US shares for an Indian HNI: the remittance, the tax and the estate
Buying Apple or an S&P 500 fund from India runs through five sets of rules: RBI's remittance limit, TCS when the money leaves, Indian tax on gains and dividends, foreign-asset disclosure, and a US estate tax that starts at $60,000. Above ₹50 lakh, each one costs real money if it is missed.
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Indian investors hold US shares through a broker app, an Indian fund of funds, or a wealth desk's offshore account. The tax and reporting rules are the same for the direct routes, and they change with the size of the holding.
1. How much you can send
RBI's Liberalised Remittance Scheme lets each resident individual send up to $250,000 a financial year for permitted current and capital account transactions, including investment abroad under the Overseas Investment Rules, 2022. The limit is per person, so two spouses can each send $250,000.
The limit counts what you send, not what you bring back. Once you have sent $250,000 in a year, selling and bringing money home does not free up room for more that year. Money from a sale that you do not reinvest has to come back within 180 days.
2. TCS when the money leaves
Your bank collects tax at source on LRS remittances above ₹10 lakh in a financial year. For investment, the rate is 20% of the amount above ₹10 lakh, unchanged by the Finance Bill 2026, which cut the rate only for education and medical treatment.
Send ₹1 crore in a year and the bank collects ₹18 lakh. It is not an extra tax. It shows against your PAN and counts towards your tax for the year, or comes back as a refund, but the money is out of your hands until you file.
3. Indian tax on gains
India treats US shares like shares not listed in India. Under the July 2024 Budget:
| Held for | Taxed at | At income above ₹2 crore, with surcharge and cess |
|---|---|---|
| Up to 24 months | Your slab rate | 39% |
| More than 24 months | 12.5%, no indexation | 14.95% |
The ₹1.25 lakh yearly exemption applies only to listed Indian equity and equity funds, so it does not cover gains on US shares. The surcharge on long-term gains is capped at 15%, which is why the long-term figure stays below 15%.
Gains are worked out in rupees, so a fall in the rupee while you hold the shares adds to your taxable gain.
4. Dividends are taxed twice, then credited
The US withholds tax on dividends paid to an Indian resident. Under the India–US tax treaty, as summarised by the Embassy of India in Washington, the rate for an individual is 25%. India then taxes the dividend at your slab rate, up to 39%, and gives credit for the US tax you paid, if you claim it in your return. Without the claim, the same dividend is taxed in both countries.
5. Disclose every year
Every resident must list foreign assets, including shares held abroad, and the income from them, in the income tax return. The Black Money Act sets a penalty of ₹10 lakh for leaving them out, whatever the asset is worth. Since 1 October 2024, the penalty does not apply when foreign assets other than property add up to ₹20 lakh or less. The Finance Bill 2026 extends the same ₹20 lakh limit to prosecution, backdated to 1 October 2024, and proposes a disclosure scheme, FAST-DS 2026, for small legacy holdings such as RSUs and old foreign bank accounts, from a date the government notifies.
An HNI's US holding is usually far above ₹20 lakh, so the full penalty applies to a missed disclosure.
The rule most investors miss: US estate tax
The US taxes the estate of a non-resident who is not a US citizen on assets in the US, and the IRS counts shares of US-organised companies as US assets even when the certificates are held abroad. A return is due if they exceed $60,000. The US has estate tax treaties with 15 countries; India is not one of them.
A non-resident's estate gets a credit of $13,000, and the rest is taxed on the US rate schedule, which reaches 40% above $1 million. Before deductions:
| US shares at death | US estate tax | Share of the holding |
|---|---|---|
| $250,000 | $57,800 | 23.1% |
| $500,000 | $142,800 | 28.6% |
| $1,000,000 | $332,800 | 33.3% |
Funds organised in the US can count as US assets too; funds organised elsewhere may not. Each fund's domicile is in its documents. Units of an Indian mutual fund that invests in US shares are units of an Indian fund, not US shares.
Questions
- How much money can an Indian resident invest in US shares?
- Up to $250,000 per person per financial year under RBI's Liberalised Remittance Scheme, which covers investment abroad under the Overseas Investment Rules, 2022.
- How much TCS is collected on money sent abroad to invest?
- 20% of the amount above ₹10 lakh in a financial year. On ₹1 crore that is ₹18 lakh, which counts towards your tax for the year.
- How are gains on US shares taxed in India?
- At your slab rate if held up to 24 months, and at 12.5% without indexation if held longer. The ₹1.25 lakh exemption does not apply.
- Are US dividends taxed twice?
- The US withholds 25% for an Indian resident individual. India taxes the dividend at your slab rate and allows credit for the US tax when you claim it in your return.
- What is the penalty for not disclosing US shares in the ITR?
- ₹10 lakh under the Black Money Act, unless your foreign assets other than property total ₹20 lakh or less.
- Can US estate tax apply to an Indian investor?
- Yes. A non-resident's US shares count as US assets, a return is due above $60,000, and India has no estate tax treaty with the US.
Sources
- RBI, FAQs on the Liberalised Remittance Scheme
- Government of India, Finance Bill 2026, Memorandum explaining the provisions
- Government of India, Finance (No. 2) Bill 2024, Memorandum explaining the provisions
- Embassy of India, Washington, Tax rates under the Income-tax Act and the India–US DTAA
- IRS, Some nonresidents with US assets must file estate tax returns
- IRS, Estate and gift tax treaties
- IRS, Instructions for Form 706-NA
- IRS, Instructions for Form 706 (unified rate schedule)
Compound is analysis, not investment advice. Reva Money is not a SEBI-registered investment adviser.
