Complete guide to tax on US stocks for Indian investors | 2026
More Indian investors now hold shares in Apple, Tesla, and Microsoft than ever before. Yet most of them file their tax returns incorrectly — or skip critical disclosures altogether. Understanding tax on US stocks in India requires you to navigate rules across two countries, three ITR schedules, and at least one form that many investors overlook entirely.
This guide breaks down every tax obligation for FY 2025-26 so you can invest with clarity and file with confidence.
How Indian tax law treats your foreign investments
India taxes its residents on worldwide income under Section 5 of the Income Tax Act, 1961. This means every rupee you earn from US stocks — whether through selling shares or receiving dividends — is taxable in India. The fact that your money left the country through the Liberalised Remittance Scheme (LRS) does not change this obligation.
US stocks are classified as "unlisted foreign securities" under Indian law. They do not trade on any recognised Indian stock exchange. This classification drives every tax rate, holding period, and exemption rule that applies to your investments. Many investors assume their Apple shares get the same tax treatment as Reliance shares. They do not.
You must use ITR-2 (or ITR-3 if you have business income) to report US stock holdings. ITR-1 and ITR-4 do not include the mandatory schedules for foreign asset disclosure. Filing the wrong form is itself a compliance failure.
Capital gains tax rates — STCG and LTCG explained.
The holding period threshold for US stocks is 24 months, not 12 months as for Indian listed equities. Shares sold within 24 months of purchase generate Short-Term Capital Gains (STCG). Shares held beyond 24 months qualify for Long-Term Capital Gains (LTCG).
Short-term capital gains are added to your total income and taxed at your applicable slab rate. The concessional 15% STCG rate under Section 111A does not apply here. That provision covers only STT-paid shares listed on Indian exchanges. A taxpayer in the 30% bracket effectively pays double on US stock STCG compared to Indian equity STCG.
Long-term capital gains attract a flat 12.5% tax without indexation under Section 112, following the Budget 2024 revision effective July 23, 2024. The previous 20% rate with indexation no longer applies. Additionally, the ₹1.25 lakh annual LTCG exemption under Section 112A is reserved exclusively for Indian listed equities. US stocks get no such exemption.
Here is an important relief: the US does not tax capital gains earned by non-resident aliens on stock sales. Under Article 13 of the India-US DTAA and US domestic law, your stock sale profits face tax only in India. There is no double taxation on capital gains.
If you want to learn more about how to invest in NASDAQ from India, Winvesta's complete guide covers the process step by step.
How to calculate capital gains when the dollar-rupee rate keeps changing
Convert your purchase price to INR using the SBI Telegraphic Transfer Buying Rate (TTBR) on the date of purchase. Convert your sale price to INR using the TTBR on the date of sale. The difference between these two INR amounts is your capital gain. Currency fluctuations can increase or decrease your taxable gain independent of the stock's actual dollar performance.
Dividend taxation — the double-tax trap and how to handle it
Dividends from US stocks trigger tax in both countries. This makes them the most complex piece of cross-border investing for Indian residents.
The US withholds tax on dividends paid to non-resident aliens. The default rate is 30%, but the India-US DTAA reduces it to 25% for individual investors who file Form W-8BEN with their US broker. The 15% rate you may have read about applies only to companies owning 10% or more of the paying company's voting stock. Retail investors face the 25% rate — period.
In India, US stock dividends are classified as"Income from Other Sources" and taxed at your slab rate. You must declare the gross dividend amount (before US withholding) as income. If a company pays you $1,000 in dividends and the US withholds $250, you report the full $1,000 equivalent in rupees.
The Foreign Tax Credit (FTC) prevents complete double taxation. You can claim credit for the 25% US withholding against your Indian tax liability. The credit equals the lower of the US tax paid or the Indian tax on that income. If your Indian slab rate exceeds 25%, you pay only the difference to India. If your slab rate falls below 25%, the excess US withholding becomes an irrecoverable cost — there is no carry-forward mechanism.
DTAA India US tax credit — how the treaty actually works
The India-US Double Taxation Avoidance Agreement governs how income gets taxed across both countries. Here is what it does and does not do for you.
For dividends, Article 10 permits both countries to tax the income, but caps US withholding at 25% for individuals. India taxes the full amount at slab rates but grants FTC for the US portion. For capital gains, Article 13 allows each country to tax them in accordance with its domestic law. Since US law exempts non-residents from stock sale gains, only India taxes your profits.
Claiming the FTC requires Form 67. You must file this form electronically on the income tax portal. It captures your foreign income details, DTAA article references, and proof of US tax payment (typically Form 1042-S from your broker). The deadline has been relaxed — Form 67 can now be filed by the end of the assessment year (March 31, 2027, for AY 2026-27). Recent ITAT rulings have confirmed that Form 67 filing is procedural. FTC cannot be denied solely because you filed the form late, provided you genuinely paid taxes abroad.
Always maintain a valid W-8BEN with your US broker to secure the reduced 25% DTAA rate instead of the default 30%.
How to report US stocks in ITR India — Schedule FA, FSI, and TR
Three schedules in your ITR handle different aspects of foreign investment reporting. Getting them wrong invites scrutiny.
Schedule FA (Foreign Assets) is required for every resident taxpayer who holds any foreign asset during the calendar year (January–December, not the fiscal year). You must list every US stock held at any point — including the stock name, number of shares, date of acquisition, initial value, peak value during the year, and closing value as of December 31. This schedule must be filed even if you earned zero income, made zero gains, or held just one fractional share worth $5. There is no minimum threshold.
Schedule FSI (Foreign Source Income) captures income earned outside India, primarily dividends from US stocks. Report the country, income head, gross amount, and tax paid abroad here. Capital gains do not go in Schedule FSI — they belong in Schedule CG.
Schedule TR (Tax Relief) consolidates your FTC claim. It links to Form 67 and calculates the DTAA relief amount. Together, these three schedules create the complete foreign investment picture the tax department needs.
For a deeper understanding of tax implications for Indian residents investing in the US stock market, Winvesta's FY 2025-26 guide provides detailed filing walkthroughs.
Penalties for non-disclosure are severe. Under the Black Money Act, 2015, failure to report foreign assets in Schedule FA can trigger a ₹10 lakh penalty per year, imprisonment of 6 months to 7 years, and a 30% tax on undisclosed income without anybenefit. Budget 2024 provided partial relief: foreign assets (excluding immovable property) valued at ₹20 lakh or below are now exempt from penalty and prosecution. However, the reporting obligation remains mandatory regardless of value. India actively receives foreign account data through FATCA and CRS exchanges — the tax department knows what you hold abroad.
TCS on foreign remittance above 10 lakh — what changed in 2025
When you send money abroad under LRS to invest in US stocks, Tax Collected at Source (TCS) applies. Budget 2025 raised the TCS-free threshold from ₹7 lakh to ₹10 lakh per financial year, effective April 1, 2025.
For investment-purpose remittances exceeding ₹10 lakh, TCS is levied at 20% on the amount above the threshold. This threshold is PAN-based and cumulative across all purposes and banks within a financial year.
Here is what many investors miss: TCS is not an additional tax. It is an advance tax payment that appears in your Form 26AS and AIS. You can adjust it fully against your income tax liability when filing your ITR. Any excess gets refunded. Budget 2026 (February 2026) brought no changes to the 20% TCS rate on investment remittances, though rates for education and medical remittances dropped to 2% from April 2026.
Key deadlines and compliance calendar
The ITR filing deadline for individuals with foreign assets (ITR-2) is July 31, 2026, for FY 2025-26. Form 67 for FTC claims can be filed until March 31, 2027. Advance tax instalments fall due on June 15, September 15, December 15, and March 15 — relevant if your estimated tax liability after TDS and TCS exceeds ₹10,000.
Belated returns can be filed until December 31, 2026, and revised returns until March 31, 2027. Interest under Section 234B applies at 1% per month for advance tax shortfalls.
Common misconceptions clarified
"I paid tax in the US so that India won't tax me." Wrong. India taxes worldwide income. FTC provides relief but does not eliminate Indian liability.
"LTCG on US stocks is tax-free like Indian stocks." The ₹1.25 lakh exemption under Section 112A applies only to Indian listed equity. US stocks face 12.5% LTCG from the first rupee of gain.
"Small holdings don't need disclosure." Schedule FA has no minimum threshold. Even fractional shares worth a few dollars must be declared.
"Reinvested dividends aren't taxable." DRIP dividends are taxable in the year they are paid. The reinvestment does not defer the tax event.
"TCS is an extra cost on my investment." TCS is fully adjustable against your tax liability and refundable if in excess. It is a cash-flow issue, not a permanent cost.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Invest in 11,000+ US stocks & ETFs
Table of Contents
More Indian investors now hold shares in Apple, Tesla, and Microsoft than ever before. Yet most of them file their tax returns incorrectly — or skip critical disclosures altogether. Understanding tax on US stocks in India requires you to navigate rules across two countries, three ITR schedules, and at least one form that many investors overlook entirely.
This guide breaks down every tax obligation for FY 2025-26 so you can invest with clarity and file with confidence.
How Indian tax law treats your foreign investments
India taxes its residents on worldwide income under Section 5 of the Income Tax Act, 1961. This means every rupee you earn from US stocks — whether through selling shares or receiving dividends — is taxable in India. The fact that your money left the country through the Liberalised Remittance Scheme (LRS) does not change this obligation.
US stocks are classified as "unlisted foreign securities" under Indian law. They do not trade on any recognised Indian stock exchange. This classification drives every tax rate, holding period, and exemption rule that applies to your investments. Many investors assume their Apple shares get the same tax treatment as Reliance shares. They do not.
You must use ITR-2 (or ITR-3 if you have business income) to report US stock holdings. ITR-1 and ITR-4 do not include the mandatory schedules for foreign asset disclosure. Filing the wrong form is itself a compliance failure.
Capital gains tax rates — STCG and LTCG explained.
The holding period threshold for US stocks is 24 months, not 12 months as for Indian listed equities. Shares sold within 24 months of purchase generate Short-Term Capital Gains (STCG). Shares held beyond 24 months qualify for Long-Term Capital Gains (LTCG).
Short-term capital gains are added to your total income and taxed at your applicable slab rate. The concessional 15% STCG rate under Section 111A does not apply here. That provision covers only STT-paid shares listed on Indian exchanges. A taxpayer in the 30% bracket effectively pays double on US stock STCG compared to Indian equity STCG.
Long-term capital gains attract a flat 12.5% tax without indexation under Section 112, following the Budget 2024 revision effective July 23, 2024. The previous 20% rate with indexation no longer applies. Additionally, the ₹1.25 lakh annual LTCG exemption under Section 112A is reserved exclusively for Indian listed equities. US stocks get no such exemption.
Here is an important relief: the US does not tax capital gains earned by non-resident aliens on stock sales. Under Article 13 of the India-US DTAA and US domestic law, your stock sale profits face tax only in India. There is no double taxation on capital gains.
If you want to learn more about how to invest in NASDAQ from India, Winvesta's complete guide covers the process step by step.
How to calculate capital gains when the dollar-rupee rate keeps changing
Convert your purchase price to INR using the SBI Telegraphic Transfer Buying Rate (TTBR) on the date of purchase. Convert your sale price to INR using the TTBR on the date of sale. The difference between these two INR amounts is your capital gain. Currency fluctuations can increase or decrease your taxable gain independent of the stock's actual dollar performance.
Dividend taxation — the double-tax trap and how to handle it
Dividends from US stocks trigger tax in both countries. This makes them the most complex piece of cross-border investing for Indian residents.
The US withholds tax on dividends paid to non-resident aliens. The default rate is 30%, but the India-US DTAA reduces it to 25% for individual investors who file Form W-8BEN with their US broker. The 15% rate you may have read about applies only to companies owning 10% or more of the paying company's voting stock. Retail investors face the 25% rate — period.
In India, US stock dividends are classified as"Income from Other Sources" and taxed at your slab rate. You must declare the gross dividend amount (before US withholding) as income. If a company pays you $1,000 in dividends and the US withholds $250, you report the full $1,000 equivalent in rupees.
The Foreign Tax Credit (FTC) prevents complete double taxation. You can claim credit for the 25% US withholding against your Indian tax liability. The credit equals the lower of the US tax paid or the Indian tax on that income. If your Indian slab rate exceeds 25%, you pay only the difference to India. If your slab rate falls below 25%, the excess US withholding becomes an irrecoverable cost — there is no carry-forward mechanism.
DTAA India US tax credit — how the treaty actually works
The India-US Double Taxation Avoidance Agreement governs how income gets taxed across both countries. Here is what it does and does not do for you.
For dividends, Article 10 permits both countries to tax the income, but caps US withholding at 25% for individuals. India taxes the full amount at slab rates but grants FTC for the US portion. For capital gains, Article 13 allows each country to tax them in accordance with its domestic law. Since US law exempts non-residents from stock sale gains, only India taxes your profits.
Claiming the FTC requires Form 67. You must file this form electronically on the income tax portal. It captures your foreign income details, DTAA article references, and proof of US tax payment (typically Form 1042-S from your broker). The deadline has been relaxed — Form 67 can now be filed by the end of the assessment year (March 31, 2027, for AY 2026-27). Recent ITAT rulings have confirmed that Form 67 filing is procedural. FTC cannot be denied solely because you filed the form late, provided you genuinely paid taxes abroad.
Always maintain a valid W-8BEN with your US broker to secure the reduced 25% DTAA rate instead of the default 30%.
How to report US stocks in ITR India — Schedule FA, FSI, and TR
Three schedules in your ITR handle different aspects of foreign investment reporting. Getting them wrong invites scrutiny.
Schedule FA (Foreign Assets) is required for every resident taxpayer who holds any foreign asset during the calendar year (January–December, not the fiscal year). You must list every US stock held at any point — including the stock name, number of shares, date of acquisition, initial value, peak value during the year, and closing value as of December 31. This schedule must be filed even if you earned zero income, made zero gains, or held just one fractional share worth $5. There is no minimum threshold.
Schedule FSI (Foreign Source Income) captures income earned outside India, primarily dividends from US stocks. Report the country, income head, gross amount, and tax paid abroad here. Capital gains do not go in Schedule FSI — they belong in Schedule CG.
Schedule TR (Tax Relief) consolidates your FTC claim. It links to Form 67 and calculates the DTAA relief amount. Together, these three schedules create the complete foreign investment picture the tax department needs.
For a deeper understanding of tax implications for Indian residents investing in the US stock market, Winvesta's FY 2025-26 guide provides detailed filing walkthroughs.
Penalties for non-disclosure are severe. Under the Black Money Act, 2015, failure to report foreign assets in Schedule FA can trigger a ₹10 lakh penalty per year, imprisonment of 6 months to 7 years, and a 30% tax on undisclosed income without anybenefit. Budget 2024 provided partial relief: foreign assets (excluding immovable property) valued at ₹20 lakh or below are now exempt from penalty and prosecution. However, the reporting obligation remains mandatory regardless of value. India actively receives foreign account data through FATCA and CRS exchanges — the tax department knows what you hold abroad.
TCS on foreign remittance above 10 lakh — what changed in 2025
When you send money abroad under LRS to invest in US stocks, Tax Collected at Source (TCS) applies. Budget 2025 raised the TCS-free threshold from ₹7 lakh to ₹10 lakh per financial year, effective April 1, 2025.
For investment-purpose remittances exceeding ₹10 lakh, TCS is levied at 20% on the amount above the threshold. This threshold is PAN-based and cumulative across all purposes and banks within a financial year.
Here is what many investors miss: TCS is not an additional tax. It is an advance tax payment that appears in your Form 26AS and AIS. You can adjust it fully against your income tax liability when filing your ITR. Any excess gets refunded. Budget 2026 (February 2026) brought no changes to the 20% TCS rate on investment remittances, though rates for education and medical remittances dropped to 2% from April 2026.
Key deadlines and compliance calendar
The ITR filing deadline for individuals with foreign assets (ITR-2) is July 31, 2026, for FY 2025-26. Form 67 for FTC claims can be filed until March 31, 2027. Advance tax instalments fall due on June 15, September 15, December 15, and March 15 — relevant if your estimated tax liability after TDS and TCS exceeds ₹10,000.
Belated returns can be filed until December 31, 2026, and revised returns until March 31, 2027. Interest under Section 234B applies at 1% per month for advance tax shortfalls.
Common misconceptions clarified
"I paid tax in the US so that India won't tax me." Wrong. India taxes worldwide income. FTC provides relief but does not eliminate Indian liability.
"LTCG on US stocks is tax-free like Indian stocks." The ₹1.25 lakh exemption under Section 112A applies only to Indian listed equity. US stocks face 12.5% LTCG from the first rupee of gain.
"Small holdings don't need disclosure." Schedule FA has no minimum threshold. Even fractional shares worth a few dollars must be declared.
"Reinvested dividends aren't taxable." DRIP dividends are taxable in the year they are paid. The reinvestment does not defer the tax event.
"TCS is an extra cost on my investment." TCS is fully adjustable against your tax liability and refundable if in excess. It is a cash-flow issue, not a permanent cost.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
