Investing in US Stocks from India - The Complete Tax and ITR Guide

Good news - you absolutely can invest in US stocks from India. And it has gotten surprisingly easy over the last few years.

But here is the thing nobody tells you upfront: the investing part is simple. The tax part? That is where most Indian investors get confused, stressed out during ITR season, or worse - end up paying double tax without realising they did not have to.

This guide walks you through everything. How to actually invest, which platforms to use, how your gains get taxed, what happens with US dividends, and most importantly - how to correctly file your ITR so you are not overpaying the government.

Three Ways to Buy US Stocks from India

There are three main routes, each with slightly different mechanics:

Route 1: Indian Platforms (INDmoney, Vested, Appreciate)

This is the easiest starting point for most Indians. Apps like INDmoney and Vested let you open a US brokerage account right from your phone.

Some platforms route US-stock access through GIFT City / IFSC entities, which can add a layer of Indian regulatory oversight on top of the US broker relationship. Specific structures change over time - check the platform's current disclosures and the IFSCA registered entities list before relying on any particular regulatory claim.

• You remit money from your Indian bank account under the Liberalised Remittance Scheme (LRS)
• The platform handles the USD conversion and routes your money to a US brokerage like DriveWealth or Alpaca Securities
• You can buy fractional shares - so you can invest ₹5,000 in Amazon even though one Amazon share costs $180+
• Most platforms have zero or very low commission on US stock trading

Platform note: Groww discontinued its US stocks service in 2024, citing complications with remittance and settlement. Zerodha and Upstox do not currently offer direct US stock investing. For US stocks, use INDmoney, Vested, or Appreciate.

Route 2: India INX / NSE IFSC (GIFT City)

India INX is India's first international exchange, located in GIFT City, Gujarat - treated as a special economic zone. You can access international securities through GIFT City's IFSC route. For resident individuals, remittances to IFSC for such investments are permitted under LRS, so the usual LRS rules and annual limit still apply.

• No Stamp Duty or Securities Transaction Tax (STT) on trades, which is a cost advantage over regular Indian exchanges
• Available through select brokers like ICICI Direct and HDFC Securities
• Still relatively new, so liquidity on some stocks can be lower than US exchanges

Route 3: Direct US Brokers (Interactive Brokers)

For more serious investors, opening a direct account with Interactive Brokers gives you access to the full US market - all stocks, ETFs, bonds. More control, lower costs at scale, but slightly more paperwork. You will need to fill a W-8BEN form (more on that shortly).

How the 20% TCS on LRS Remittance Actually Works

Any LRS remittance above ₹10 lakh in a financial year attracts 20% Tax Collected at Source (TCS). This threshold was raised from ₹7 lakh to ₹10 lakh in Budget 2025, effective April 1, 2025. So if you send ₹12 lakh to buy US stocks, your bank will collect 20% on the ₹2 lakh above the threshold - that is ₹40,000 as TCS upfront.

Key point: TCS is NOT an additional tax. It is an advance payment towards your income tax liability. You can fully claim it back as a credit when you file your ITR. It just temporarily holds your cash.

If your total tax liability for the year is ₹1.5 lakh and you paid ₹40,000 as TCS, you only need to pay ₹1.1 lakh more. Or if your liability is less than ₹40,000, you get the excess refunded.

US Stocks Tax in India: How Capital Gains Are Taxed

India taxes you on your global income - which includes gains from US stocks.

Budget 2024 update: LTCG on foreign assets is now taxed at 12.5% without indexation. Changed from the earlier 20% with indexation. For most investors holding quality stocks long term, this is actually better.

Example: You bought Apple shares worth ₹1,00,000 in January 2022 and sold them in March 2024 for ₹1,60,000. Holding period is 26 months so LTCG of ₹60,000 is taxed at 12.5% = ₹7,500 tax.

What About Losses?

• Short term losses can be set off against both STCG and LTCG
• Long term losses can only be set off against LTCG
• Unabsorbed losses can be carried forward for 8 years

US Dividends and the DTAA India US Treaty Benefit

When a US company pays you a dividend, the US government automatically withholds tax before the money reaches you. The default withholding rate is 30%. So if Apple declares a $10 dividend per share, you receive only $7 - the rest goes to the IRS.

The W-8BEN Form: Your Best Friend

India and the US have a Double Taxation Avoidance Agreement (DTAA). Under this treaty, the default US withholding on dividends drops from 30% to 25% for most Indian individual investors (the 15% rate often quoted online applies only to corporate shareholders that own 10% or more of the voting stock - it does not apply to retail investors).

To claim this benefit, submit a W-8BEN form to your broker. Most Indian platforms ask you to fill this during account opening. If you have not done it, do it now - it lowers your US withholding from 30% to 25% immediately.

Key point: W-8BEN tells the US that you are an Indian tax resident covered under the India-US DTAA. With it, US withholding drops from 30% to 25% for individual investors. Without it, you pay the full 30% - and still owe Indian tax on top.

But You Still Pay Tax in India Too, Right?

Yes - US dividends are taxable in India at your income tax slab rate. But you get credit for the 25% already paid in the US.

Example: You received $100 in dividends. US deducted $25 (25% after W-8BEN). In India, assuming you are in the 30% slab, you owe 30% of approximately ₹8,300 = ₹2,490. You get credit for approximately ₹2,075 already paid in the US. Net tax payable in India = ₹415. You do not pay 30% plus 25%. You pay 30% total, with 25% already credited.

ITR Filing for US Stocks: What You Need to Report

If you have foreign income or foreign assets including US stocks, you cannot file ITR-1. You must file ITR-2 (if no business income) or ITR-3 (if you have business or professional income).

Warning: Filing ITR-1 when you hold foreign assets is a mistake. The IT department matches LRS remittance data with ITR filings.

Schedule FA: Foreign Assets

Schedule FA is mandatory for every Indian resident who holds foreign assets - even if you have zero gains during the year. If you hold even one US share, you must fill Schedule FA.

• Name of the company or investment
• Country (United States)
• Date of acquisition and cost of acquisition in INR at the exchange rate on purchase date
• Peak value during the year in INR
• Closing value on 31st December of the calendar year - Schedule FA follows the calendar year, not the financial year
• Income derived such as dividends received

Watch out: Schedule FA follows the calendar year (Jan to Dec), not India's financial year (Apr to Mar). Report the closing value as of December 31, not March 31.

Schedule FSI and Schedule TR

Schedule FSI is where you report income earned outside India - dividends from US stocks. Schedule TR is where you claim the DTAA credit against your Indian tax liability.

Also important: Form 67 must be filed on or before the due date under section 139(1), which is usually July 31 for non-audit cases, unless extended. File it before or alongside your ITR, not after. Many people miss this step and their DTAA credit claim gets rejected.

Common Mistakes with Schedule FA Foreign Assets Reporting

• Not filing Schedule FA: Mandatory even with zero gains. Penalty under the Black Money Act can be significant.
• Confusing TCS with capital gains tax: TCS on LRS is an advance tax, not capital gains tax. Threshold is now ₹10 lakh (Budget 2025).
• Not submitting W-8BEN: Without it, you pay 30% withholding instead of 25% on dividends.
• Not filing Form 67: Must be filed on or before the due date under section 139(1), which is usually July 31 for non-audit cases, unless extended. File it before or alongside your ITR, not after.
• Using wrong exchange rate: For Schedule FA and foreign-income reporting, use the SBI telegraphic transfer (TT) buying rate as prescribed (Rule 115). For capital gains on US shares, compute purchase cost and sale proceeds in INR using the actual conversion / TT rates and broker-bank records applicable on the relevant dates, and keep documentation consistent.
• Missing DTAA credit in Schedule TR: Report in Schedule FSI but also claim in Schedule TR - both are required.

Which Platform Should You Use to Invest?

The Bottom Line

Investing in US stocks from India is genuinely straightforward. The platforms have made the process painless. What trips people up is the tax compliance - and once you understand the three schedules (FA, FSI, TR) and the W-8BEN form, it is not that complicated either.

• Submit W-8BEN to get 25% withholding instead of 30% on dividends (the 15% rate is only for corporate shareholders with 10%+ voting stock)
• TCS on LRS above ₹10 lakh (Budget 2025 threshold) is refundable - claim it in ITR
• File ITR-2 or ITR-3 (not ITR-1) if you hold foreign assets
• Fill Schedule FA every year you hold US stocks - even with zero gains
• File Form 67 on or before the section 139(1) due date (usually July 31 for non-audit cases, unless extended) to claim DTAA credit
• Claim DTAA credit in Schedule TR to avoid double taxation
• Use the SBI TT buying rate (per Rule 115) for Schedule FA and foreign-income reporting; for capital gains, use actual conversion/TT rates on the trade dates and keep broker-bank records consistent

If your US stock portfolio is getting sizeable, a good CA for ITR filing is absolutely worth it. The DTAA credits and correct Schedule FA filing alone can save you more than the CA fee.

Disclaimer: This article is for educational and informational purposes only. It does not constitute financial, investment, legal, or tax advice. Tax laws change frequently - always verify with a qualified CA or official sources (incometax.gov.in, rbi.org.in). DesiUtils.in has no commercial relationship with any platform mentioned.