1042-S form for Indian RSU holders: what it is and how to use it in ITR-2

Every February, Indian RSU holders with US shares that paid dividends find a document called Form 1042-S in their broker's tax document section. It looks unfamiliar, it's in USD, and it doesn't obviously connect to the ITR-2 filing — until you know what each box means.

The 1042-S is the source document for your foreign tax credit (FTC) claim. Without it, you can't complete Form 44. Without Form 44, you can't claim credit for the US tax already deducted from your dividends, and you end up paying Indian tax on the same income twice.

What Form 1042-S is

Form 1042-S (Foreign Person's US Source Income Subject to Withholding) is an IRS information return. US companies and brokers file it with the IRS and send a copy to any non-US recipient who received US-source income subject to US withholding tax during the calendar year.

For Indian RSU holders, the 1042-S typically covers:

• Dividends paid on RSU shares held in the broker account (income code 06)
• Occasionally, substitute dividends or other US-source income

It covers the US calendar year (January 1–December 31), not the Indian financial year (April 1–March 31). A 1042-S for calendar year 2025 is used when filing ITR-2 for AY 2026-27 (FY 2025-26, which covers April 2025–March 2026). Dividends paid in January–March 2025 (US calendar year 2025, Indian FY 2024-25) and April–December 2025 (Indian FY 2025-26) both appear on the same 1042-S.

This calendar-year vs financial-year mismatch is manageable: report all 2025 calendar year dividends in your AY 2026-27 (FY 2025-26) ITR-2. The ITD's consistent practice is to match the calendar year 1042-S to the assessment year in which most of that calendar year falls.

Box-by-box breakdown

Box 1: Income Code

06 = Dividends (the most common for RSU holders)

Other codes you might see: 01 (Interest), 15 (Short-term capital gains — uncommon for Indian residents), 17 (Real property gains).

If your 1042-S shows anything other than code 06, verify with your broker what income type it represents before including it in Form 44.

Box 2: Gross Income

The total gross dividend paid before any withholding. This is the number that goes into your Form 44 as gross income and into Schedule FSI as gross foreign-source income.

This is also what your AIS may pick up as "dividend income from foreign securities" — compare Box 2 (converted to INR) to your AIS entry to confirm they match.

Box 3a: Exemption Code

Usually blank for Indian residents with a treaty claim. If populated, it indicates why income is partly exempt — not relevant for standard dividend withholding situations.

Box 3b: Tax Rate

The withholding rate applied. Should be 15.00 if your W-8BEN was on file and valid. If it shows 30.00, your W-8BEN was missing or expired.

Box 4a: Exemption Code (Chapter 4)

FATCA-related field. Usually blank for individual RSU holders.

Box 7a: US Federal Tax Withheld

The actual USD amount withheld. This is the number that goes into Form 44 as "Tax paid in source country." Convert to INR using the SBI TTBR on the dividend payment date.

Box 7a should equal Box 2 × Box 3b%. For example: gross dividend $1,000 × 25% = $250 withheld (assuming valid W-8BEN invoking India-US DTAA Article 10(2)(b)).

Box 7b: Tax Not Withheld (Tax Withheld by Other Agent)

Usually blank. Sometimes populated if a withholding agent other than your broker applied the withholding.

Box 12: Reference Number

Your broker's internal account or plan reference. No ITR-2 relevance.

Box 13: Withholding Agent Information

Your broker's details. No ITR-2 relevance.

Box 14: Recipient Name and Address

Your name and address as registered with the broker. Verify this matches your PAN records — name mismatches can complicate FTC claims.

Box 15a–15e: Recipient's US TIN / Foreign TIN

Box 15b (Foreign TIN): Should show your PAN. This is how the IRS links the 1042-S to you as an Indian resident. If blank, your W-8BEN may not have included your PAN — update your W-8BEN.

Box 17a: Country Code

IN for India. Confirms you are treated as an Indian resident for treaty purposes.

Box 17b: Treaty Article

10 — the India-US DTAA article covering dividends. If this is blank, the treaty benefit was not applied.

Where to find your 1042-S

Brokers typically make 1042-S available by February 15 of the following year. Some brokers issue them earlier if the underlying paying company filed its information early.

If you don't see a 1042-S in your broker portal, it means either the company didn't pay dividends on your vested shares during the year, or you had no vested shares at the time of the dividend record date.

Converting 1042-S amounts to INR

The 1042-S is entirely in USD. ITR-2 and Form 44 require INR amounts. The conversion method:

For each dividend payment:

1. Find the exact payment date in your broker's dividend history (Statements → Dividend Activity or Activity → Dividends)
2. Look up the SBI TTBR for that date at sbi.co.in → Foreign Exchange Rates → TTBR historical rates
3. Multiply the dividend amount × SBI TTBR = INR gross dividend
4. Multiply the withholding amount × SBI TTBR (same date) = INR withholding

If dividends were paid monthly or quarterly, repeat for each payment date.

Practical shortcut used by many CAs: Use the average SBI TTBR for the financial year quarter in which the dividend was paid. This is not technically correct but is widely accepted in practice and reduces computation significantly for small dividend amounts.

How 1042-S feeds into Form 44 and ITR-2

Step 1: File Form 44

Form 44 is filed on the ITD compliance portal — it is not part of ITR-2 itself.

In Form 44, for each source country and income type:

File Form 44 before or simultaneously with ITR-2 on the same day. Form 44 filed after ITR-2 submission may result in the FTC being disallowed.

Step 2: Schedule FSI in ITR-2

Schedule FSI (Foreign Source Income) in ITR-2 captures the same dividend:

Step 3: Schedule TR in ITR-2

Schedule TR (Tax Relief) shows the total FTC claimed. This is populated automatically from Schedule FSI in the online ITR-2. Verify that the credit figure here matches what you computed in Form 44.

Step 4: Schedule OS in ITR-2

The gross dividend income (Box 2 in INR) is reported under Income from Other Sources in Schedule OS. It feeds into your total income for slab rate computation.

A worked example

1042-S for calendar year 2025:

• Box 2 (Gross income): $800
• Box 3b (Tax rate): 25% (India-US DTAA Article 10(2)(b) for individual investors)
• Box 7a (Tax withheld): $120
• Box 17a (Country): IN
• Box 17b (Treaty article): 10

Dividend payment dates and SBI TTBR:

• March 15, 2025: $200 dividend / $30 withheld — SBI TTBR ₹83.20
• June 15, 2025: $200 dividend / $30 withheld — SBI TTBR ₹83.50
• September 15, 2025: $200 dividend / $30 withheld — SBI TTBR ₹84.10
• December 15, 2025: $200 dividend / $30 withheld — SBI TTBR ₹84.60

INR conversions:

• March: ₹16,640 dividend / ₹2,496 withheld
• June: ₹16,700 dividend / ₹2,505 withheld
• September: ₹16,820 dividend / ₹2,523 withheld
• December: ₹16,920 dividend / ₹2,538 withheld
• Total: ₹67,080 gross / ₹10,062 withheld

Form 44:

• Gross income: ₹67,080
• Tax paid in USA: ₹10,062
• Indian tax on ₹67,080 at 30% slab: ₹20,124 + cess = ₹20,929
• FTC: ₹10,062 (US tax is less than Indian tax — full amount claimable)

Net Indian tax payable on this income: ₹20,929 − ₹10,062 = ₹10,867 Total effective tax: ₹10,062 (US) + ₹10,867 (India) = ₹20,929 = 31.2% effective — matching the Indian slab. No double taxation.

What to do if your 1042-S shows incorrect information

Wrong withholding rate (30% instead of 25%): File a new W-8BEN. For the current year's excess withholding, file Form 1040-NR to reclaim from the IRS.

Wrong name or PAN: Contact your broker to update the W-8BEN and request a corrected 1042-S. A corrected 1042-S is marked 'C' in Box 6.

Missing 1042-S for dividends you received: Check your broker's dividend activity. If dividends were paid but no 1042-S was issued, contact the broker — it may be a portal display issue or an account classification error.

1042-S received but you are a US citizen/green card holder: If you are a US person (citizen, LPR, substantial presence test), you should not be receiving a 1042-S — you should receive a 1099-DIV instead. Contact your broker to correct your account classification.

Broker-by-broker: where to find your 1042-S

Different platforms use different navigation paths:

Fidelity NetBenefits (most common employer equity platform):

• netbenefits.com → Accounts → Tax Forms → 1042-S
• Available by 15 February; sometimes later if the paying company's filing was delayed
• If not visible, call Fidelity's participant line and ask specifically for "1042-S for non-resident alien accounts"

E*TRADE / Morgan Stanley at Work:

• etrade.com → Accounts → Tax Center → tax forms for the year → 1042-S

Schwab Equity Awards:

• schwabequityawards.com → My Profile → Tax Documents → 1042-S

Morgan Stanley Equity Edge Online:

• Stock Plan → Tax Documents → 1042-S

What to do if 1042-S is missing or not generated

This happens for three main reasons:

1. Wrong account classification (US person instead of NRA): The broker issued a 1099-DIV instead of a 1042-S, meaning your W-8BEN was missing or expired. Contact the broker to reclassify the account and request a corrected form. The 1099-DIV may show 0% WHT — but you should have had 25% withheld. The under-withheld amount may need to be corrected via a new W-8BEN; the already-underpaid WHT can sometimes be recouped only via a Form 1040-NR filing.

2. De minimis amount or exemption applied: If the dividend amount was below certain thresholds or an exemption code applied, some brokers do not generate a 1042-S. Use the broker's dividend transaction history to reconstruct amounts and WHT for Form 44.

3. Unvested RSU dividend equivalents handled separately: Dividend equivalents on unvested shares are sometimes processed through the equity plan administrator's payroll system, not the broker's regular dividend workflow. Contact the equity plan team directly if you believe dividend equivalents were paid but no 1042-S was issued.

Backup document: If you cannot obtain a 1042-S and your broker's tax statement shows the dividend and WHT amounts with a notation that WHT was applied, use the broker's consolidated tax statement. The Income-tax portal will accept the broker's statement as a supporting document for Form 44. The 1042-S is the preferred document, but it is not the only acceptable one.

RSU dividend equivalents vs. regular vested-share dividends

Some US companies pay dividend equivalents on unvested RSU awards — crediting the dividend amount to the employee's account at vest rather than paying cash at the dividend date. If you receive these:

• They appear on the 1042-S as income code 06 (dividends), same as regular dividends paid on vested shares
• WHT treatment is identical: 25% with a valid W-8BEN, 30% without
• For Form 44, treat them identically to regular dividends — same INR conversion, same FTC claim

If your employer does not pay dividend equivalents (many technology companies do not), you will only see a 1042-S for dividends on shares that were already vested and held in your broker account at the dividend record date.

Form 67 vs. Form 44: which applies to your 1042-S

For AY 2026-27 (FY 2025-26 income, filed July 2026), the operative form is Form 67 — the 1042-S data feeds into Form 67 exactly as described in the worked example above (Box 2 for gross income, Box 7a for US WHT, both converted to INR at SBI TTBR).

From AY 2027-28 onwards (income earned from 1 April 2026), Form 44 replaces Form 67 under the new Income-tax Act, 2025. The data you extract from the 1042-S is identical — the portal navigation changes, the underlying document and the conversion methodology do not.