How is gain taxed in India?
Listed shares (equity, equity MFs):
- ≤12 months: STCG at 20% (post-July 2024)
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12 months: LTCG at 12.5% on gain over ₹1.25 lakh
Unlisted shares:
- ≤24 months: STCG at slab rates
-
24 months: LTCG at 12.5% without indexation
TDS for NRIs:
- Listed equity: 20% STCG, 12.5% LTCG (post-July 2024)
- Debt: 30% STCG, 12.5% LTCG
DTAA can reduce — requires TRC + Form 10F.
How does US tax it?
For US tax residents, Indian share gain fully taxable on Schedule D / Form 8949.
- Short-term gain (held ≤1 year US standard): ordinary rates
- Long-term gain (held >1 year): 15-20% LTCG rate
Holding-period thresholds differ between India (12 months listed) and US (12 months). For Indian listed equity held >12 months, both countries = long-term.
Foreign Tax Credit
Indian capital gains tax paid FTC-creditable via Form 1116, passive basket.
US LTCG rate 15-20%; Indian LTCG 12.5%. US tax slightly exceeds Indian. FTC zeros out most but leaves small US net.
Short-term: US ordinary rate (up to 37%) vs India 20% — FTC partial, US net tax exists.
Worked example
Sold Reliance for ₹10,00,000 on Dec 1, 2025, bought for ₹5,00,000 on Jan 15, 2023. Gain ₹5,00,000.
India (LTCG, 2+ years): 12.5% × (₹5L - ₹1.25L) = ₹46,875. TDS at sale.
In USD (year-avg ~₹83): Proceeds ~$12,048. Gain ~$6,024. Indian tax ~$565.
US tax (15% bracket): $6,024 × 15% = $904. FTC: $565. Net US tax: $339.
Repatriation
Sale proceeds to US: bank requires Form 15CA + Form 15CB. Up to USD 1 million per FY from NRO.
What if sold through Resident demat?
If held in Resident demat (didn't convert when NRI), TDS may not be applied automatically. You'd self-calculate and pay via ITR. Often gets missed.
Best practice: Convert demat to NRO before sale.
STT and securities transaction tax
STT is levied at sale of listed equity — NOT income tax, NOT FTC-creditable. Transaction cost only.
Common share-sale mistakes
- Treating Resident-demat sale as not reportable in India
- Mismatching FX rates between proceeds and basis
- Missing FTC claim
- Not filing ITR-2 to claim refund of excess TDS
Strategy — when to time sale
If moving back to India, becoming RNOR: sell BEFORE moving — gains only in India. If remaining US resident long-term: sale timing matters less but coordinate with US bracket and offset losses.