trade" tab.

This layout provides a grid-based view of currency pairs like EUR/USD, USD/JPY, and GBP/USD.

The interface is dominated by the charting window, where you will conduct most of your analysis. Key interface elements are clearly laid out, making it intuitive once you spend some time with it.

Placing your first trade is a straightforward process. Here is a simple walkthrough to get you started.

• Select Your Currency Pair. Use the Forex Trader grid or the symbol entry box to find and load a pair like EUR/USD.

• Analyze the Chart. Before placing a trade, look at the price action.

• Open the Order Entry Tool. You can do this by right-clicking on the chart or, more directly, by clicking on the Bid or Ask price in the Forex Trader grid.

• Choose Your Order Type. For beginners, the most common orders are Market, Limit, and Stop.

• Set Your Trade Size. Forex trade sizes are measured in lots.

• Confirm and Send. Review all the details on your order ticket: the pair, order type, size, and any stop-loss or take-profit levels you've set.

Advanced thinkorswim Tools

To gain a real edge, you must move beyond the basics and leverage the powerful tools integrated into thinkorswim.

Mastering the charts is paramount. Start by adding a few essential technical indicators.

Moving Averages help you identify the trend direction. The Relative Strength Index shows overbought or oversold conditions.

Next, you must explore the OnDemand feature. This is a game-changer for strategy development.

The feature allows you to go back to any date and time in the past and practice trading with real, historical market data tick-by-tick. We highly recommend using OnDemand to test any new strategy extensively before you deploy real capital.

You can also set up custom alerts using thinkScript, the platform's proprietary scripting language. You do not need to be a programmer to use it for simple alerts.

Finally, take advantage of the economic data integration. thinkorswim allows you to overlay key economic announcements directly onto your price charts.

This provides invaluable context, showing you exactly how market-moving news events impacted price action historically.

Trade Smart, File Right

Trading forex on the powerful TD Ameritrade/Schwab thinkorswim platform from India is entirely achievable and can be a rewarding venture.

Success, however, depends on two parallel skills. You must master your trading strategy while also diligently managing your tax obligations.

By understanding the rules of ITR and TCS for forex, you can trade with confidence. You are building your wealth in a compliant, transparent, and sustainable way.