How Much Tax on US Stocks in India is Payable As Per Law?

As an investor in US stocks from India, you end up paying two main taxes - dividend tax and capital gains tax (Short term and Long term). The tax liability is separate for both. A flat 25% tax is levied on dividends in the US which is adjusted against Indian tax. On the other hand capital gains tax is calculated in India only. 

Note that as of October 1, 2025, the US stock market commands a massive total market capitalisation of around $67.8 trillion. Investing in US stocks has become a popular choice for many Indian investors looking to tap into the growth of global leaders like Apple, Amazon, and Microsoft. 

In this vast sea of opportunities, one must acquaint themselves with all the tax rules and responsibilities. This blog will help you understand the tax on US stocks in India, how to calculate taxes, what DTAA is and more. 

Quick Synopsis 

• Indian investors pay two main taxes on US stocks: dividend tax and capital gains when paying tax on US stocks in India..
• Dividends are taxed at 25% in the US, but this amount can be adjusted against your Indian tax.
• The US does not tax capital gains for non-residents, but India taxes both STCG and LTCG.

Taxes Applicable on Investing in US Stocks 

There are two key tax on US stocks in India when you invest in stocks of USA:

Tax on Dividends

Dividends from US stocks are subject to a 25% withholding tax by the US government. For example, on a $200 dividend, $50 is withheld in the US, and the investor receives $150. 

The tax paid in the US can be adjusted against the Indian tax liability. So if India’s tax on the dividend is $60, after adjusting for $50 paid in the US, you pay only $10 in India.

Capital Gains Tax

In the USA, capital gains from selling shares are not taxed for non-residents. However, capital gain tax on US stocks in India is applicable. The capital gains tax on US stocks in India differs based on your holding period:

Long-Term Capital Gains (LTCG) apply if you keep shares for more than 24 months. Short-term capital gains tax on foreign shares applies if held less than 24 months.

How to Calculate STCG and LTCG on Your US Stock Investment? 

First, you have to calculate the profit by simply subtracting your buying price from your selling price. Also, to calculate your capital gains tax on US stocks in India, you have to determine the holding period of shares. 

If you keep them for more than 24 months, your profit counts as Long-Term Capital Gain (LTCG) and you are liable to pay 12.5% tax. If you sell the stock within 24 months, the profit becomes Short-Term Capital Gain (STCG). The tax calculation is then based on your income tax slab in India.

What is the Double Taxation Avoidance Agreement (DTAA)? 

The Double Taxation Avoidance Agreement (DTAA) is a tax treaty between India and the US that ensures you do not end up paying tax on US stocks in India on the same income twice. 

It clearly defines which country has the right to tax different types of income and how those taxes should be handled based on where you live. 

Objectives of DTAA

• Eliminate Double Taxation: It makes sure the income you earn in one country is not taxed again in the other.
• Encourage Better Economic Ties: By creating a stable and predictable tax setup, it helps India and the US strengthen their trade and investment relationship.
• Improve Clarity: The agreement lays out clear tax on US stocks in India for people and businesses working across borders, so there is less confusion.
• Reduce Tax Evasion: It allows both countries to share information, which makes it harder for anyone to hide income or avoid taxes illegally.
• Support International Trade: It cuts down extra tax costs on cross-border deals, helping businesses operate more smoothly and competitively in both countries.

How to File Your US Stocks Investing in Income Tax Filing?

By following these simple steps, you can report your US stock investments in ITR:

Choose the Right ITR Form: If you have any foreign assets, you can not file using ITR-1 or ITR-4. Instead, use ITR-2 if you are salaried with foreign investments, or ITR-3 if you also have business income.

Fill Out Schedule FA (Foreign Assets): This section is where you share details about your US stock investments, like:

• Country: USA
• Your broker/platform
• Type of asset: US stocks
• Value of your investment at the start of the financial year
• Value as on 31st March

Report Any Dividend Income: Dividends from US stocks are subject to a 25% withholding tax by the US government. Even so, you still need to declare this income in India under “Income from Other Sources.” 

To avoid paying tax twice, you can claim a Foreign Tax Credit (FTC) under the India-US DTAA.

4. Report Capital Gains When You Sell US Stocks

• STCG: If you sold the stock within 12 months, the profit is taxed at 20%.
• LTCG: If you held it for 12 months or more, your gains are taxed at 12.5%.

Investing in US stocks opens the door to global opportunities, but understanding the US stock tax in India is just as important as choosing the right companies to invest in. 

With the right disclosures and proper filing, you can enjoy the benefits of global investing after paying tax on US stocks in India.