If you've ever bought a share of Apple, Tesla, or Amazon from India, congratulations — you now own a small piece of some of the world's biggest companies. But along with that ownership comes something less exciting: taxes.

Here's the thing most beginners don't realise. When you invest in US stocks from India, you're not dealing with one tax system. You're dealing with two — the US tax system and the Indian tax system. That can sound intimidating, but once you break it down, it's actually pretty logical.

This guide walks you through every tax an Indian investor needs to know about when investing in US stocks — capital gains tax, dividend tax, TCS, DTAA, and Foreign Tax Credit (FTC) — explained the way you'd explain it to a friend, with a full real-world example at the end so you can see exactly how the numbers work.

Whether you're a student exploring your first investment, a young professional building a portfolio, or just someone curious about how global investing works, this one's for you.

A Quick Overview: What Taxes Apply to Indian Investors in US Stocks?

Before we go deep into each one, here's the big picture. As an Indian resident investing in US stocks, you could be dealing with up to four things:

*The tax rates mentioned are based on regulations applicable in 2026 and are subject to change from time to time in accordance with applicable notifications, circulars, and prevailing laws.

💡 Quick tip: None of these taxes should scare you away from investing. They're mostly about paperwork and timing, not about losing money. Once you understand the mechanics, filing becomes routine.

Let's unpack each one.

Capital Gains Tax on US Stocks: LTCG and STCG Explained

Capital gains simply means the profit you make when you sell a stock for more than you paid for it. If you bought a share for $100 and sold it for $150, your capital gain is $50.

Here's the good part: the US does not charge Indian investors capital gains tax. Under US tax rules, a Non-Resident Alien (a legal term for a non-US citizen who isn't a US tax resident) is not taxed on capital gains from selling US stocks. So this part of your income is taxed only in India which actually avoids the "double taxation" problem entirely.

In India, how much tax you pay depends on how long you hold the stock. This is called the holding period, and it splits your gains into two categories.

Long-Term Capital Gains (LTCG)

If you hold a US stock for more than 24 months before selling it, your profit is treated as a long-term capital gain. As per current rules, LTCG on US stocks is taxed at 12.5%, plus applicable surcharge and cess. Unlike Indian stocks, there's no indexation benefit and no exemption threshold; 12.5% applies from the first rupee of gain.

Short-Term Capital Gains (STCG)

If you sell within 24 months of buying, the gain is short-term. STCG gets added to your total income and taxed at your regular income tax slab rate so if you fall in the 30% bracket, your short-term gains are taxed at 30%, not a special lower rate.

Why this matters: Holding period isn't just a technical detail it can significantly change how much tax you owe. A gain taxed at 12.5% (long-term) versus 30% (short-term, for a high earner) is a big difference. This is one reason many investors think in terms of years, not months, when investing in individual US stocks.

One risk to note: Currency movement affects your tax too. Since gains are calculated in Indian rupees (not dollars), a weakening rupee can inflate your reported gain — and, in rare cases, even show a "gain" in rupee terms when you actually lost money in dollar terms.

Dividend Tax on US Stocks: The 25% Withholding

If a US company you've invested in pays out a dividend, here's where things get slightly more interesting  because this is the one type of income that genuinely gets taxed in both countries, at least initially.

Tax in the US

Under the India-US tax treaty, dividends paid to Indian investors are subject to a 25% withholding tax in the US. This means the tax is deducted automatically before the money ever reaches you. If a company declares a $100 dividend, you'll actually receive $75 in your account; the remaining $25 goes straight to the US government.

Tax in India

Since India taxes the global income of its residents, this dividend also needs to be reported in your Indian tax return. It's added to your total income under "Income from Other Sources" and taxed at your applicable slab rate on the full gross dividend amount (the $100, not just the $75 you received).

At first glance, this looks like double taxation and technically, it is. But that's exactly the problem the DTAA and FTC were designed to solve, which we'll cover next.

What Is TCS (Tax Collected at Source) on US Stock Investments?

TCS is probably the most misunderstood part of investing in US stocks mostly because people assume it's an extra tax. It isn't. Think of it as a deposit the government asks for upfront, which you get credit for later.

How TCS Works

When you send money abroad to invest through your bank, under the Reserve Bank of India's Liberalised Remittance Scheme (LRS) your bank collects TCS on your behalf if your total remittances in that financial year cross a certain limit.

So if you remit ₹12 lakh in a financial year to invest in US stocks, TCS applies only to the ₹2 lakh above the threshold, not the entire amount.

Important: This ₹10 lakh limit is cumulative across all your foreign remittances in that financial year, not just stock investments. If you've already sent money abroad for a trip or your child's education, that counts toward the same limit.

How to Claim Back TCS

This is the part people worry about most, so let's be clear: TCS is not a loss. It's simply collected in advance and can be claimed back in a few ways:

1. Adjust it against your total tax liability. When you file your Income Tax Return (ITR), the TCS collected shows up in your Form 26AS, and you can offset it against any tax you owe whether from your salary, capital gains, or other income.
2. Offset it against salary TDS. If you're a salaried employee, you can share your TCS certificate with your employer's payroll or HR team, and they can reduce your monthly TDS deduction accordingly, so the money doesn't sit locked up for months. (To ensure this need to first look with your company policy.)
3. Claim a refund. If your total tax liability is lower than the TCS already collected, the excess is refunded to you after you file your ITR.

Risk to keep in mind: TCS doesn't reduce how much you can invest but it does mean more cash needs to leave your account upfront. If you're planning a large lump-sum investment, factor this into your cash flow so you're not caught off guard.

What Is FTC (Foreign Tax Credit)?

Foreign Tax Credit (FTC) is the mechanism that stops you from being taxed twice on the same income specifically, the 25% withheld on your US dividends.

Here's the simple version: since you already paid 25% tax to the US government on your dividend, India allows you to subtract that amount from your Indian tax bill on the same income, instead of taxing you all over again on the full amount.

To claim FTC, you need to:

1. File Form 67 on the income tax portal that declares the foreign income and the tax already paid abroad.
2. Report the credit under Schedule TR (Tax Relief) in your Income Tax Return.
3. Submit Form 67 before filing your ITR. This step matters, because filing it late can cause your credit claim to be rejected or delayed.

Why this matters: Without FTC, you'd effectively pay tax twice on your dividend income once to the US, once to India which could push your total tax on dividends well above 50%. FTC brings that down to just your Indian slab rate, with credit for what you already paid in the US.

A limitation to be aware of: FTC can only be claimed up to the amount of tax actually payable on that income in India. If the US tax rate is higher than what you'd owe in India on the same income, you generally can't claim a refund for the excess — you can only offset up to your Indian tax liability.

What Is DTAA (Double Taxation Avoidance Agreement)?

DTAA is the treaty between India and the US (and many other countries) that lays out the rules for how income earned across both countries should be taxed so you're not unfairly taxed twice on the same income.

Think of DTAA as the "rulebook," and FTC as the "tool" you use to apply those rules when filing your taxes. DTAA is what establishes your right to claim credit for foreign tax paid; FTC is how you actually claim it.

The India-US DTAA specifically clarifies:

• Capital gains from US stocks are taxed only in India (since the US doesn't tax non-resident aliens on capital gains) so there's no double taxation issue here at all.
• Dividends can be taxed in both countries, but India gives credit for the tax already withheld in the US, so you're not taxed twice on the same amount.

Without a treaty like DTAA in place, cross-border investors would face full tax in both countries with no relief which would make international investing far less attractive. DTAA is essentially what makes investing in US stocks from India financially sensible.

Reporting Requirements: The Paperwork Side

Indian residents are required to disclose foreign assets, even where the investments have not generated capital gains during the year. Investor may need to report their foreign securities holdings in the applicable return and Schedule FA The disclosure requirements depend on the taxpayer's residential status, applicable ITR form and prevailing tax provisions.

Here's what typically comes up when filing:

• ITR Form: Use ITR-2 (if you have salary, dividend, or capital gains income) or ITR-3 (if you also have business or professional income).
• Schedule FA (Foreign Assets): Mandatory disclosure of all foreign holdings — even if you made no gains that year.
• Schedule FSI (Foreign Source Income): Reports income earned outside India, including dividends and capital gains.
• Schedule TR (Tax Relief): Where you claim your Foreign Tax Credit.
• Form 67: Filed separately to formally claim FTC on tax paid abroad.

Read more: Types of ITR Forms and Eligibility

Failure to comply with applicable foreign-asset disclosure requirements may have serious tax and penal consequences under the applicable law. Investors should ensure that their foreign assets and income are reported accurately

Example: Putting It All Together

Numbers make everything clearer, so let's walk through a complete, realistic example.

Meet Neha, a marketing professional in Bengaluru who decided to start investing in US stocks in FY 2025-26.

Step 1: She remits money and pays TCS

Neha transfers ₹12,00,000 to her US brokerage account, her only foreign remittance for the year.

• First ₹10,00,000 → No TCS
• Remaining ₹2,00,000 → TCS @ 20% = ₹40,000

She pays her bank ₹12,40,000 in total. The full ₹12,00,000 gets invested, the ₹40,000 is collected as TCS, sitting as a credit she can claim later.

Step 2: She buys shares

Using the SBI TT buying rate of roughly ₹84/USD, her ₹12,00,000 converts to about $14,280. She buys 60 shares of a US company at $238 each.

Step 3: She receives a dividend

During the year, she earns a $80 dividend. The US withholds 25% ($20), so she receives $60 in her account. The full $80 (converted to INR) is taxable in India as "Income from Other Sources" at her slab rate. She files Form 67 and claims FTC for the $20 already withheld in the US so she isn't taxed twice on this amount.

Step 4: She sells her shares after 30 months

Two-and-a-half years later, she sold all 60 shares at $300 each — total sale value $18,000. Since she held the stock for more than 24 months, this qualifies as LTCG.

• Purchase value (in INR, at ₹84/USD): ₹12,00,000
• Sale value (in INR, at ₹86/USD on the applicable date): ₹15,48,000
• Capital Gain: ₹3,48,000
• LTCG Tax @ 12.5%: ₹43,500 (plus applicable surcharge and cess)

No tax is owed to the US on this gain, since the US doesn't tax non-resident aliens on capital gains so there's no double taxation to worry about here.

Step 5: She adjusts her TCS

When filing her ITR, Neha adjusts the earlier ₹40,000 TCS against her total tax liability for the year (LTCG tax plus tax on her dividend income). Since her total tax liability comfortably exceeds ₹40,000, the entire TCS gets absorbed, no separate refund needed.

Step 6: She files her return

Neha files ITR-2, disclosing her US stock holding in Schedule FA, her dividend and capital gains in Schedule FSI, and her FTC claim in Schedule TR (backed by Form 67).

That's the complete lifecycle remit, invest, earn, sell, and file with every tax touchpoint accounted for.

Key Takeaways

• Indian residents may generally be subject to Indian tax on income from foreign investments, subject to their residential status and applicable tax provisions.
• Capital gains on US stocks are taxed only in India LTCG at 12.5% (holding period over 24 months) and STCG at your income slab rate (holding period under 24 months). The US does not tax non-resident aliens on capital gains.
• Dividends face a 25% withholding tax in the US and are also taxed in India at your slab rate but the Foreign Tax Credit (FTC), claimed via Form 67, prevents you from being taxed twice.
• TCS at 20% applies only on foreign remittances above ₹10 lakh in a financial year, and it is fully adjustable against your tax liability or refundable; it is not an extra cost..
• The India-US DTAA treaty provides a framework for relief from double taxation, subject to treaty conditions and domestic tax law.
• Reporting your US stock holdings in Schedule FA, even with zero gains, is mandatory skipping it can attract serious penalties.
• Currency conversion for tax purposes uses the SBI TT buying rate as of the last day of the month before the transaction.

*The tax rates mentioned in Key Takeaways are based on regulations applicable in 2026 and are subject to change from time to time in accordance with applicable notifications, circulars, and prevailing laws.

Final Thoughts

Taxation on US stocks can look like a maze at first capital gains here, withholding tax there, forms with names like Schedule FSI and FTC. But once you see how the pieces connect, it's really just a system designed to make sure you pay a fair amount, once, in the right place.

The key things to remember: hold for the long term where it makes sense, keep your Form 67 and TCS certificates handy, and don't skip reporting your foreign assets even in a quiet year.

If you're just starting to explore investing in US stocks from India, understanding these tax basics upfront will save you a lot of confusion (and paperwork stress) later. It's worth spending a little time learning the fundamentals of US stock investing including how to pick stocks, manage currency risk, and build a diversified portfolio before you make your first move.

Disclaimer:
This article is provided solely for general educational and informational purposes and is not intended to constitute tax, legal, accounting or investment advice, or a recommendation, solicitation or offer to buy or sell any security or financial product. The information provided is based on tax and regulatory provisions understood to be applicable as of the date of publication and may change due to subsequent amendments, notifications, judicial decisions or regulatory developments. Tax treatment may vary depending on the investor's residential status, nature of the security, transaction structure, source of income and other individual circumstances. The examples and calculations used in this article are illustrative only and should not be relied upon for determining an individual's actual tax liability. Investors should independently verify the applicable laws and consult their own tax, legal or financial advisers before making any investment or tax-related decision. Motilal Oswal Financial Services Limited / Motilal Oswal IFSC entity does not provide tax or legal advice through this article.

Open Demat Account and Begin Your Investment Journey!

Frequently Asked Questions