How Indian residents invest in US stocks
Popular platforms:
- INDmoney, Vested, Groww (Indian-based US stock platforms)
- Direct accounts with US brokers (Interactive Brokers, Charles Schwab)
- ETFs on Indian exchanges with US exposure (Motilal Oswal NASDAQ 100, etc.)
Mechanism: Funds remitted from Indian bank via LRS ($250K/year per resident).
US tax on Indian-resident investor
Dividends:
- 25% US WHT on US-source dividends to foreign person
- DTAA reduces to 15% (with TRC + Form 10F submitted to broker)
India-US DTAA caps US WHT on dividends to Indian residents at:
- 15% if not majority shareholder
- 25% if substantial shareholder
For typical retail investors, 15% rate via DTAA.
Interest:
- 30% US WHT default
- DTAA: 15% on portfolio interest, 10% on certain other interest
Capital gains:
- US doesn't tax foreign-person capital gains on US stocks (FIRPTA exception only for US real property)
- 0% US tax on stock sale gains
- 100% Indian taxable
Indian tax on the same investments
Dividends:
- Taxable at slab rates as "income from other sources"
- US WHT already paid creates FTC via Form 67
Interest:
- Same — taxable as income, FTC for US WHT
Capital gains:
- US stocks are unlisted foreign assets for Indian tax
- Held > 24 months: LTCG @ 12.5% without indexation (post-July 2024)
- Held ≤ 24 months: STCG at slab rates
Worked example — dividend
You invest in Apple via Indian broker. Receive $1,000 dividend.
US side:
- US WHT 25% (broker withholds)
- DTAA reduces to 15% if TRC submitted: $150 US tax
Indian side:
- $1,000 (~₹83,000) declared as "income from other sources"
- Taxed at slab rate (say 30%): ₹25,000
- FTC for US tax paid: ~₹12,500
- Net Indian tax: ~₹12,500
- Total tax: $150 + $150 = $300 = 30%
If TRC not submitted, US WHT is full 25%: $250. India FTC ₹20,750. Net India tax: ₹4,250. Total: $250 + $50 = $300. Same total, but better FTC management with TRC.
Worked example — capital gain
You buy 10 shares of Tesla at $200 ($2,000 total), sell after 3 years at $400 ($4,000 total). Gain $2,000.
US side: 0% US tax (foreign person on stock gain).
Indian side:
- Holding > 24 months: LTCG
- Gain in INR @ ₹83: ₹1,66,000
- LTCG @ 12.5% = ₹20,750
- No FTC (no US tax paid)
Indian tax: ~₹20,750 / $250.
LRS compliance
LRS allows $250K/year remittance per Indian resident for investment in foreign stocks.
Each remittance:
- Form A2 declaration to bank
- Source of funds documentation
- No specific income tax filing on outbound remittance (LRS itself is not a tax event)
TCS (Tax Collected at Source) at 20% on LRS remittance above ₹7 lakh per FY for some categories. Creditable against Indian tax.
Schedule FA in Indian ITR
Indian ITR-2 has Schedule FA (Foreign Assets). You must declare:
- Foreign stocks held (broker, account, peak value, year-end value)
- Foreign accounts (US brokerage account)
- Income from foreign assets
Missing Schedule FA: penalty under Black Money Act ₹10 lakh + criminal prosecution.
Common NRI investment mistakes
- Missing Schedule FA disclosure (Indian side)
- Not submitting TRC + Form 10F to US broker (overpaying WHT)
- Reporting only realized gains (Indian unrealized still matters for Schedule FA)
- Confusing LRS limit with tax-free amount
ETFs vs direct stocks
ETFs on Indian exchanges tracking US (e.g., Motilal Oswal NASDAQ 100):
- Simpler tax — treated as Indian equity-MF
- LTCG @ 12.5% if held > 12 months
- No US WHT or foreign asset disclosure complexity
Direct US stocks via Indian broker:
- More flexibility, individual stock selection
- US WHT on dividends, Schedule FA disclosure
- LTCG threshold 24 months (vs 12 months for Indian equity)
For most retail investors, Indian-listed US ETFs simpler. For larger investors with specific stock picks, direct US stocks worth complexity.
Practical advice
- Submit TRC + Form 10F to US broker annually
- Declare Schedule FA in Indian ITR
- Use Form 67 to claim FTC on US WHT
- Track LRS usage annually
- Consider Indian-listed US ETFs for simpler exposure
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.