U.S. Stocks and Tax Implications in India

Legal Framework for Investing in U.S. Stocks from India

• Liberalised Remittance Scheme (LRS) introduced in 2004.

• Initially $25000 , Current remittance limit: $2,50,000 per financial year (for residents, including minors).

• Permissible uses: Education, travel, investments including U.S. equities.

• If remittance exceeds ₹10 lakh, Tax Collected at Source (TCS) applies:

  • TCS rates vary depending on the nature of remittance.

Taxation on U.S. Dividends

• Dividend from U.S. stocks:

  • Treated as foreign income.

  • Subject to 25% withholding tax in the U.S..

  • Remaining 75% taxed in India as per slab rates.

• Double Taxation Avoidance Agreement (DTAA):

  • India-U.S. DTAA allows foreign tax credit for tax already paid in U.S.

  • To claim benefit: File Form 67 before Indian ITR filing.

  • Challenges in claiming:

    • Different financial years (U.S.: Jan–Dec vs India: Apr–Mar).

    • Exchange rate differences.

    • Timing and documentation mismatches.

Capital Gains Tax on U.S. Stocks

• No capital gains tax in U.S. for Indian NRAs (Non-Resident Aliens).

• But India taxes all capital gains from U.S. equities:

• Governed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

• Mandatory to disclose all foreign assets (stocks, bank accounts, etc.) under Schedule FA in ITR.

• Penalties for non-disclosure:

  • ₹10 lakh per year per asset.

  • Imprisonment up to 7 years in extreme cases.

• Even if:

  • Stock is not sold (no gains/losses),

  • Value is negligible (even $1),

  • Dividend is minimal,

  • Still must be declared.