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Tax Implications For Indian Residents Investing In The US Stock Market

Want to invest in US Stocks but don’t know what taxes you’ll pay? Read this to know more.
March 10, 2021

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The US markets have grown exponentially over the past 2 decades and currently have a whopping market cap of $36,258,650.9 million. When you compare the dollar to the Indian rupee, there’s only one clear winner.

So people choose to invest in their favourite US brands to create wealth for their child’s university education abroad or to simply create a nest egg. But with every investment, comes taxes. And when it comes to taxes, it’s good to be sure of how much you’ll likely pay.

So before you buy an Apple, Google, Microsoft, Tesla, or Netflix share, read this blog to know exactly what tax rules and regulations will apply to your US stock investments.

Fun Fact: Einstein did not understand taxes. He was an expert in theoretical physics. Read more about tax saving mistakes to avoid in 2020.

What Are The Tax Implications?

The tax rules and regulations are different for both countries. But fortunately, India and the US have a Double Tax Avoidance Agreement (DTAA) in place. This ensures that you don't pay a tax on the same income twice. Here is a list of the taxes you need to be aware of:

1. Tax on Dividends 

  • Flat tax @ 25% in the US deducted before you receive the dividends. 
  • Tax is also applicable to the dividends in India received in cash or if reinvested. 
  • DTAA allows you to offset the tax liability in India with the taxed money held in the US.

2. Capital Gains Tax

  • No capital gains tax in the US.
  • In India, Long Term Capital Gains tax applicable on stocks held for over 2 years. 
  • 20% plus all applicable fees and surcharges for LTCG.
  • Short Term Capital Gains applicable on stocks held for less than 2 years.
  • Tax rate according to investor’s slab for STCG.

Let’s assume you invest $1000 in the US markets. You receive $100 dividends. You earn a profit of $800. The amount you receive after paying:

  • Tax on $100 dividends @ 25% = $75
  • Dividend tax liability in India @ 40%: 60 - 25 = $35 [Tax paid in the US offsets the tax to be paid in India]
  • LTCG in India after 24 months at 20% = $640
  • STCG: Depends on your tax slab.

You can invest in your favourite US brands on your own using Cube. To try, start with as little as $1.

How To Invest In US Stocks With Cube Wealth?

When you invest in the US markets from India, you deal with 2 currencies. So naturally, there are FOREX implications to be mindful of along with brokerage charges, account maintenance charges, etc. There’s also the risk of currency fluctuations. 

But with an app like Cube Wealth. you have the advantage of speak to an experienced wealth coach who can guide you through the process efficiently. Moreover, Cube is the first app to bring US advisory to India. Our advisory partner, award-winning RIA, Rick Holbrook, currently manages ~$130 million for HNIs. 

To invest in the best US stocks from India, speak to a wealth coach or Download the app today.

Watch this video to know how to buy US stocks from India

Priya Bansal
Curious about personal finance and all things money. Can either find me reading a book or dancing to a tune.

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