Tax implications of NASDAQ investments for Indian residents
Investing in NASDAQ-listed stocks gives Indian residents access to global tech giants such as Apple, Microsoft, and Amazon. However, understanding the tax treatment of NASDAQ investments in India requires careful attention to multiple regulations. From capital gains NASDAQ India rules to dividend withholding tax provisions, this guide covers everything you need for FY 2025-26 compliance.
The Union Budget 2026-27, presented in February 2026, maintained the existing capital gains framework while introducing relief for foreign asset disclosure. Indian investors now benefit from a simplified 12.5% long-term capital gains rate and a ₹20 lakh threshold for Black Money Act penalties.
Capital gains tax treatment for U.S. stocks
US-listed stocks, including those on NASDAQ, are classified as unlisted shares under Indian tax law. This classification determines how your gains are taxed when you sell these investments.
Long-term capital gains apply when you hold NASDAQ stocks for more than 24 months. Under the Finance (No. 2) Act, 2024, LTCG attracts a flat 12.5% tax rate without indexation benefits. This replaced the earlier 20% rate, which was indexed before July 23, 2024. A maximum surcharge of 15% applieston Section 112 gains, plus the standard 4% health and education cess.
Short-term capital gains apply when you sell within 24 months of purchase. These gains add to your total taxable income and are subject to taxation at your applicable slab rate. For high earners, this can reach 30% plus surcharge, with combined effective rates touching 39% for incomes exceeding ₹5 crore.
The ₹1.25 lakh LTCG exemption under Section 112A does not apply to foreign stocks. This exemption applies only to Indian-listed equity and equity mutual funds for which STT is paid. Even ₹1 of LTCG on NASDAQ-listed stocks is taxable, making holding-period optimisation crucial for tax efficiency.
For a detailed breakdown of how to calculate your capital gains from U.S. stocks, read our guide on how to handle U.S. stock taxation in India.
For calculating gains, you must convert purchase and sale amounts to INR using the SBI TT Buying Rate on the respective transaction dates. The difference between sale proceeds and cost of acquisition, after currency conversion, determines your taxable capital gain.
Dividend withholding tax on U.S. stocks
When NASDAQ-listed companies pay dividends to Indian residents, tax is assessed in both countries. The U.S. imposes a withholding tax at source before the dividend reaches your account.
Under U.S. domestic law, the default withholding rate is 30%. However, the India-US Double Taxation Avoidance Agreement reduces this to 25% for individual investors who submit Form W-8BEN to their U.S. broker. This form certifies your Indian residency and claims treaty benefits under Article 10 of the DTAA.
Form W-8BEN remains valid for three calendar years from the signing date. Most platforms, such as Interactive Brokers, Vested, and INDmoney, offer digital submission. Without this form, you pay 30% of your dividends upfront rather than 25%.
In India, dividends from U.S. stocks face taxation as Income from Other Sources at your applicable slab rate. You must report the gross dividend amount before U.S. withholding on your Indian return. The foreign tax credit mechanism then prevents double taxation on the same income.
DTAA benefits the U.S. and India for stock investors
The India-US DTAA provides significant relief for Indian investors in U.S. markets. Article 10 governs dividend taxation, while Article 13 addresses capital gains.
For dividends, the treaty caps U.S. withholding at 25% for individual investors. Companies holding at least 10% voting stock in a U.S. company benefit from a reduced 15% rate. Without DTAA protection, the U.S. would withhold 30% on all dividend payments.
Capital gains from selling US stocks remain taxable only in India for Indian residents. The U.S.U.S. does not tax non-resident aliens on stock sale profits. This means you face no U.S. tax on NASDAQ stock sales, eliminating the need for foreign tax credit claims on capital gains.
The foreign tax credit mechanism under Section 90 allows you to offset U.S. dividend withholding against your Indian tax liability. The credit equals the lower of the U.S. tax paid and the Indian tax attributable to that foreign income. Currency conversion uses the SBI TT Buying Rate on the last day of the month preceding payment.
Form 67 filing enables FTC claims. Following the August 2022 amendments, you can file this form until the end of the Assessment Year rather than before the ITR due date. For AY 2026-27, the deadline extends to March 31, 2027.
ITR filing NASDAQ income requirements
Indian residents with NASDAQ investments are not eligible to file ITR-1 or ITR-4. You must file ITR-2 if you have salary and capital gains without business income. ITR-3 applies if you have business income alongside foreign investments.
Three schedules require careful attention when filing your return. Schedule FA mandates disclosure of all foreign assets regardless of value. Schedule FSI captures foreign-source income, including dividends. Schedule TR summarises your tax relief claims under DTAA provisions.
Understanding the complete tax implications for Indian residents investing in the U.S. stock market helps you stay compliant across both jurisdictions.
Schedule FA follows calendar-year reporting, covering January 1 to December 31, 2025, for AY 2026-27. You must report initial investment value, peak value during the year, and closing value as of December 31. Entity names, broker account numbers, and country codes are mandatory fields.
Schedule FA reporting for foreign assets
Schedule FA disclosure remains non-negotiable for all Indian residents holding foreign assets. Even if your NASDAQ portfolio generated no income during the year, you must report the holdings. The reporting threshold is zero, meaning any foreign asset triggers disclosure requirements.
Table A3 of Schedule FA covers foreign equity and debt interests. You need the country code (the USA uses ISD Code 1), company names, addresses, and the nature of interest held. Investment values must be converted to INR using exchange rates applicable on the relevant dates.
Budget 2026 introduced relief for small investors by raising the ₹ 20 lakh de minimis threshold under the Black Money Act. Previously set at ₹5 lakh, this threshold now exempts smaller portfolios from penalties for inadvertent non-disclosure. The change applies retroactively from October 1, 2024.
Penalties for non-disclosure above the threshold remain severe. Section 42 and 43 violations attract a penalty of ₹10 lakh per undisclosed asset per year. Willful failures can lead to prosecution with imprisonment ranging from six months to seven years.
A one-time Foreign Asset Disclosure Scheme 2026 offers a six-month window for voluntary compliance. Category A covers unreported income up to ₹1 crore with 30% tax plus 30% penalty. Category B addresses missed Schedule FA disclosures up to ₹5 crore with just a ₹1 lakh fee.
Foreign tax credit claiming process.
Claiming that the FTC requires systematic documentation and timely filing. The process involves reporting gross foreign income, calculating Indian tax liability, and offsetting taxes already paid abroad.
Start by collecting Form 1042-S from your U.S. broker. This document shows dividend payments and taxes withheld during the calendar year. Most brokers make this available by mid-February for the preceding year.
File Form 67 electronically through the income tax portal. Include details of foreign income, country of origin, taxes paid abroad, and applicable DTAA articles. Supporting documents include broker statements and proof of tax deduction.
Rule 128 governs the FTC calculation with specific provisions. Credit applies to tax, surcharge, and cess, but not to interest or penalties. No carry-forward exists for unused FTC, making accurate matching of income and credit essential.
Courts have held Form 67 filing as directory rather than mandatory. The Madras High Court and various ITAT benches held that FTC cannot be denied solely on procedural grounds if taxes were actually paid abroad. However, timely filing prevents disputes and processing delays.
Tax-efficient strategies for NASDAQ investors
Strategic planning can significantly reduce your tax burden on U.S. stock investments. Several legal methods help optimise your tax position without compromising compliance.
Holding period optimisation delivers the most significant savings. Converting STCG to LTCG by holding beyond 24 months can reduce tax from 39% to 12.5% at the highest brackets. If you approach the 24-month mark, waiting a few extra weeks delivers substantial savings.
Tax-loss harvesting is effective for Indian investors because India has no wash-sale rule. You can sell loss-making stocks and immediately repurchase identical shares. Short-term losses offset both STCG and LTCG, while long-term losses offset only LTCG. Unused losses carry forward for eight assessment years if you file ITR before the due date.
Staggering large sales across financial years mitigates slab-rate impacts on short-term gains. This proves particularly useful when you have substantial positions to exit.
The ₹10 lakh TCS-free threshold for LRS remittances remains unchanged in FY 2025-26. Above this limit, 20% TCS applies to amounts remitted for investment purposes. This TCS is fully refundable against your tax liability when filing ITR.
Dividend minimisation makes sense given that the 25% U.S. withholding tax affects the flow. Growth-oriented NASDAQ stocks that prioritise capital appreciation over dividends may be more tax-efficient for Indian investors.
The regulatory landscape for NASDAQ investing from India remains favourable. The $250,000 annual LRS limit provides ample room for retail investors. Multiple compliant platforms facilitate direct market access with integrated tax reporting. Understanding tax on NASDAQ stocks in India empowers you to maximise returns while maintaining full compliance with both jurisdictions.
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
Table of Contents
No h1 or h2 headings found in this article.
Investing in NASDAQ-listed stocks gives Indian residents access to global tech giants such as Apple, Microsoft, and Amazon. However, understanding the tax treatment of NASDAQ investments in India requires careful attention to multiple regulations. From capital gains NASDAQ India rules to dividend withholding tax provisions, this guide covers everything you need for FY 2025-26 compliance.
The Union Budget 2026-27, presented in February 2026, maintained the existing capital gains framework while introducing relief for foreign asset disclosure. Indian investors now benefit from a simplified 12.5% long-term capital gains rate and a ₹20 lakh threshold for Black Money Act penalties.
Capital gains tax treatment for U.S. stocks
US-listed stocks, including those on NASDAQ, are classified as unlisted shares under Indian tax law. This classification determines how your gains are taxed when you sell these investments.
Long-term capital gains apply when you hold NASDAQ stocks for more than 24 months. Under the Finance (No. 2) Act, 2024, LTCG attracts a flat 12.5% tax rate without indexation benefits. This replaced the earlier 20% rate, which was indexed before July 23, 2024. A maximum surcharge of 15% applieston Section 112 gains, plus the standard 4% health and education cess.
Short-term capital gains apply when you sell within 24 months of purchase. These gains add to your total taxable income and are subject to taxation at your applicable slab rate. For high earners, this can reach 30% plus surcharge, with combined effective rates touching 39% for incomes exceeding ₹5 crore.
The ₹1.25 lakh LTCG exemption under Section 112A does not apply to foreign stocks. This exemption applies only to Indian-listed equity and equity mutual funds for which STT is paid. Even ₹1 of LTCG on NASDAQ-listed stocks is taxable, making holding-period optimisation crucial for tax efficiency.
For a detailed breakdown of how to calculate your capital gains from U.S. stocks, read our guide on how to handle U.S. stock taxation in India.
For calculating gains, you must convert purchase and sale amounts to INR using the SBI TT Buying Rate on the respective transaction dates. The difference between sale proceeds and cost of acquisition, after currency conversion, determines your taxable capital gain.
Dividend withholding tax on U.S. stocks
When NASDAQ-listed companies pay dividends to Indian residents, tax is assessed in both countries. The U.S. imposes a withholding tax at source before the dividend reaches your account.
Under U.S. domestic law, the default withholding rate is 30%. However, the India-US Double Taxation Avoidance Agreement reduces this to 25% for individual investors who submit Form W-8BEN to their U.S. broker. This form certifies your Indian residency and claims treaty benefits under Article 10 of the DTAA.
Form W-8BEN remains valid for three calendar years from the signing date. Most platforms, such as Interactive Brokers, Vested, and INDmoney, offer digital submission. Without this form, you pay 30% of your dividends upfront rather than 25%.
In India, dividends from U.S. stocks face taxation as Income from Other Sources at your applicable slab rate. You must report the gross dividend amount before U.S. withholding on your Indian return. The foreign tax credit mechanism then prevents double taxation on the same income.
DTAA benefits the U.S. and India for stock investors
The India-US DTAA provides significant relief for Indian investors in U.S. markets. Article 10 governs dividend taxation, while Article 13 addresses capital gains.
For dividends, the treaty caps U.S. withholding at 25% for individual investors. Companies holding at least 10% voting stock in a U.S. company benefit from a reduced 15% rate. Without DTAA protection, the U.S. would withhold 30% on all dividend payments.
Capital gains from selling US stocks remain taxable only in India for Indian residents. The U.S.U.S. does not tax non-resident aliens on stock sale profits. This means you face no U.S. tax on NASDAQ stock sales, eliminating the need for foreign tax credit claims on capital gains.
The foreign tax credit mechanism under Section 90 allows you to offset U.S. dividend withholding against your Indian tax liability. The credit equals the lower of the U.S. tax paid and the Indian tax attributable to that foreign income. Currency conversion uses the SBI TT Buying Rate on the last day of the month preceding payment.
Form 67 filing enables FTC claims. Following the August 2022 amendments, you can file this form until the end of the Assessment Year rather than before the ITR due date. For AY 2026-27, the deadline extends to March 31, 2027.
ITR filing NASDAQ income requirements
Indian residents with NASDAQ investments are not eligible to file ITR-1 or ITR-4. You must file ITR-2 if you have salary and capital gains without business income. ITR-3 applies if you have business income alongside foreign investments.
Three schedules require careful attention when filing your return. Schedule FA mandates disclosure of all foreign assets regardless of value. Schedule FSI captures foreign-source income, including dividends. Schedule TR summarises your tax relief claims under DTAA provisions.
Understanding the complete tax implications for Indian residents investing in the U.S. stock market helps you stay compliant across both jurisdictions.
Schedule FA follows calendar-year reporting, covering January 1 to December 31, 2025, for AY 2026-27. You must report initial investment value, peak value during the year, and closing value as of December 31. Entity names, broker account numbers, and country codes are mandatory fields.
Schedule FA reporting for foreign assets
Schedule FA disclosure remains non-negotiable for all Indian residents holding foreign assets. Even if your NASDAQ portfolio generated no income during the year, you must report the holdings. The reporting threshold is zero, meaning any foreign asset triggers disclosure requirements.
Table A3 of Schedule FA covers foreign equity and debt interests. You need the country code (the USA uses ISD Code 1), company names, addresses, and the nature of interest held. Investment values must be converted to INR using exchange rates applicable on the relevant dates.
Budget 2026 introduced relief for small investors by raising the ₹ 20 lakh de minimis threshold under the Black Money Act. Previously set at ₹5 lakh, this threshold now exempts smaller portfolios from penalties for inadvertent non-disclosure. The change applies retroactively from October 1, 2024.
Penalties for non-disclosure above the threshold remain severe. Section 42 and 43 violations attract a penalty of ₹10 lakh per undisclosed asset per year. Willful failures can lead to prosecution with imprisonment ranging from six months to seven years.
A one-time Foreign Asset Disclosure Scheme 2026 offers a six-month window for voluntary compliance. Category A covers unreported income up to ₹1 crore with 30% tax plus 30% penalty. Category B addresses missed Schedule FA disclosures up to ₹5 crore with just a ₹1 lakh fee.
Foreign tax credit claiming process.
Claiming that the FTC requires systematic documentation and timely filing. The process involves reporting gross foreign income, calculating Indian tax liability, and offsetting taxes already paid abroad.
Start by collecting Form 1042-S from your U.S. broker. This document shows dividend payments and taxes withheld during the calendar year. Most brokers make this available by mid-February for the preceding year.
File Form 67 electronically through the income tax portal. Include details of foreign income, country of origin, taxes paid abroad, and applicable DTAA articles. Supporting documents include broker statements and proof of tax deduction.
Rule 128 governs the FTC calculation with specific provisions. Credit applies to tax, surcharge, and cess, but not to interest or penalties. No carry-forward exists for unused FTC, making accurate matching of income and credit essential.
Courts have held Form 67 filing as directory rather than mandatory. The Madras High Court and various ITAT benches held that FTC cannot be denied solely on procedural grounds if taxes were actually paid abroad. However, timely filing prevents disputes and processing delays.
Tax-efficient strategies for NASDAQ investors
Strategic planning can significantly reduce your tax burden on U.S. stock investments. Several legal methods help optimise your tax position without compromising compliance.
Holding period optimisation delivers the most significant savings. Converting STCG to LTCG by holding beyond 24 months can reduce tax from 39% to 12.5% at the highest brackets. If you approach the 24-month mark, waiting a few extra weeks delivers substantial savings.
Tax-loss harvesting is effective for Indian investors because India has no wash-sale rule. You can sell loss-making stocks and immediately repurchase identical shares. Short-term losses offset both STCG and LTCG, while long-term losses offset only LTCG. Unused losses carry forward for eight assessment years if you file ITR before the due date.
Staggering large sales across financial years mitigates slab-rate impacts on short-term gains. This proves particularly useful when you have substantial positions to exit.
The ₹10 lakh TCS-free threshold for LRS remittances remains unchanged in FY 2025-26. Above this limit, 20% TCS applies to amounts remitted for investment purposes. This TCS is fully refundable against your tax liability when filing ITR.
Dividend minimisation makes sense given that the 25% U.S. withholding tax affects the flow. Growth-oriented NASDAQ stocks that prioritise capital appreciation over dividends may be more tax-efficient for Indian investors.
The regulatory landscape for NASDAQ investing from India remains favourable. The $250,000 annual LRS limit provides ample room for retail investors. Multiple compliant platforms facilitate direct market access with integrated tax reporting. Understanding tax on NASDAQ stocks in India empowers you to maximise returns while maintaining full compliance with both jurisdictions.
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
