DTAA India-US: How to claim tax treaty benefits on US stocks
Indian investors in U.S. stocks often pay more tax than necessary. The reason? Most misunderstand the DTAA India USA tax treaty — or skip the paperwork to claim its benefits.
The Double Taxation Avoidance Agreement between India and the United States prevents you from paying income tax twice on the same earnings. Signed in 1989 and last amended through a 2000 protocol, this treaty covers dividends, capital gains, interest, and other income categories. It remains unchanged as of February 2026.
Without the DTAA, your U.S. stock dividends are subject to a 30% withholding tax in the U.S. Then India taxes the same dividends again at your slab rate. The treaty addresses this by capping U.S. withholding and providing a Foreign Tax Credit in India.
What is DTAA, and why does it matter for U.S. stock investors
DTAA stands for Double Taxation Avoidance Agreement. India has signed such treaties with over 90 countries, including the United States. The legal authority derives from Section 90 of the Income-tax Act, 1961.
The treaty assigns taxing rights between the two countries for different income types. It also establishes the Foreign Tax Credit (FTC). This lets you offset taxes paid in one country against your liability in the other.
For Indian investors holding Apple, Tesla, or any US-listed stock, the DTAA directly affects two income streams.
For a detailed breakdown of all tax implications for Indian residents investing in the U.S. stock market, including dividend and capital gains calculations, read our complete guide.
First, dividends — where the U.S. withholds tax at source. Second, capital gains — where the treaty determines which country can tax your profits.
Key provisions every investor should know
The India-US DTAA comprises 29 articles covering various types of income. Three articles matter most for stock investors.
Article 10 governs dividend taxation. Article 13 covers capital gains treatment. Article 4 defines tax residency, which determines your eligibility for treaty benefits in the first place.
The treaty also includes a Saving Clause under Article 1. This allows the U.S. to tax its own citizens and residents on worldwide income regardless of treaty provisions. A Limitation on Benefits clause under Article 24 prevents treaty shopping by third-country residents.
You qualify for DTAA benefits if you hold a valid tax residency certificate from India's income tax department. Your tax residency — not your citizenship or NRI status under FEMA — determines your eligibility.
Article 10 DTAA dividend: The rate is 25%, not 15%
This is where most Indian investors get it wrong. The widely circulated claim that the DTAA reduces U.S. dividend withholding to 15% is incorrect for retail investors.
Article 10 of the DTAA's dividend provisions specifies two rates. Companies that directly own 10% or more of the voting stock in the dividend-paying company get the 15% rate. All other investors — including every individual retail investor — pay 25%.
Since no Indian retail investor owns 10% of Apple or Microsoft's voting shares, the applicable treaty rate is 25%. This is still a meaningful reduction from the default 30% U.S. statutory rate. The 5-percentage-point saving adds up across your entire dividend portfolio over the years.
Without a valid Form W-8BEN on file with your broker, the full 30% rate applies automatically. Filing this single form saves you 5% on every dividend payment you receive from U.S. stocks.
Special rules apply to REITs and Regulated Investment Companies. The 15% rate is generally unavailable for these structures regardless of ownership percentage.
Article 13 DTAA capital gains: Zero US tax for Indian residents
Article 13 DTAA capital gains treatment is simpler — and far more favourable. The treaty states that each country may tax capital gains in accordance with its domestic law.
Under U.S. domestic law, non-resident aliens do not pay capital gains tax on U.S. stock sales. Two conditions must hold: you must not be present in the U.S. for 183 or more days during the tax year, and your gains must not be connected with a U.S. trade or business. Most Indian investors easily satisfy both conditions.
This means your capital gains face taxation only in India. If you hold U.S. stocks for over 24 months, you pay 12.5% Long-Term Capital Gains tax with no indexation benefit. Stocks sold within 24 months attract Short-Term Capital Gains at your income tax slab rate, ranging from 5% to 30%.
U.S. stocks count as unlisted securities under Indian tax law. The favorable 15% STCG and 10% LTCG rates that apply to Indian listed equities do not apply here.
How to claim treaty benefits: A step-by-step process
Claiming DTAA benefits requires action in both countries. Missing any step costs you real money.
Step 1 — File Form W-8BEN with your U.S. broker. This certifies your foreign status and entitles you to the treaty rate. In Part II, specify Article 10, Paragraph 2(b), rate 25%, and income type Dividends. Enter your PAN number in Line 6a as your Foreign Tax Identifying Number.
For line-by-line instructions, refer to our W-8BEN form guide to help Indians complete it correctly the first time.
The form stays valid for three calendar years.
Step 2 — Collect Form 1042-S annually. Your U.S. broker provides this document by mid-February each year. It records all dividends received and taxes withheld during the previous calendar year.
Step 3 — Obtain your Tax Residency Certificate—file Form 10FA with your Assessing Officer to apply. The officer issues Form 10FB, which is the actual TRC. Processing typically takes 15 to 30 working days. The tax residency certificate issued by India remains valid for one financial year.
Step 4 — File Form 67 on the income tax portal. This is the form that actually claims your Foreign Tax Credit. You must submit it on or before the ITR due date — typically July 31. Enter each dividend income item with the country, gross amount in INR, U.S. tax paid, and reference to DTAA Article 10 and Section 90.
Step 5 — Complete your ITR-2 or ITR-3 with the required schedules. Three schedules are critical. Schedule FSI reports your foreign source income. Schedule TR summarises your tax relief claim. Schedule FA requires disclosure of all foreign assets and accounts on a calendar-year basis; failure to do so can attract a penalty of up to ₹10 lakh under the Black Money Act.
Your FTC equals the lower of the U.S. tax paid and the Indian tax payable on that specific income. If your Indian slab rate falls below 25%, part of the U.S. withholding becomes an irrecoverable cost. There is no carry-forward of unused Foreign Tax Credit.
To obtain a lower-withholding certificate for U.S. brokers, you must file Form 8833 directly with the IRS. However, most Indian retail investors find the standard W-8BEN process sufficient for their needs.
Documentation you need to keep ready
Your US-side documents include the signed Form W-8BEN, annual Form 1042-S from your broker, and detailed brokerage statements showing every trade and dividend transaction.
Your India-side documents include Form 10FA (application for TRC), Form 10FB (the actual Tax Residency Certificate), Form 10F (supplementary self-declaration if your TRC lacks certain details), Form 67 (Foreign Tax Credit claim), and your ITR-2 or ITR-3 with Schedules FSI, TR, and FA.
Keep all conversion workings using the SBI Telegraphic Transfer Buying Rate on the last day of the month preceding each transaction. This is the only acceptable exchange rate for Indian tax purposes. Retain all documents for at least seven years from the end of the relevant assessment year.
Common DTAA mistakes that cost investors money
Skipping Form 67 before the ITR deadline. The Centralised Processing Centre routinely rejects FTC claims without a timely Form 67 filing. Some ITAT rulings have held the requirement to be procedural rather than mandatory, but until this is settled definitively, file it on time every year.
Reporting net dividends instead of gross. Your ITR must show the full gross dividend amount before U.S. withholding. Reporting only the net amount you received creates incorrect computations and can trigger scrutiny.
Using the wrong ITR form. Foreign income and assets require ITR-2 or ITR-3. Filing ITR-1 (Sahaj) or ITR-4 (Sugam) will either fail validation or miss the required foreign income schedules entirely.
Ignoring Schedule FA for foreign assets. This schedule is mandatory even if you earned zero income from your U.S. holdings during the year. Non-disclosure penalties under the Black Money Act can reach ₹10 lakh.
Applying incorrect exchange rates. Only the SBI TT Buying Rate as of the last day of the month preceding the transaction date is acceptable. Google rates, credit card rates, or actual remittance rates will not pass tax scrutiny.
Letting Form W-8BEN expire. The three-year validity window passes quickly—an expired form automatically triggers a 30% withholding by your broker. Recovering the excess 5% requires filing a U.S. tax return, which is complex and slow.
Assuming Indian equity tax rates apply to U.S. stocks. US-listed shares are unlisted securities under Indian tax law. The favourable STT-linked rates for Indian listed equities (15% STCG, 10% LTCG) do not apply to your U.S. portfolio.
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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Table of Contents
Indian investors in U.S. stocks often pay more tax than necessary. The reason? Most misunderstand the DTAA India USA tax treaty — or skip the paperwork to claim its benefits.
The Double Taxation Avoidance Agreement between India and the United States prevents you from paying income tax twice on the same earnings. Signed in 1989 and last amended through a 2000 protocol, this treaty covers dividends, capital gains, interest, and other income categories. It remains unchanged as of February 2026.
Without the DTAA, your U.S. stock dividends are subject to a 30% withholding tax in the U.S. Then India taxes the same dividends again at your slab rate. The treaty addresses this by capping U.S. withholding and providing a Foreign Tax Credit in India.
What is DTAA, and why does it matter for U.S. stock investors
DTAA stands for Double Taxation Avoidance Agreement. India has signed such treaties with over 90 countries, including the United States. The legal authority derives from Section 90 of the Income-tax Act, 1961.
The treaty assigns taxing rights between the two countries for different income types. It also establishes the Foreign Tax Credit (FTC). This lets you offset taxes paid in one country against your liability in the other.
For Indian investors holding Apple, Tesla, or any US-listed stock, the DTAA directly affects two income streams.
For a detailed breakdown of all tax implications for Indian residents investing in the U.S. stock market, including dividend and capital gains calculations, read our complete guide.
First, dividends — where the U.S. withholds tax at source. Second, capital gains — where the treaty determines which country can tax your profits.
Key provisions every investor should know
The India-US DTAA comprises 29 articles covering various types of income. Three articles matter most for stock investors.
Article 10 governs dividend taxation. Article 13 covers capital gains treatment. Article 4 defines tax residency, which determines your eligibility for treaty benefits in the first place.
The treaty also includes a Saving Clause under Article 1. This allows the U.S. to tax its own citizens and residents on worldwide income regardless of treaty provisions. A Limitation on Benefits clause under Article 24 prevents treaty shopping by third-country residents.
You qualify for DTAA benefits if you hold a valid tax residency certificate from India's income tax department. Your tax residency — not your citizenship or NRI status under FEMA — determines your eligibility.
Article 10 DTAA dividend: The rate is 25%, not 15%
This is where most Indian investors get it wrong. The widely circulated claim that the DTAA reduces U.S. dividend withholding to 15% is incorrect for retail investors.
Article 10 of the DTAA's dividend provisions specifies two rates. Companies that directly own 10% or more of the voting stock in the dividend-paying company get the 15% rate. All other investors — including every individual retail investor — pay 25%.
Since no Indian retail investor owns 10% of Apple or Microsoft's voting shares, the applicable treaty rate is 25%. This is still a meaningful reduction from the default 30% U.S. statutory rate. The 5-percentage-point saving adds up across your entire dividend portfolio over the years.
Without a valid Form W-8BEN on file with your broker, the full 30% rate applies automatically. Filing this single form saves you 5% on every dividend payment you receive from U.S. stocks.
Special rules apply to REITs and Regulated Investment Companies. The 15% rate is generally unavailable for these structures regardless of ownership percentage.
Article 13 DTAA capital gains: Zero US tax for Indian residents
Article 13 DTAA capital gains treatment is simpler — and far more favourable. The treaty states that each country may tax capital gains in accordance with its domestic law.
Under U.S. domestic law, non-resident aliens do not pay capital gains tax on U.S. stock sales. Two conditions must hold: you must not be present in the U.S. for 183 or more days during the tax year, and your gains must not be connected with a U.S. trade or business. Most Indian investors easily satisfy both conditions.
This means your capital gains face taxation only in India. If you hold U.S. stocks for over 24 months, you pay 12.5% Long-Term Capital Gains tax with no indexation benefit. Stocks sold within 24 months attract Short-Term Capital Gains at your income tax slab rate, ranging from 5% to 30%.
U.S. stocks count as unlisted securities under Indian tax law. The favorable 15% STCG and 10% LTCG rates that apply to Indian listed equities do not apply here.
How to claim treaty benefits: A step-by-step process
Claiming DTAA benefits requires action in both countries. Missing any step costs you real money.
Step 1 — File Form W-8BEN with your U.S. broker. This certifies your foreign status and entitles you to the treaty rate. In Part II, specify Article 10, Paragraph 2(b), rate 25%, and income type Dividends. Enter your PAN number in Line 6a as your Foreign Tax Identifying Number.
For line-by-line instructions, refer to our W-8BEN form guide to help Indians complete it correctly the first time.
The form stays valid for three calendar years.
Step 2 — Collect Form 1042-S annually. Your U.S. broker provides this document by mid-February each year. It records all dividends received and taxes withheld during the previous calendar year.
Step 3 — Obtain your Tax Residency Certificate—file Form 10FA with your Assessing Officer to apply. The officer issues Form 10FB, which is the actual TRC. Processing typically takes 15 to 30 working days. The tax residency certificate issued by India remains valid for one financial year.
Step 4 — File Form 67 on the income tax portal. This is the form that actually claims your Foreign Tax Credit. You must submit it on or before the ITR due date — typically July 31. Enter each dividend income item with the country, gross amount in INR, U.S. tax paid, and reference to DTAA Article 10 and Section 90.
Step 5 — Complete your ITR-2 or ITR-3 with the required schedules. Three schedules are critical. Schedule FSI reports your foreign source income. Schedule TR summarises your tax relief claim. Schedule FA requires disclosure of all foreign assets and accounts on a calendar-year basis; failure to do so can attract a penalty of up to ₹10 lakh under the Black Money Act.
Your FTC equals the lower of the U.S. tax paid and the Indian tax payable on that specific income. If your Indian slab rate falls below 25%, part of the U.S. withholding becomes an irrecoverable cost. There is no carry-forward of unused Foreign Tax Credit.
To obtain a lower-withholding certificate for U.S. brokers, you must file Form 8833 directly with the IRS. However, most Indian retail investors find the standard W-8BEN process sufficient for their needs.
Documentation you need to keep ready
Your US-side documents include the signed Form W-8BEN, annual Form 1042-S from your broker, and detailed brokerage statements showing every trade and dividend transaction.
Your India-side documents include Form 10FA (application for TRC), Form 10FB (the actual Tax Residency Certificate), Form 10F (supplementary self-declaration if your TRC lacks certain details), Form 67 (Foreign Tax Credit claim), and your ITR-2 or ITR-3 with Schedules FSI, TR, and FA.
Keep all conversion workings using the SBI Telegraphic Transfer Buying Rate on the last day of the month preceding each transaction. This is the only acceptable exchange rate for Indian tax purposes. Retain all documents for at least seven years from the end of the relevant assessment year.
Common DTAA mistakes that cost investors money
Skipping Form 67 before the ITR deadline. The Centralised Processing Centre routinely rejects FTC claims without a timely Form 67 filing. Some ITAT rulings have held the requirement to be procedural rather than mandatory, but until this is settled definitively, file it on time every year.
Reporting net dividends instead of gross. Your ITR must show the full gross dividend amount before U.S. withholding. Reporting only the net amount you received creates incorrect computations and can trigger scrutiny.
Using the wrong ITR form. Foreign income and assets require ITR-2 or ITR-3. Filing ITR-1 (Sahaj) or ITR-4 (Sugam) will either fail validation or miss the required foreign income schedules entirely.
Ignoring Schedule FA for foreign assets. This schedule is mandatory even if you earned zero income from your U.S. holdings during the year. Non-disclosure penalties under the Black Money Act can reach ₹10 lakh.
Applying incorrect exchange rates. Only the SBI TT Buying Rate as of the last day of the month preceding the transaction date is acceptable. Google rates, credit card rates, or actual remittance rates will not pass tax scrutiny.
Letting Form W-8BEN expire. The three-year validity window passes quickly—an expired form automatically triggers a 30% withholding by your broker. Recovering the excess 5% requires filing a U.S. tax return, which is complex and slow.
Assuming Indian equity tax rates apply to U.S. stocks. US-listed shares are unlisted securities under Indian tax law. The favourable STT-linked rates for Indian listed equities (15% STCG, 10% LTCG) do not apply to your U.S. portfolio.
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
