Key Takeaways on Tax on Foreign Stocks in India
- Capital gains tax: Foreign shares are treated as unlisted securities under Indian tax law. Short-term capital gains (held ≤24 months) are taxed at 20%, and long-term capital gains (held >24 months) at 12.5% without indexation[reference:0][reference:1].
- Dividend tax: Dividends from foreign stocks are taxed at the investor's applicable income tax slab rate in India. The US typically withholds 25% tax on dividends paid to Indian residents under the India-US DTAA[reference:2].
- LRS and TCS: Indian residents can invest up to USD 250,000 per financial year under LRS. TCS at 20% applies on remittances exceeding â‚ą10 lakh in a financial year and is adjustable against tax liability[reference:3].
- Reporting is mandatory: Resident and Ordinarily Resident (ROR) taxpayers must disclose all foreign assets in Schedule FA of their ITR—regardless of value. Foreign income must be reported in Schedule FSI[reference:4][reference:5].
- Claim Foreign Tax Credit: Use Form 44 (replaced Form 67 from 1 April 2026) to claim credit for taxes paid abroad under DTAA[reference:6].
More Indians are investing in foreign stocks than ever before. US stocks, global ETFs, and overseas employee stock plans have become easily accessible through the Liberalised Remittance Scheme (LRS) and investment platforms[reference:7]. But while buying Apple or Nvidia shares is now a few taps away, understanding how those investments are taxed in India is far more complex.
Many investors know how to buy foreign assets. Far fewer understand how those investments are taxed when they are sold, how dividends are treated, or what they must report in their income tax return[reference:8]. This guide covers everything about the tax on foreign stocks in India—capital gains, dividends, TCS on LRS remittances, DTAA benefits, Foreign Tax Credit, and the critical reporting requirements you cannot afford to miss.
Looking for expert help with tax on foreign stocks in India, foreign stocks capital gains tax India, US stocks tax India, Schedule FA reporting? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
How Are Foreign Stocks Taxed in India?
For Indian resident taxpayers, global income is taxable in India under the Income-tax Act, 2025 (which came into effect on 1 April 2026, corresponding to the erstwhile Income-tax Act, 1961)[reference:9][reference:10]. This means income earned from foreign shares, overseas brokerage accounts, and foreign trading activities must be reported and taxed in India—regardless of where the income is earned or whether tax has been paid in the foreign jurisdiction[reference:11].
The taxation of foreign stocks falls into three main categories:
- Capital gains tax — on profits from selling foreign shares
- Dividend tax — on income from foreign company dividends
- TCS on remittances — Tax Collected at Source when sending money abroad under LRS
Capital Gains Tax on Foreign Stocks
Shares listed only on overseas exchanges—such as those in the US (NYSE, NASDAQ), South Korea, or Taiwan—are treated as unlisted securities under Indian tax law[reference:12][reference:13]. The holding period determines whether the gain is short-term or long-term[reference:14].
Holding Period and Tax Rates
| Holding Period | Category | Tax Rate | Key Points |
|---|---|---|---|
| ≤ 24 months | Short-term capital gains (STCG) | 20% | Taxed at a flat 20% rate[reference:15] |
| > 24 months | Long-term capital gains (LTCG) | 12.5% | Without indexation[reference:16][reference:17] |
Important: Unlike listed Indian shares, foreign shares do not get the â‚ą1.25 lakh exemption under Section 112A because no Securities Transaction Tax (STT) is paid on these transactions[reference:18].
Example: LTCG on Foreign Stocks
Suppose you buy foreign shares for â‚ą5,00,000. After three years, you sell them for â‚ą8,00,000[reference:19]:
| Component | Amount |
|---|---|
| Sale proceeds | â‚ą8,00,000 |
| Less: Cost of acquisition | (â‚ą5,00,000) |
| Long-term capital gain | â‚ą3,00,000 |
| Tax @ 12.5% | â‚ą37,500 |
Plus applicable surcharge and cess (verify current rates on incometaxindia.gov.in).
Currency Conversion: The SBI TT Rule
When you invest in foreign stocks, transactions occur in foreign currency, but taxes are calculated in Indian rupees[reference:20]. The prescribed method:
- Compute capital gains in the same foreign currency (e.g., USD) by taking sale consideration, cost of acquisition, and transfer-related expenses in USD[reference:21]
- Convert the resultant capital gain into Indian rupees using the State Bank of India (SBI) Telegraphic Transfer (TT) buying rate prevailing on the last day of the month immediately preceding the month in which the shares are sold[reference:22][reference:23]
Example: If you sell shares in August 2026, the applicable exchange rate would be the SBI TT buying rate as on 31 July 2026[reference:24].
⚠️ Note: Currency fluctuations can affect taxable capital gains. There is no separate tax relief for rupee depreciation that may have occurred between investment and sale[reference:25]. (Verify current exchange rates and prescribed methods on incometaxindia.gov.in.)
Overseas Intraday Trading
The tax treatment of overseas intraday trading is different. Since there is ordinarily no delivery of shares, such transactions generally do not give rise to capital gains. Instead, profits are treated as business income and taxed at the taxpayer's applicable slab rate[reference:26].
Dividend Tax on Foreign Stocks
Dividends from foreign companies—like Apple, Microsoft, or Google—are taxable in India[reference:27].
US Dividend Withholding
When a US company pays a dividend to an Indian resident, the US typically withholds tax at source:
- Standard US withholding: 30%
- Reduced rate under India-US DTAA: 25% (after submitting Form W-8BEN)[reference:28][reference:29]
Example: If you receive $100 as a dividend:
| Step | Amount |
|---|---|
| Gross dividend | $100 |
| US withholding @ 25% | ($25) |
| Net dividend received | $75 |
Indian Tax on Dividends
In India, dividends are taxed according to the investor's income tax slab rate under the head "Income from Other Sources"[reference:30][reference:31].
Example with Foreign Tax Credit:
Suppose your Indian slab rate is 30%:
| Step | Amount |
|---|---|
| Indian tax on dividend @ 30% | $30 |
| Less: US tax already paid | ($25) |
| Additional tax payable in India | $5 |
You can claim credit for the US tax already paid under the Double Taxation Avoidance Agreement (DTAA)[reference:32]. (Verify current DTAA provisions on incometaxindia.gov.in.)
LRS and TCS: Sending Money Abroad
Under the Reserve Bank of India's Liberalised Remittance Scheme (LRS) , resident individuals can remit up to USD 250,000 per financial year for permitted purposes, including investments in foreign stocks, ETFs, and mutual funds[reference:33][reference:34].
TCS on LRS Remittances
Before money leaves India, your bank may collect Tax Collected at Source (TCS) under the LRS[reference:35]:
| LRS Remittance in a Financial Year | TCS Rate |
|---|---|
| Up to â‚ą10 lakh | 0% |
| Above â‚ą10 lakh | 20% on the excess amount[reference:36] |
Key points to note (verify current TCS rates on the RBI or Income Tax portal):
- The â‚ą10 lakh limit is cumulative and includes all eligible LRS remittances, not just overseas investments[reference:37]
- TCS is not an extra tax—it works like advance tax and can be adjusted against your final tax liability when filing your ITR[reference:38]
- TCS collected is reflected in Form 26AS and can be claimed while filing your return[reference:39]
Form W-8BEN for US Investments
If investing in US stocks, bonds, or ETFs, you should submit Form W-8BEN to your overseas broker. This establishes your resident Indian status and ensures applicable India-US tax treaty benefits are applied correctly[reference:40].
Reporting Foreign Stocks in Your ITR
This is the most critical and most commonly missed obligation. If you are a Resident and Ordinarily Resident (ROR) taxpayer holding foreign assets, you must report them in your ITR—regardless of value[reference:41][reference:42].
Which ITR Form to Use?
| Situation | ITR Form |
|---|---|
| Holding foreign assets or earning foreign income | ITR-2 or ITR-3 (cannot use ITR-1 or ITR-4)[reference:43] |
| Salary + one house property + no foreign assets | ITR-1 |
| Business income + foreign assets | ITR-3 |
Schedule FA: Foreign Assets
Schedule FA (Foreign Assets) is a mandatory disclosure section for resident taxpayers holding assets outside India[reference:44][reference:45].
What must be reported?
- Overseas brokerage accounts
- Foreign shareholdings (including US stocks, ETFs, and RSUs)
- Foreign bank accounts
- Other foreign financial assets[reference:46]
Reporting period: Schedule FA follows the calendar year (January 1 to December 31), while income tax returns follow the financial year[reference:47]. For AY 2026-27, you must report all foreign assets held at any time between January 1, 2025 and December 31, 2025—even if held for just one day[reference:48][reference:49].
Schedule FSI: Foreign Source Income
Any income earned from foreign assets (dividends, interest, capital gains) must be disclosed in Schedule FSI (Foreign Source Income)[reference:50][reference:51].
Schedule TR: Tax Relief
If claiming Foreign Tax Credit, report relief in Schedule TR of the ITR[reference:52].
Foreign Tax Credit: Form 44
If tax has already been deducted or paid in a foreign country, Indian resident taxpayers can claim Foreign Tax Credit (FTC) to avoid double taxation[reference:53].
Key Changes for 2026
Under the Income-tax Act, 2025 and Income-tax Rules, 2026:
- Form 44 has replaced Form 67 for claiming Foreign Tax Credit (FTC)[reference:54]
- Credit is available under the applicable DTAA[reference:55]
How to Claim FTC
- Ensure the foreign income has been offered to tax in India[reference:56]
- File Form 44 electronically on the Income Tax Department's portal before claiming the credit[reference:57]
- Report foreign income in Schedule FSI and claim relief in Schedule TR[reference:58]
- Retain supporting documents:
- Foreign tax withholding certificates
- Brokerage statements
- Dividend statements
- Tax payment receipts[reference:59]
The FTC available is limited to the lower of: the foreign tax paid or deducted, OR the Indian tax payable on the same income[reference:60].
The India-US DTAA: Avoiding Double Taxation
The Double Taxation Avoidance Agreement (DTAA) between India and the US prevents double taxation on the same income[reference:61].
Capital Gains
Under Article 13 of the India-US DTAA, each country may tax capital gains in accordance with its own domestic law[reference:62]. India taxes capital gains on US stocks as per Indian tax law (STCG at 20%, LTCG at 12.5%)[reference:63].
Key point: No capital gains tax is deducted in the US for Indian residents on publicly traded US stocks[reference:64]. India is the taxing jurisdiction.
Dividends
The US withholds 25% on dividends paid to Indian residents under the India-US DTAA (reduced from the standard 30% domestic rate)[reference:65][reference:66]. India taxes the dividend at the investor's slab rate, with credit for US tax paid.
Special Cases: GIFT City and Section 47(viiab)
US stocks traded through GIFT City may qualify for a capital gains tax exemption under Section 47(viiab) if:
- The shares are listed on an IFSC exchange
- Sold by a non-resident
- Sale consideration is received in foreign currency[reference:67]
If the exemption is unavailable, the shares are treated as unlisted securities, and the same STCG (20%) and LTCG (12.5%) rates apply[reference:68]. (Verify current applicability of Section 47(viiab) on incometaxindia.gov.in.)
RSUs and ESOPs: Special Tax Treatment
Restricted Stock Units (RSUs) and Employee Stock Options (ESOPs) from foreign employers have a two-stage tax treatment[reference:69]:
| Stage | Event | Tax Treatment |
|---|---|---|
| Stage 1 | Vesting or exercise | Taxed as salary income at slab rate |
| Stage 2 | Sale of shares | Taxed as capital gains (STCG at 20% or LTCG at 12.5%) |
Key point: The cost of acquisition for capital gains purposes is the value on which salary tax was paid at vesting/exercise.
Reporting Foreign Assets: Common Mistakes to Avoid
1. Assuming small investments don't need reporting
"If I invested only ₹5,000 in a US stock, that's too small to report." This is incorrect. Schedule FA requires reporting regardless of value—even a ₹1 investment must be disclosed[reference:70].
2. Using ITR-1 or ITR-4
If you have foreign assets or foreign income, you cannot use ITR-1 or ITR-4. You must file ITR-2 or ITR-3[reference:71].
3. Forgetting Schedule FA
Many taxpayers report foreign income but forget to disclose the foreign assets themselves in Schedule FA. The reporting obligation arises from holding the foreign asset itself, not merely from earning income from it[reference:72].
4. Missing the calendar year reporting period
Schedule FA uses the calendar year (January 1 to December 31), not the financial year[reference:73]. For AY 2026-27, report assets held between January 1, 2025 and December 31, 2025.
5. Not claiming Foreign Tax Credit
If tax was withheld abroad, you can claim credit in India. Failing to file Form 44 (formerly Form 67) means missing out on this credit.
6. Incorrect currency conversion
Use the SBI TT buying rate on the last day of the month preceding the sale month—not the rate on the transaction date or the rate shown on your broker's statement[reference:74].
Penalties for Non-Compliance
| Violation | Consequence |
|---|---|
| Failure to report foreign assets | Penalty under income tax law |
| Undisclosed foreign income | Tax at 30% on value of undisclosed asset as on 31 March 2026[reference:75] |
| Non-filing of required schedules | Assessment and potential scrutiny |
2026 Tax Year Checklist for Foreign Stock Investors
- Review all foreign holdings held between January 1, 2025 and December 31, 2025
- Gather brokerage statements for all foreign accounts
- Collect dividend statements and tax withholding certificates
- Calculate capital gains using SBI TT buying rates
- Prepare Schedule FA with all foreign asset details
- Prepare Schedule FSI with all foreign income
- File Form 44 (if claiming Foreign Tax Credit)
- File ITR-2 or ITR-3 (not ITR-1 or ITR-4)
- Verify TCS credit in Form 26AS for LRS remittances
Where Tax Garden Helps
Tax on foreign stocks involves multiple moving parts: capital gains calculation with currency conversion, dividend taxation with DTAA credit, TCS on LRS remittances, and mandatory reporting in Schedule FA, Schedule FSI, and Schedule TR.
Tax Garden's CAs help you:
- Calculate capital gains on foreign stocks using prescribed SBI TT rates
- Claim Foreign Tax Credit using Form 44
- Prepare and file Schedule FA, Schedule FSI, and Schedule TR
- Ensure DTAA benefits are correctly applied
- File the correct ITR form (ITR-2 or ITR-3)
- Avoid penalties for non-disclosure of foreign assets
Looking for expert help with tax on foreign stocks in India, foreign stocks capital gains tax India, US stocks tax India, Schedule FA reporting? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Tax on Foreign Stocks in India: FAQs
What is the tax rate on foreign stocks in India?
Foreign shares are treated as unlisted securities. Short-term capital gains (held ≤24 months) are taxed at 20%. Long-term capital gains (held >24 months) are taxed at 12.5% without indexation. Verify current rates on incometaxindia.gov.in.
Do I have to pay tax on US stocks in India?
Yes. As an Indian resident, your global income is taxable in India. Capital gains from US stocks are taxed in India at STCG 20% or LTCG 12.5%. Dividends are taxed at your slab rate.
What is the â‚ą1.25 lakh exemption for foreign stocks?
There is NO â‚ą1.25 lakh exemption for foreign stocks. The exemption under Section 112A applies only to listed Indian shares on which STT is paid. Foreign shares do not qualify.
Do I need to report foreign stocks in my ITR even if I made no profit?
Yes. Schedule FA requires disclosure of foreign assets regardless of value or whether any income was earned. Even if you held a foreign stock for one day, you must report it.
What ITR form should I use for foreign stocks?
You must use ITR-2 or ITR-3. You cannot use ITR-1 or ITR-4 if you hold foreign assets or have foreign income.
What is TCS on LRS and how does it work?
When you remit money abroad under LRS, TCS at 20% applies on remittances exceeding â‚ą10 lakh in a financial year. This TCS is adjustable against your tax liability when filing your ITR. Verify current TCS rates on the RBI or Income Tax portal.
How are foreign dividends taxed in India?
Foreign dividends are taxed at your applicable income tax slab rate under 'Income from Other Sources.' You can claim Foreign Tax Credit for tax withheld abroad using Form 44.
What is Form 44 (formerly Form 67)?
Form 44 is the form for claiming Foreign Tax Credit (FTC) under the Income-tax Act, 2025. It replaced Form 67 from 1 April 2026. File it electronically before claiming credit for taxes paid abroad.
Do I pay tax in both the US and India on US stocks?
Under the India-US DTAA, you generally do not pay tax twice. Capital gains are taxed only in India (US does not tax capital gains of Indian residents on US stocks). Dividends have US withholding (25%) with credit available in India.
What happens if I don't report my foreign stocks?
Failure to report foreign assets can lead to penalties, scrutiny, and tax at 30% on undisclosed foreign assets. The Income Tax Department receives data through CRS and FATCA, so non-disclosure is increasingly risky.
Sources: Income-tax Act, 2025; Income-tax Rules, 2026; India-US Double Taxation Avoidance Agreement (DTAA), Article 13; RBI Liberalised Remittance Scheme (LRS) guidelines; CBDT notifications on Schedule FA, Schedule FSI, Schedule TR, and Form 44. Verify current rates, due dates, and reporting requirements on incometaxindia.gov.in before acting, as rules may be updated periodically. This article is general information on tax on foreign stocks in India and not a substitute for advice on your specific situation.
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