US Stocks from India: RSUs, ESOPs, and Tax in Two Countries

You bought Rs. 2 lakh of Apple stock through Vested / INDmoney. Year 2: disclosure in Schedule FA (mandatory, non-negotiable). Year 3: sell at Rs. 3 lakh. Dual tax events (US withholding + India LTCG), DTAA treaty relief, and Form 67 for foreign tax credit. Miss any step and the ITR becomes complicated: non-disclosure of holdings triggers Black Money Act penalty at Rs. 10 lakh/year, missing Form 67 forfeits the US tax credit. Tech employees with RSUs discover all three rules simultaneously; LRS investors discover them one at a time over filing seasons.

By the end, you will know the end-to-end tax flow for foreign stock holdings by an Indian resident: dividend rules, capital-gain rates, FA disclosure, Form 67, and the W-8BEN optimisation.

Read this first

Schedule FA walkthrough

The three events

DIVIDEND. US withholds 25% (15% if W-8BEN filed, under India-US DTAA). India taxes the dividend at slab rate in your hands. Foreign tax credit up to the DTAA rate via Form 67.
SALE. Long-term (> 24 months holding): 12.5% Indian LTCG without indexation. Short-term (< 24 months): slab rate. US typically does not withhold capital-gains tax for non-US persons filing W-8BEN.
HOLDING DISCLOSURE. Schedule FA in ITR-2 / ITR-3 every year you hold any foreign asset, even with zero activity.

Form 67 and the foreign tax credit

Form 67 is the formal claim for foreign tax credit (FTC) under section 90/91. Due BEFORE or WITH the ITR. Not after. Miss the deadline, FTC is disallowed, and you pay full Indian tax on the same income that was already taxed abroad (double taxation, no relief). The form requires: country of source, tax paid abroad, certificate/receipt from the foreign tax authority, and the DTAA article invoked (Article 11 for dividend from US to India).

Practical mechanics: Vested / INDmoney provide an annual statement with per-transaction US withholding data. Upload that as proof with Form 67. The FTC is limited to the LOWER of (a) actual foreign tax paid and (b) Indian tax on that same income. For a 30%-slab investor: US withheld 15% dividend tax, Indian tax at 30% = credit 15%, pay 15% in India to total 30% (same as if it were Indian-source income). Treaty does its job.

W-8BEN and the 10% saving

Every Indian resident investing in US equity MUST file W-8BEN with the US broker to claim DTAA benefits. Without W-8BEN: 25-30% US withholding on dividends. With W-8BEN: 15% withholding (the DTAA rate between India and US for dividends). W-8BEN is a single form, valid for 3 years, filed once with your broker (auto-done by Vested/INDmoney during KYC). The 10-15% saving is real money on every dividend for as long as you hold the stock.

Form 67 must be filed BEFORE or WITH ITR

Form 67 (foreign tax credit claim) is a separate e-filing, due before or simultaneous with the ITR. Missing the deadline = FTC disallowed = full Indian tax + full US withholding already paid = double tax. Set a reminder: Form 67 before 31 July (or the ITR due date).

Form 67 must precede or accompany ITR

Form 67 filed late = FTC disallowed. A perfect Indian ITR without Form 67 means you pay full Indian tax on already-US-taxed dividend income. Double taxation. Set a pre-31-July reminder.

W-8BEN. 3-year validity, free 10% saving

Sign and submit W-8BEN with your foreign broker once every 3 years. Without it: 30% US withholding on dividends. With it: 15%. Zero cost, major saving. Vested / INDmoney auto-include in KYC.

LRS cap and the $250,000 per year rule

Liberalised Remittance Scheme caps your outward remittance at USD 250,000 per financial year (all purposes: investment, travel, medical, etc.). Investing in US stocks eats into this LRS cap. Stay well under. Exceeding without prior RBI approval is a FEMA contravention, separate from tax.

Key Takeaways

Holding US stocks to Schedule FA disclosure every year, whether sold or not.
W-8BEN cuts US dividend withholding from 25-30% to 15% under DTAA Article 11.
Long-term (> 24 months): 12.5% Indian LTCG without indexation.
Form 67 is the FTC claim; file before or with ITR to avoid double taxation.
Non-disclosure in Schedule FA: Rs. 10 lakh/year penalty under Black Money Act.