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Tax
Residents are taxed in India on the worldwide gain at 12.5% after two years — with no exemption and the rupee doing the maths.
A resident Indian buying US shares or ETFs is taxed in India on the worldwide gain. There is no STT, so section 112A does not reach foreign shares: the ₹1,25,000 exemption never applies, and the holding test is the general twenty-four months. Long-term gains pay 12.5% without indexation, short-term gains join your income at slab, and because the gain is computed in rupees the exchange rate is part of your cost and your proceeds. On top of that sit US withholding on dividends and the treaty relief that gives it back.
| Asset | Long-term after | Short-term | Long-term |
|---|---|---|---|
| US / foreign shares & ETFs | 24 months | Your slab | 12.5% |
Foreign shares are a capital asset held outside the section 111A/112A list: no STT, so no concessional short-term rate and no ₹1,25,000 long-term exemption. What remains is the general rule — twenty-four months to long-term, 12.5% without indexation long-term, slab short-term. Dividends are a separate head: taxed at slab in India, with the US tax already withheld credited against it.
Cost is what you paid in rupees (including the conversion spread your bank charged), proceeds are what the sale raised in rupees when it landed, and the difference is the taxable gain. A US position that is flat in dollars can still show an Indian gain if the rupee weakened while you held it — and the reverse is equally true. Keep your remittance advice and contract notes; without the rupee cost you cannot compute the gain after a few years.
US dividends are withheld at 30% unless a W-8BEN is on file, in which case the India–US treaty rate of 25% for individuals applies. The withheld amount is US tax on income you also report in India, so the treaty's relief mechanism gives you a credit for it — claimed in your Indian return under the foreign-tax-credit rule, with the certificate that rule prescribes. Both sides of that sentence matter: you report the gross dividend, and you claim the credit.
Outward remittance for investment attracts TCS once the combined ₹10 lakh per-PAN per-year threshold is crossed, at 20% for 'other purposes'. TCS is collected at source, not a final tax: it is adjustable against your income-tax liability or refundable when you file, so a cost calculator that folds it into 'the cost of US investing' is overstating the case. And underlying it all, the LRS cap is USD 250,000 per financial year for a resident — the hard ceiling on how much can go out at all.
Price a US route before you remit →
Yes. Residency decides the Indian liability, not whether the source country taxed you. India taxes a resident on global income, so the gain is reported here — and if the US did tax it, the treaty's relief mechanism gives a credit so the same income is not taxed twice.
Because the gain is computed in rupees. If the rupee weakened between purchase and sale, the same dollar proceeds convert to more rupees, and that difference is a taxable capital gain in India. The reverse also holds: a dollar gain can shrink or vanish in rupee terms if the rupee strengthens.
It is adjustable against your income-tax liability and refundable if it exceeds it — it is a collection mechanism, not a levy on the investment. Report it in your return as tax paid and it flows through the computation; it is not part of your cost of acquisition.
Reviewed 25 Sept 2026. Tax rates are set by statute and change with the annual Finance Act, so the Income Tax Department's own pages are the authority — every claim here links to one, with the snapshot date noted where the department's site refused an automated read.