Tax
US shares and ETFs: Indian tax, US withholding, no ₹1.25 lakh
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.
Rates on this page
| Asset | Long-term after | Short-term | Long-term |
|---|---|---|---|
| US / foreign shares & ETFs | 24 months | Your slab | 12.5% |
Which Indian rules apply to a foreign share
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.
The rupee is part of the calculation
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 withholding on dividends, and the treaty
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.
TCS is not a tax — and LRS caps how much you can send
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 →
Questions on us shares and etfs
Do I pay tax in India on US shares if the US does not tax my gain?
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.
Why does my US holding show a gain when the share price is flat?
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.
Is the TCS I paid on remittance refundable?
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.
Sources
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.
- Income Tax Department — Capital Gain (Tax Guide)Two holding periods since 23 Jul 2024 (12 months listed securities, 24 months other assets); section 111A short-term rate of 20% on STT-paid equity shares, equity-oriented funds and business-trust units; section 112A long-term rate of 12.5% on the same assets above ₹1,25,000; the uniform 12.5% long-term rate without indexation; the deemed short-term list (depreciable assets, market-linked debentures, specified mutual funds, unlisted bonds and unlisted debentures).Read: Internet Archive snapshot of 14 May 2026 (the department's live pages return 403 to this host).
- CBDT — FAQs on the new capital-gains regime (via PIB, 24 Jul 2024, PRID 2036604)Effective 23 Jul 2024; the two holding periods; gold's long-term test reduced from 36 to 24 months; STT-paid listed-equity short-term rate raised from 15% to 20% and the long-term rate from 10% to 12.5%; the section 112A exemption raised from ₹1 lakh to ₹1,25,000 from FY 2024-25 onwards; other long-term gains at 12.5% without indexation; rollover benefits unchanged (section 54EC bonds up to ₹50 lakh).Read: Live fetch, 25 Sep 2026.
- India–US Double Taxation Avoidance Agreement, Article 10 (dividends)The treaty dividend rate of 25% for individuals otherwise chargeable at 30%, which is why US dividends are withheld at 25% when a W-8BEN is on file.Read: Verified 24 Sep 2026 for LETSINVEST-146 (PDF downloaded and read); reused here.
- Income Tax Rules, 1962 — Rule 128 (foreign tax credit)The rule that governs a foreign tax credit claim, including the form and the certificate the taxpayer must furnish. Honest limitation: the rule's own PDF could not be re-read for this build — the department's site refuses this host (403) and the archive rejected the PDF request — so the hub links to the rule and does not quote a form number.Read: URL taken from the department's own site index (archived 20 Jun 2026); the PDF body could not be read today.
- Income Tax Department — section 394 TCS table (via the HDFC Bank LRS page, verified for LETSINVEST-146)TCS rates on outward remittances with effect from 1 Apr 2026 (nil up to ₹10 lakh, 20% for other purposes above it) — and the fact that TCS is a tax collected at source the taxpayer can adjust, not a final tax.Read: Verified 24 Sep 2026 for LETSINVEST-146; reused here.
- RBI — Liberalised Remittance Scheme FAQsThe USD 250,000-per-financial-year LRS cap for residents — the ceiling that decides how much can be sent to a US broker at all.Read: Verified 24 Sep 2026 for LETSINVEST-146; reused here.