US stock tax FAQ: 50 common questions answered for Indians
Every Indian investor who buys Apple, Tesla, or an S&P 500 ETF eventually hits the same wall. Tax questions pile up fast — and finding reliable, India-specific answers takes hours of digging.
This US stock tax FAQ India guide puts 50 common tax questions answered in one place. Whether you need a quick reference tax guide for filing season or want tax doubts clarification on US stocks before your first trade, this comprehensive FAQ taxation resource has you covered.
Capital gains tax on US stocks
1. How are capital gains from US stocks taxed in India? LTCG attracts a flat 12.5% tax under Section 112. STCG is taxed at your income tax slab rate, up to approximately 39%, including surcharge and cess.
2. What is the holding period for LTCG on US stocks? You must hold US stocks for more than 24 months. Shares sold before 24 months are completely generated STCG.
3. Does the ₹1.25 lakh LTCG exemption apply to US stocks? No. The annual LTCG exemption under Section 112A applies only to Indian-listed equity where STT has been paid. Even ₹1 of LTCG on US stocks is fully taxable at 12.5%.
4. Can I use indexation to reduce LTCG on US stocks? No. Indexation for unlisted shares and foreign equity was permanently removed for sales on or after 23 July 2024.
5. How do I convert US dollar gains into Indian rupees? Use the SBI TT Buying Rate on the last day of the month preceding the sale month.
6. Which method should I use to determine which shares were sold? India follows the FIFO (first-in, first-out) method. The shares you purchased earliest are treated as the ones sold first.
7. What is the maximum effective LTCG tax rate, including surcharge? Approximately 14.56%, with a surcharge capped at 15% and 4% cess on top.
8. Can I set off US stock losses against Indian stock gains? Yes. STCL offsets both STCG and LTCG from any asset. LTCL offsets only LTCG.
9. How long can I carry forward unabsorbed capital losses? Losses carry forward for 8 assessment years, but only if your ITR is filed by the due date.
10. Does India's Section 111A concessional STCG rate apply to US stocks? No. The 20% STCG rate under Section 111A applies only to Indian-listed equity for which STT has been paid. US stock STCG goes directly to your slab rate.
Dividend taxation and withholding
11. How are US stock dividends taxed for Indian investors? Dividends face double taxation. The US withholds 25% at source via a W-8BEN, and India taxes the gross dividend at your applicable slab rate.
12. What happens without a W-8BEN form? The US withholding rate jumps from 25% to 30%. Filing the W-8BEN reduces this under the India-US DTAA. Learn more in this W-8BEN form guide for Indian investors.
13. How long is the W-8BEN valid? Three calendar years from the date of signing. Most brokerages send renewal reminders.
14. Do reinvested dividends (DRIP) escape Indian taxation? No. DRIP dividends are taxable in the year received. The reinvested amount becomes your new cost basis.
15. How do I avoid paying tax on the same dividend twice? Claim a Foreign Tax Credit through Form 67. The credit equals the lower of your Indian tax liability or US tax withheld on that income.
16. What if my Indian tax rate is lower than the 25% US withholding? You can only claim FTC up to your Indian tax liability. If your slab rate is 20%, the remaining 5% becomes an irrecoverable loss.
17. Can I carry forward excess Foreign Tax Credit? No. Unused FTC in a given year is permanently lost.
18. On which amount do I report dividends in India — gross or net? Always report the gross dividend amount before US withholding. If you received $75 after $25 was withheld from a $100 dividend, report the full $100 in Indian rupees.
DTAA benefits and Form 67
19. What is the India-US DTA, A and how does it help? The Double Taxation Avoidance Agreement (1989, amended 2000) prevents the same income from being taxed twice. Article 13 ensures that the US does not tax Indian residents on stock gains, while Article 10 caps dividend withholding at 25%.
20. How do I file Form 67? File electronically on the income tax e-filing portal before submitting your ITR. Attach the US broker's Form 1042-S and a self-declaration per Rule 128.
21. What is the deadline for filing Form 67? Form 67 must be filed before the end of the Assessment Year, 31 March, 23 July, March 2027, for FY 2025-26. The best practice is to file your ITR before submitting it.
22. What happens if I file Form 67 late? CPC Bangalore routinely auto-rejects late-filed FTC claims, forcing appeals. Multiple ITAT benches have ruled that the requirement is "directory, not mandatory," but the safest approach is filing on time. For a deeper understanding of how the DTAA and FTC work together, read this complete guide to taxation on US stocks in India.
23. Is FTC calculated on total foreign tax paid or per country? Rule 128 mandates country-by-country, source-by-source calculation. US dividends and UK dividends are computed separately if you invest in both markets.
ITR filing requirements
24. Which ITR form should I use? ITR-2 for salary, capital gains, plus foreign assets. ITR-3 if you also have business income. ITR-1 and ITR-4 do not include foreign asset schedules and cannot be used.
25. What is Schedule FA, and why does it follow the calendar year? Schedule FA requires disclosure of all foreign assets held on 1 January and 31 December of the financial year end. end For AY 2026-27, report assets held at any point in calendar year 2025, even those sold mid-year.
26. What goes into Schedule FA Table A2 vs Table A3? Table A2 covers your brokerage account details and balances. Table A3 lists each investment with initial, peak, and closing values.
27. Do I need to report US stocks worth just $50 in Schedule FA? Yes. There is no minimum threshold for Schedule FA disclosure. Even a single US stock that generates no income must be reported.
28. What is the penalty for not disclosing US stocks in Schedule FA? Under the Black Money Act, penalties amount to ₹10 lakh per year of non-disclosure, with a potential imprisonment of up to 7 years. Assets with an aggregate value below ₹20 lakh have been exempt from monetary penalties since October 2024, but the disclosure obligation remains.
29. What are the ITR filing deadlines for FY 2025-26? ITR-2 is due July 311, July 2026. ITR-3 with business income is due 31 August, 2026. Belated returns can be filed on 31 December, 2026, and revised returns can be filed on 31 March 2027.
30. Where do I report US stock gains in the ITR? Capital gains are reported on Schedule CG under "unlisted shares." Dividends go into Schedule OS, foreign income into Schedule FSI, and FTC summary into Schedule TR.
TCS on remittances
31. What is TCS, and when does it apply? Tax Collected at Source applies when you remit money abroad under LRS. For overseas investments, the TCS rate of 20% applies to cumulative remittances exceeding ₹10 lakh per financial year.
32. What is the TCS-free threshold? ₹10 lakh per PAN per financial year (raised from ₹7 lakh by Budget 2025), covering all LRS purposes combined.
33. Is TCS an additional tax? No. TCS reflects in Form 26AS and is fully adjustable against your income tax liability. Excess TCS is refunded.
34. What is the LRS annual limit? USD 250,000 per financial year, covering all permitted purposes combined.
Estate tax
35. Does the US estate tax apply to Indian investors? Yes. The US taxes "US-situs assets" held by non-resident aliens. US stocks and US-domiciled ETFs qualify.
36. What is the estate tax exemption for non-US citizens? Only $60,000 — compared to ~$13.99 million for US citizens. Holdings above $60,000 at death attract tax rates from 18% to 40%.
37. Is there an India-US estate tax treaty? No. The DTAA covers income tax only. India abolished estate duty in 1985. There is no treaty to offset the US estate tax for Indian residents.
38. How can I avoid the US estate tax? Hold Ireland-domiciled UCITS ETFs (like CSPX instead of SPY), which are not US-situs assets. Indian mutual funds investing in the US market also avoid this issue.
US ETFs vs individual stocks
39. Are US ETFs taxed differently from individual US stocks? No. Both are classified as unlisted securities with the same 12.5% LTCG and slab-rate STCG rules.
40. What are the tax advantages of Ireland-domiciled ETFs? Three benefits: no US estate tax, lower dividend withholding at 15% versus 25%, and accumulating share classes that defer Indian tax until you sell.
41. Did Section 50AA change foreign ETF taxation? Temporarily, yes. From April 2023 to March 2025, foreign fund gains were taxed at slab rates regardless of holding period. The Finance Act 2024 restored normal LTCG/STCG treatment effective April 2025.
Tax loss harvesting and wash sale rules
42. Does India have a wash sale rule? No. You can sell US stocks at a loss and immediately repurchase the same stock, booking the loss for tax purposes.
43. What is the best strategy for tax loss harvesting? Sell loss-making positions bMarch 31 March, claim the capital loss on your ITR, and repurchase immediately if desired. File the ITR by the due date to preserve carry-forward rights.
44. Are there any anti-avoidance rules to watch for? Section 94(7) disallows losses from dividend stripping. Section 94(8) covers bonus stripping. GAAR provides a broader backstop against arrangements lacking commercial substance.
FATCA and compliance
45. What is FATCA, and how does it affect me? Under the India-US FATCA agreement, US brokers report your account balance, income, and sale proceeds to the IRS, which shares data with Indian tax authorities.
46. Can Indian tax authorities find out about my unreported US stocks? Yes. FATCA data is cross-matched with your ITR and Schedule FA. Discrepancies trigger automated notices.
Recent changes and special scenarios
47. Does the new Income Tax Act 2025 change US stock taxation? No. The new Act (effective April 2026) simplifies the language and introduces a "Tax Year" concept, while retaining the same 12.5% LTCG and slab-rate STCG structure.
48. What is the FAST-DS disclosure scheme? A one-time window under the Finance Bill 2026 for declaring undisclosed foreign assets. Smaller cases pay 60% of asset value; those with assets from already-taxed income pay a flat ₹1 lakh fee. The scheme provides immunity from prosecution under the Black Money Act.
49. Does the Tiger Global Supreme Court ruling affect individual investors? The January 2026 ruling confirmed GAAR overrides DTAA provisions. This primarily impacts fund structures, but reinforces that all DTAA claims must have genuine substance.
50. When should I consult a tax professional? Seek professional advice if your portfolio exceeds $60,000 (estate tax planning), if you have income from multiple countries, if you received a foreign asset notice, or if your situation involves corporate actions like mergers or ADR conversions.
This comprehensive FAQ taxation guide covers the most critical scenarios. Bookmark this page and check back before each filing season to stay current.
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
No h1 or h2 headings found in this article.
Every Indian investor who buys Apple, Tesla, or an S&P 500 ETF eventually hits the same wall. Tax questions pile up fast — and finding reliable, India-specific answers takes hours of digging.
This US stock tax FAQ India guide puts 50 common tax questions answered in one place. Whether you need a quick reference tax guide for filing season or want tax doubts clarification on US stocks before your first trade, this comprehensive FAQ taxation resource has you covered.
Capital gains tax on US stocks
1. How are capital gains from US stocks taxed in India? LTCG attracts a flat 12.5% tax under Section 112. STCG is taxed at your income tax slab rate, up to approximately 39%, including surcharge and cess.
2. What is the holding period for LTCG on US stocks? You must hold US stocks for more than 24 months. Shares sold before 24 months are completely generated STCG.
3. Does the ₹1.25 lakh LTCG exemption apply to US stocks? No. The annual LTCG exemption under Section 112A applies only to Indian-listed equity where STT has been paid. Even ₹1 of LTCG on US stocks is fully taxable at 12.5%.
4. Can I use indexation to reduce LTCG on US stocks? No. Indexation for unlisted shares and foreign equity was permanently removed for sales on or after 23 July 2024.
5. How do I convert US dollar gains into Indian rupees? Use the SBI TT Buying Rate on the last day of the month preceding the sale month.
6. Which method should I use to determine which shares were sold? India follows the FIFO (first-in, first-out) method. The shares you purchased earliest are treated as the ones sold first.
7. What is the maximum effective LTCG tax rate, including surcharge? Approximately 14.56%, with a surcharge capped at 15% and 4% cess on top.
8. Can I set off US stock losses against Indian stock gains? Yes. STCL offsets both STCG and LTCG from any asset. LTCL offsets only LTCG.
9. How long can I carry forward unabsorbed capital losses? Losses carry forward for 8 assessment years, but only if your ITR is filed by the due date.
10. Does India's Section 111A concessional STCG rate apply to US stocks? No. The 20% STCG rate under Section 111A applies only to Indian-listed equity for which STT has been paid. US stock STCG goes directly to your slab rate.
Dividend taxation and withholding
11. How are US stock dividends taxed for Indian investors? Dividends face double taxation. The US withholds 25% at source via a W-8BEN, and India taxes the gross dividend at your applicable slab rate.
12. What happens without a W-8BEN form? The US withholding rate jumps from 25% to 30%. Filing the W-8BEN reduces this under the India-US DTAA. Learn more in this W-8BEN form guide for Indian investors.
13. How long is the W-8BEN valid? Three calendar years from the date of signing. Most brokerages send renewal reminders.
14. Do reinvested dividends (DRIP) escape Indian taxation? No. DRIP dividends are taxable in the year received. The reinvested amount becomes your new cost basis.
15. How do I avoid paying tax on the same dividend twice? Claim a Foreign Tax Credit through Form 67. The credit equals the lower of your Indian tax liability or US tax withheld on that income.
16. What if my Indian tax rate is lower than the 25% US withholding? You can only claim FTC up to your Indian tax liability. If your slab rate is 20%, the remaining 5% becomes an irrecoverable loss.
17. Can I carry forward excess Foreign Tax Credit? No. Unused FTC in a given year is permanently lost.
18. On which amount do I report dividends in India — gross or net? Always report the gross dividend amount before US withholding. If you received $75 after $25 was withheld from a $100 dividend, report the full $100 in Indian rupees.
DTAA benefits and Form 67
19. What is the India-US DTA, A and how does it help? The Double Taxation Avoidance Agreement (1989, amended 2000) prevents the same income from being taxed twice. Article 13 ensures that the US does not tax Indian residents on stock gains, while Article 10 caps dividend withholding at 25%.
20. How do I file Form 67? File electronically on the income tax e-filing portal before submitting your ITR. Attach the US broker's Form 1042-S and a self-declaration per Rule 128.
21. What is the deadline for filing Form 67? Form 67 must be filed before the end of the Assessment Year, 31 March, 23 July, March 2027, for FY 2025-26. The best practice is to file your ITR before submitting it.
22. What happens if I file Form 67 late? CPC Bangalore routinely auto-rejects late-filed FTC claims, forcing appeals. Multiple ITAT benches have ruled that the requirement is "directory, not mandatory," but the safest approach is filing on time. For a deeper understanding of how the DTAA and FTC work together, read this complete guide to taxation on US stocks in India.
23. Is FTC calculated on total foreign tax paid or per country? Rule 128 mandates country-by-country, source-by-source calculation. US dividends and UK dividends are computed separately if you invest in both markets.
ITR filing requirements
24. Which ITR form should I use? ITR-2 for salary, capital gains, plus foreign assets. ITR-3 if you also have business income. ITR-1 and ITR-4 do not include foreign asset schedules and cannot be used.
25. What is Schedule FA, and why does it follow the calendar year? Schedule FA requires disclosure of all foreign assets held on 1 January and 31 December of the financial year end. end For AY 2026-27, report assets held at any point in calendar year 2025, even those sold mid-year.
26. What goes into Schedule FA Table A2 vs Table A3? Table A2 covers your brokerage account details and balances. Table A3 lists each investment with initial, peak, and closing values.
27. Do I need to report US stocks worth just $50 in Schedule FA? Yes. There is no minimum threshold for Schedule FA disclosure. Even a single US stock that generates no income must be reported.
28. What is the penalty for not disclosing US stocks in Schedule FA? Under the Black Money Act, penalties amount to ₹10 lakh per year of non-disclosure, with a potential imprisonment of up to 7 years. Assets with an aggregate value below ₹20 lakh have been exempt from monetary penalties since October 2024, but the disclosure obligation remains.
29. What are the ITR filing deadlines for FY 2025-26? ITR-2 is due July 311, July 2026. ITR-3 with business income is due 31 August, 2026. Belated returns can be filed on 31 December, 2026, and revised returns can be filed on 31 March 2027.
30. Where do I report US stock gains in the ITR? Capital gains are reported on Schedule CG under "unlisted shares." Dividends go into Schedule OS, foreign income into Schedule FSI, and FTC summary into Schedule TR.
TCS on remittances
31. What is TCS, and when does it apply? Tax Collected at Source applies when you remit money abroad under LRS. For overseas investments, the TCS rate of 20% applies to cumulative remittances exceeding ₹10 lakh per financial year.
32. What is the TCS-free threshold? ₹10 lakh per PAN per financial year (raised from ₹7 lakh by Budget 2025), covering all LRS purposes combined.
33. Is TCS an additional tax? No. TCS reflects in Form 26AS and is fully adjustable against your income tax liability. Excess TCS is refunded.
34. What is the LRS annual limit? USD 250,000 per financial year, covering all permitted purposes combined.
Estate tax
35. Does the US estate tax apply to Indian investors? Yes. The US taxes "US-situs assets" held by non-resident aliens. US stocks and US-domiciled ETFs qualify.
36. What is the estate tax exemption for non-US citizens? Only $60,000 — compared to ~$13.99 million for US citizens. Holdings above $60,000 at death attract tax rates from 18% to 40%.
37. Is there an India-US estate tax treaty? No. The DTAA covers income tax only. India abolished estate duty in 1985. There is no treaty to offset the US estate tax for Indian residents.
38. How can I avoid the US estate tax? Hold Ireland-domiciled UCITS ETFs (like CSPX instead of SPY), which are not US-situs assets. Indian mutual funds investing in the US market also avoid this issue.
US ETFs vs individual stocks
39. Are US ETFs taxed differently from individual US stocks? No. Both are classified as unlisted securities with the same 12.5% LTCG and slab-rate STCG rules.
40. What are the tax advantages of Ireland-domiciled ETFs? Three benefits: no US estate tax, lower dividend withholding at 15% versus 25%, and accumulating share classes that defer Indian tax until you sell.
41. Did Section 50AA change foreign ETF taxation? Temporarily, yes. From April 2023 to March 2025, foreign fund gains were taxed at slab rates regardless of holding period. The Finance Act 2024 restored normal LTCG/STCG treatment effective April 2025.
Tax loss harvesting and wash sale rules
42. Does India have a wash sale rule? No. You can sell US stocks at a loss and immediately repurchase the same stock, booking the loss for tax purposes.
43. What is the best strategy for tax loss harvesting? Sell loss-making positions bMarch 31 March, claim the capital loss on your ITR, and repurchase immediately if desired. File the ITR by the due date to preserve carry-forward rights.
44. Are there any anti-avoidance rules to watch for? Section 94(7) disallows losses from dividend stripping. Section 94(8) covers bonus stripping. GAAR provides a broader backstop against arrangements lacking commercial substance.
FATCA and compliance
45. What is FATCA, and how does it affect me? Under the India-US FATCA agreement, US brokers report your account balance, income, and sale proceeds to the IRS, which shares data with Indian tax authorities.
46. Can Indian tax authorities find out about my unreported US stocks? Yes. FATCA data is cross-matched with your ITR and Schedule FA. Discrepancies trigger automated notices.
Recent changes and special scenarios
47. Does the new Income Tax Act 2025 change US stock taxation? No. The new Act (effective April 2026) simplifies the language and introduces a "Tax Year" concept, while retaining the same 12.5% LTCG and slab-rate STCG structure.
48. What is the FAST-DS disclosure scheme? A one-time window under the Finance Bill 2026 for declaring undisclosed foreign assets. Smaller cases pay 60% of asset value; those with assets from already-taxed income pay a flat ₹1 lakh fee. The scheme provides immunity from prosecution under the Black Money Act.
49. Does the Tiger Global Supreme Court ruling affect individual investors? The January 2026 ruling confirmed GAAR overrides DTAA provisions. This primarily impacts fund structures, but reinforces that all DTAA claims must have genuine substance.
50. When should I consult a tax professional? Seek professional advice if your portfolio exceeds $60,000 (estate tax planning), if you have income from multiple countries, if you received a foreign asset notice, or if your situation involves corporate actions like mergers or ADR conversions.
This comprehensive FAQ taxation guide covers the most critical scenarios. Bookmark this page and check back before each filing season to stay current.
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
