Indian residents investing in US shares, exchange-traded funds, restricted stock units or overseas brokerage accounts must consider more than capital-gains tax. They may also have to report the foreign brokerage account, disclose every foreign investment, declare dividend income, claim foreign tax credit and preserve supporting documents.

These obligations can apply even when no shares were sold during the year and even when the investment value is small.

Who must report US stocks and ETFs?

The reporting requirements primarily apply to a person who is classified as a resident and ordinarily resident in India.

Such a taxpayer is generally taxable in India on global income, including:

• Dividends received from US companies or US ETFs;
• Capital gains from the sale or redemption of US securities;
• Interest or cash credits received in the foreign brokerage account; and
• Other income arising from foreign investments.

Schedule FA is generally not required to be completed by a non-resident or a resident but not ordinarily resident. However, their Indian taxability must still be examined according to their residential status and the source and receipt of income.

How are dividends from US stocks and ETFs taxed?

Dividends from US stocks and ETFs are generally taxable in India under the head Income from Other Sources at the slab rate applicable to the taxpayer.

The gross dividend should ordinarily be reported before deducting US withholding tax. A deduction may be claimed only for eligible interest expenditure incurred to earn the dividend, subject to a maximum of 20% of the dividend income. Brokerage charges, portfolio-management fees and other collection expenses are not generally deductible from dividend income.

Under Article 10 of the India-US Double Taxation Avoidance Agreement, the United States may tax dividends paid to an Indian resident. In ordinary individual investor cases, the treaty rate may be up to 25% of the gross dividend, subject to treaty eligibility and documentation such as a valid Form W-8BEN furnished to the broker.

How are gains from selling US shares taxed?

US stocks and ETFs are not treated as securities listed on a recognised stock exchange in India. Consequently, the special provisions applicable to Indian listed equity shares, including section 111A and section 112A, do not ordinarily apply.

Capital gains must be computed in Indian rupees. The sale consideration, cost and related transfer expenses should be converted using the exchange-rate rules applicable under the Income-tax Rules. Simply converting the net dollar gain at the year-end exchange rate may produce an incorrect result.

Example

Suppose an Indian resident purchased US shares for an INR-equivalent cost of ₹4,00,000 and sold them after more than 24 months for an INR-equivalent consideration of ₹6,50,000.

The long-term capital gain would generally be ₹2,50,000. For a transfer occurring on or after 23 July 2024, the gain would ordinarily be taxable at 12.5%, before surcharge and health and education cess. The ₹1,25,000 exemption applicable to specified listed securities under section 112A does not ordinarily apply to US shares.

Which ITR schedules must be completed?

1. Schedule Capital Gains

Every sale, redemption or other taxable transfer of US stocks or ETFs should be reported in the applicable short-term or long-term capital-gains schedule.

2. Schedule Other Sources

Gross dividends, interest and other taxable investment receipts should be reported under the appropriate income head.

3. Schedule FSI

Schedule FSI records income arising from sources outside India. Dividend income and capital gains from US investments should be linked to the corresponding income head. Where foreign tax credit is claimed, the applicable country code, foreign tax, treaty article and eligible relief must also be entered.

4. Schedule TR

Schedule TR provides a country-wise summary of the foreign tax relief claimed under section 90, section 90A or section 91.

5. Schedule FA

Schedule FA captures foreign assets and accounts held at any time during the relevant calendar year ending on 31 December. Depending on the brokerage arrangement, US investments may require disclosure in:

• Table A2: Foreign custodian account;
• Table A3: Foreign equity and debt interest;
• Table B: Financial interest in an entity outside India; or
• Another relevant table based on the nature of the account or asset.

Information may include the date of acquisition, initial investment value, peak value, closing value, gross income and sale or redemption proceeds.

How does foreign tax credit work?

Where US tax has been withheld from dividend or other foreign income that is also taxable in India, an Indian resident may claim foreign tax credit.

• Section 90: Applies where India has entered into a DTAA with the foreign country, such as the United States.
• Section 90A: Applies to notified agreements between specified associations in India and specified territories.
• Section 91: Provides unilateral relief where no applicable tax treaty exists.

The credit is generally restricted to the foreign tax attributable to the income that is also offered to tax in India. It cannot ordinarily exceed the Indian tax payable on the corresponding foreign income. Credit is not allowed for foreign tax that remains disputed, although it may be claimed after the dispute is settled, subject to the prescribed conditions.

Form 67 for AY 2026-27

For FY 2025-26 and AY 2026-27, foreign tax credit continues to be claimed under the Income-tax Act, 1961 and Rule 128 of the Income-tax Rules, 1962 by filing Form 67.

Form 67 requires details of:

• Foreign-source income offered to tax in India;
• Tax paid or deducted in the United States;
• The applicable DTAA provision;
• Foreign tax credit claimed; and
• Evidence of foreign tax payment or deduction.

Form 67 is filed online through: e-File > Income Tax Forms > File Income Tax Forms > Forms as per Income-tax Act, 1961 > Form 67.

It is advisable to submit Form 67 before filing the return or sufficiently before the applicable statutory deadline. Preserve its acknowledgement and ensure that the amounts match Schedule FSI and Schedule TR.

What changes under the Income-tax Act, 2025?

The Income-tax Act, 2025 came into force from 1 April 2026. It generally applies from tax year 2026-27 onwards. It does not replace the Income-tax Act, 1961 for the return relating to FY 2025-26 and AY 2026-27.

Under the 2026 framework, Form 44 replaces the earlier Form 67 for the relevant tax years governed by the Income-tax Act, 2025. Form 44 must generally be furnished within 12 months from the end of the relevant tax year, subject to the return being filed within the prescribed time. Accountant verification is required for companies and, in other cases, where foreign tax paid for the tax year is ₹1 lakh or more.

Does section 89A apply to an ordinary US brokerage account?

Generally, no. Section 89A is a timing-relief provision for specified foreign retirement-benefit accounts maintained in a notified country. The United States is a notified country for this purpose.

Relief may be relevant where an individual opened an eligible retirement account while being a non-resident of India and resident in the United States, and the United States taxes the account on withdrawal or redemption instead of annually on accrual.

Ordinary taxable brokerage accounts holding US stocks or ETFs do not become retirement-benefit accounts merely because the investment is intended for retirement. Accounts such as a qualifying 401(k) or IRA should be separately examined under section 89A and Rule 21AAA.

Documents to retain

• Annual brokerage and custodian statements;
• Monthly account statements showing peak and closing balances;
• Trade confirmations and transaction-wise capital-gains reports;
• Dividend statements and US withholding-tax records;
• Form 1042-S, where issued;
• Copy of Form W-8BEN furnished to the broker;
• Foreign tax payment or deduction certificate;
• Exchange rates used for income and asset conversion;
• Form 67 acknowledgement; and
• Prior-year Schedule FA disclosures for reconciliation.

Common mistakes

• Reporting only capital gains and omitting the foreign brokerage account from Schedule FA;
• Showing net dividends after US withholding instead of gross dividends;
• Claiming the entire US tax without calculating the eligible Indian foreign tax credit;
• Applying section 112A and the ₹1,25,000 threshold to US shares;
• Using a single year-end exchange rate for all transactions;
• Leaving out investments sold before the end of the calendar year;
• Filing ITR-1 or ITR-4 despite holding foreign assets;
• Mismatch between Form 67, Schedule FSI and Schedule TR; and
• Treating an ordinary US brokerage account as eligible for section 89A relief.

Conclusion

An Indian resident holding US stocks or ETFs must coordinate three separate requirements: taxation of foreign income, reporting of foreign assets and claiming credit for US tax. The taxpayer should reconcile brokerage statements, dividend records, transaction-wise gains, Schedule FA values and Form 67 before filing the return.

Incorrect or incomplete foreign-asset reporting can have consequences beyond ordinary income-tax adjustments. The return should therefore be reviewed carefully, particularly where the taxpayer holds multiple brokerage accounts, RSUs, employee stock plans, retirement accounts or investments transferred between brokers.

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