Nowadays, many Indian investors are funding US companies such as Apple, Google, or Tesla from their money. Although the earnings might be thrilling, you also have to be aware of the withholding tax on US stocks—particularly with relation to dividends.
Should you profit from US equities, this advice will assist in your understanding of tax policies and avoidance of double taxation.
Explain withholding tax
Tax deducted at source by the US government on the dividends given to outside investors—including Indians—is withholding tax. It is gathered before the money finds your account. Therefore, a portion of your US equities, should you be receiving dividends, are automatically taxed in the US.
Holding Tax Rate for US Stocks
The norm is thirty percent.
But thanks to the India–US Double Taxation Avoidance Agreement (DTAA), Indian investors pay just 15%.
You have to turn in Form W-8BEN through your broker to gain this advantage.
Example:
Apple gives you a $100 dividend, for instance.
- Without Form W-8BEN => $30 withheld (30%)
- Form W-8BEN → $15 withheld (15%).
The balance ends up in your account.
Regarding Capital Gains
Sales of US stocks result in no withholding tax payable on capital gains. Nonetheless, in India, financial gains are taxed.
Your Income Tax Return (ITR) must show capital gains declarations.
Should you own US equities for more than 24 months, profits are taxed as long-term capital gains at 20% with indexation.
How Can One Prevent Double Tax?
Definitely yes. With a DTAA, India and the US let you claim credit in India for the 15% tax paid in the US already.
This keeps one from paying tax twice on the same dividend income.
You had to:
- List US dividend income in your ITR.
- Display US tax paid here.
- Claim foreign tax credit on your return using Schedule FSI and Schedule TR.
Form W-8BEN submission guidelines
Most Indian brokers—including Zerodha, Vested, INDmoney, Groww, etc.—let you send it online.
It is good for three years.
Without this form, your tax rate will be thirty percent rather than fifteen percent.
Advice for US Stocks Indian Investors
- Get the lower tax rate by always filing Form W-8BEN.
- Record every selling transaction and dividend.
- Review withholding using the tax statement of your broker.
- File your ITR correctly if you want international tax credit.
Finally
Every Indian trading abroad must first understand withholding tax on US equities. Although 15% tax is taken on profits, correct filing allows you to recover it. Plan wisely, obey the guidelines, and appreciate worldwide investment free from tax complications.
