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Yes, under the Double Taxation Avoidance Agreement (DTAA) between the US and India, the US government deducts a 25% withholding tax on the dividend of Indian investors. Considering this, to avoid double taxation, when filing your ITR, you can claim a foreign tax credit.
In the US, capital gains from US taxes are not taxed. However, these are taxable in India as per the holding period. If the US stocks are held for the short term (24 months), they are taxed at the income tax slab rate. Further, if they hold the US stocks for a long time (more than 24 months), they are taxed at 20% plus surcharge and cess.
When converting the returns from USD to Indian Rupees, the actual profit from the returns gets impacted as per the conversion exchange rate. For instance, if the value of rupees decreases, your gains in INR increase, which potentially increases your taxable income. On the other hand, if the value of rupees appreciates, your effective return decreases.
You need to mention your US stock in the Schedule FA (Foreign Assets). Additionally, mention the income received from these investments in Schedule FSI (Foreign Source of Income). Further, state the capital gains from the US stocks under Schedule CG (capital gain).
Yes, there is an estate tax on US stocks for Indian investors. Considering this, while holding US stocks, if an Indian investor passes away, their estate is subject to US estate tax. It is applicable to assets valued at more than USD 60,000. Further, using trusts or holding structures can help in minimizing the exposure to estate tax.
By Varun Gupta |Last Updated: November 4, 2025
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