Capital gains tax on US stocks in India: the complete guide (LTCG, STCG, RSUs, dividends, ITR-2)

Most tax guides written for Indian investors assume you are investing in Indian listed equity — stocks on NSE or BSE, equity mutual funds, maybe some bonds. Those guides are largely useless if you hold US stocks. The tax treatment is categorically different in almost every dimension: the holding period threshold, the applicable rate, the currency in which you compute the gain, the ITR form, the schedules you fill, and the foreign tax credit mechanics.

This guide covers capital gains taxation on US-listed equities — individual stocks, ETFs, ADRs — held by Indian tax residents. It also covers dividends, RSU-specific cost basis rules, ESPP perquisite treatment, advance tax obligations, loss harvesting, and every ITR form and schedule you need to know by name.

Part of the 2026 tax filing series. This article focuses on capital gains and the mechanics of computing and reporting them. For foreign asset disclosure (Schedule FA), see the complete Schedule FA guide. For TCS on LRS remittances and how to reclaim it, see the TCS and LRS guide. For RSU-specific perquisite and capital gains planning, see Rovia for RSU holders.

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1. The foundational rule: US stocks are not treated like Indian listed equity

When an Indian resident buys shares of Reliance Industries on NSE and sells them, they pay Securities Transaction Tax (STT) on the transaction. That STT payment is the ticket to a concessional tax regime: 12.5% LTCG (after 12 months) and 20% STCG (within 12 months), both calculated directly without needing to touch the slab rate.

When the same Indian resident buys Apple shares on Nasdaq through Rovia, no STT is paid — the transaction happens on a US exchange under US market structure. No STT means no access to the concessional equity regime under the Indian Income Tax Act.

US stocks are classified under Indian tax law as unlisted foreign equity — the same category as shares in a foreign private company. The tax treatment that follows from this classification:

Aspect	Indian listed equity (STT paid)	US stocks / foreign equity (no STT)
Short-term threshold	12 months or less	24 months or less
Long-term threshold	More than 12 months	More than 24 months
STCG rate	20% (flat)	Slab rate (up to 30% + surcharge + cess)
LTCG rate	12.5% (flat, above ₹1.25 lakh exemption)	12.5% (flat, no exemption, post 23 July 2024)
Indexation on LTCG	Not available	Not available (post 23 July 2024)
Currency of computation	INR (bought and sold in INR)	INR (converted from USD using RBI TT rate)
STT deduction	Yes	No

The single most important thing to absorb from this table: the 12-month rule people talk about for Indian equity does not apply to US stocks. Your Apple shares must be held for more than 24 months to qualify for the 12.5% long-term rate.

The Budget 2024 change: 12.5% without indexation

Before 23 July 2024, long-term capital gains on foreign equity (including US stocks held more than 24 months) were taxed at 20% with indexation benefit. Indexation allowed you to inflate the cost of acquisition by the Cost Inflation Index (CII), which meaningfully reduced the taxable gain when Indian inflation had been running high.

The Finance (No. 2) Act 2024, which received Presidential assent on 16 August 2024 and was effective from 23 July 2024, changed this to 12.5% without any indexation.

Two important consequences:

1. If you sold US stocks before 23 July 2024 (in FY 2024-25), your LTCG from those sales is taxed under the old regime: 20% with indexation. You will use CII to inflate the INR cost basis, compute the indexed gain, and pay 20%.

2. If you sold US stocks on or after 23 July 2024 (which covers all of FY 2025-26 and going forward), the new regime applies: 12.5% on the actual INR gain, no indexation.

For most investors with US stocks held in a USD-denominated account where the rupee has depreciated over time, the 12.5% flat rate without indexation is likely a net positive — you pay less even without the inflation adjustment. But for investors who held stocks for many years with significant CII benefit, the math might differ. In either case, the law is what it is.

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2. The 24-month holding period — exactly which assets, exactly when it starts

The three thresholds in Indian capital gains law

Indian tax law has three different holding-period thresholds for different asset classes:

• 12 months — Indian listed equity and equity mutual funds (STT-paid transactions on recognised stock exchanges)
• 24 months — Foreign equity (US stocks, foreign ETFs, foreign company shares), unlisted securities, immovable property (from FY 2024-25 onward for property; was 24 months earlier for equity, now confirmed for foreign equity)
• 36 months — Unlisted Indian equity (shares of Indian private companies), debt mutual funds, bonds, gold ETFs (as of post-2023 rule changes)

US stocks sit firmly in the 24-month bucket. Shares held for more than 24 months are long-term. Shares held for 24 months or less are short-term.

"More than 24 months" means the holding period must exceed 24 complete calendar months. If you buy on 15 March 2024, the 24-month mark falls on 15 March 2026 — you need to sell on 16 March 2026 or later to qualify as long-term.

RSUs: holding period starts at vest, not grant

If you receive RSU grants from your employer, the holding period for capital gains purposes starts on the vest date — the date on which the shares were transferred to your demat or brokerage account.

The grant date is irrelevant for capital gains holding period purposes. A grant made in January 2022 with a vest in January 2024 has a holding period that starts in January 2024. You will not qualify for LTCG until January 2026.

This is distinct from the perquisite tax event (which also occurs at vest — the FMV at vest is your perquisite income, taxed as salary). The same vest date that triggers perquisite tax also starts the capital gains clock.

Fractional shares

Fractional shares — increasingly common on platforms that allow partial share purchases — follow exactly the same holding period rules. A fractional share of 0.25 AAPL is still a fractional share of AAPL. The holding period starts on the purchase date of that fraction. Each fractional purchase creates a separate lot with its own acquisition date and cost basis.

Different lots, different periods

If you bought shares of the same company on multiple dates — a common pattern for regular monthly investors — each purchase creates a separate lot with its own acquisition date. Some lots may be long-term, others short-term, depending on when you bought them relative to the sale date.

Which lot you sell matters enormously for your tax liability. This is addressed in the cost basis and lot identification section below.

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3. How to compute the capital gain in INR

The core formula

Even though you bought and sold in USD, Indian tax law requires you to compute the capital gain in Indian Rupees. The formula is:

Capital Gain (INR) = Sale Proceeds (INR) − Cost of Acquisition (INR)

Sale Proceeds (INR)      = Sale price (USD) × RBI TT buying rate on sale date
Cost of Acquisition (INR) = Purchase price (USD) × RBI TT buying rate on purchase date

No deduction is available for brokerage commissions paid on a US exchange under the standard capital gains computation (unlike Section 48 treatment, brokerage on foreign transactions is debated — consult your CA). STT is of course zero.

Which exchange rate to use

The exchange rate to use is the RBI Reference Rate — also referred to as the telegraphic transfer (TT) buying rate published by the State Bank of India on the relevant date.

The RBI publishes reference rates for major currencies (USD, EUR, GBP, JPY) every business day. For USD/INR, this rate is the official rate for computing the INR equivalent of foreign currency transactions.

You can find historical RBI reference rates on the RBI website (rbi.org.in → Database on Indian Economy → Exchange Rates). Rovia provides the applicable SBI TT rate for each of your transactions on the platform, visible in your transaction statement and tax report.

If there is no rate published for a particular date (weekend, holiday), use the rate of the immediately preceding working day.

Why you need the exact rate on the exact date

Using an approximate or average rate introduces errors in your cost basis that will misstate your capital gains. The Income Tax Department has access to historical RBI rates and can flag discrepancies during scrutiny. Use the actual rate for the actual transaction date.

The computation step by step

Say you bought 10 shares of Microsoft on 5 June 2022 at $265 per share, when the SBI TT buying rate was ₹77.60 per USD. You sold all 10 shares on 20 August 2024 at $430 per share, when the SBI TT buying rate was ₹83.90 per USD.

Cost of Acquisition:

• USD cost = 10 × $265 = $2,650
• INR cost = $2,650 × ₹77.60 = ₹2,05,640

Sale Proceeds:

• USD proceeds = 10 × $430 = $4,300
• INR proceeds = $4,300 × ₹83.90 = ₹3,60,770

Capital Gain:

• INR gain = ₹3,60,770 − ₹2,05,640 = ₹1,55,130

Holding period: 5 June 2022 to 20 August 2024 = 26 months and 15 days → more than 24 months → Long-term capital gain

Tax (post Budget 2024, sale on 20 August 2024): 12.5% × ₹1,55,130 = ₹19,391

Plus 4% Health and Education Cess on the tax = ₹776.

Total tax on this gain = approximately ₹20,167.

Note: There is no basic exemption on LTCG from foreign equity (unlike the ₹1.25 lakh exemption that applies to LTCG on Indian listed equity under Section 112A). The 12.5% applies from the first rupee of long-term gain on foreign equity.

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4. The FX gain component — it is part of your capital gain, not separate

A question that comes up frequently: "What if the stock price was flat in USD but the rupee depreciated? Do I pay tax on the FX gain?"

The answer is yes, and here is the precise mechanism.

Because you compute both cost and proceeds in INR using the exchange rate on the respective dates, any appreciation in USD relative to INR between your purchase date and sale date automatically inflates your INR proceeds relative to your INR cost — creating a gain even if the stock itself went nowhere in dollar terms.

This is not a separately classified "foreign exchange gain" for Indian tax purposes. It is simply part of the total INR capital gain, computed as described above. There is no separate FX gain treatment, no separate FX gain rate, and no deduction or exclusion for the currency component.

Example:

You buy 1 share of Apple at $150 when the SBI TT rate is ₹82/USD.

• INR cost = 1 × $150 × ₹82 = ₹12,300

Two years later, Apple is still trading at exactly $150, but the rupee has weakened to ₹88/USD. You sell.

• INR proceeds = 1 × $150 × ₹88 = ₹13,200
• INR capital gain = ₹13,200 − ₹12,300 = ₹900

Despite zero gain in USD terms, you have a ₹900 capital gain in INR — entirely driven by rupee depreciation. That ₹900 is a long-term gain (assuming more than 24 months) taxed at 12.5%, generating ₹112.50 in tax.

The reverse is also true: if the rupee strengthens significantly while the stock appreciates in USD, your INR gain will be smaller than the USD gain. Both directions are captured automatically in the INR computation.

This FX component is why holding US stocks has a built-in INR-hedge property for Indian investors: rupee weakness mechanically creates INR gains even without underlying stock appreciation. But it cuts both ways — if you hold USD cash (not stocks) and the rupee strengthens, you have no capital gain offset mechanism.

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5. RSU cost basis — what it is and how to use it

The perquisite event and the capital gains event are separate

When RSU shares vest, two tax events occur:

1. Perquisite income: The fair market value (FMV) of shares at vest is treated as salary income under Section 17(2) of the Income Tax Act. Your employer deducts TDS on this. This is the perquisite tax.

2. Acquisition for capital gains: You are now the owner of shares with a cost of acquisition equal to the FMV at vest.

These are two separate tax events. The perquisite tax you paid at vest is a separate income tax liability that has already been discharged — it does not reduce your capital gains basis, and it does not flow into Schedule CG.

Computing the RSU cost basis in INR

RSU Cost Basis (INR) = FMV per share at vest (USD) × SBI TT buying rate on vest date × number of shares vested

The FMV at vest is typically the closing price of the stock on the vest date on the relevant US exchange (NYSE or Nasdaq). Rovia provides this figure in your RSU tax report alongside the applicable SBI TT rate for the vest date.

Example:

100 shares of your employer (say, a US tech company listed on Nasdaq) vest on 15 February 2024. The closing price is $200. The SBI TT buying rate on 15 February 2024 is ₹83.50/USD.

• RSU Cost Basis = 100 × $200 × ₹83.50 = ₹16,70,000
• Holding period starts: 15 February 2024

If you sell all 100 shares on 20 February 2026 (more than 24 months from vest) at $280, and the SBI TT rate is ₹87/USD:

• Sale Proceeds = 100 × $280 × ₹87 = ₹24,36,000
• LTCG = ₹24,36,000 − ₹16,70,000 = ₹7,66,000
• Tax = 12.5% × ₹7,66,000 = ₹95,750 + 4% cess = ₹99,580 total

Lot identification: FIFO vs specific lot

Indian tax law does not explicitly mandate FIFO (first-in, first-out) for foreign equity the way some jurisdictions do for mutual fund units. However, the Income Tax Act under Section 48 read with the general principles of capital gains computation allows identification of specific lots at the time of sale.

In practice, most platforms and many CAs use FIFO as the default. Specific lot identification (selling specific lots that are advantageous for your tax position — for example, lots that are long-term, or lots with higher cost basis) is a legitimate strategy and is not prohibited under Indian tax law. There is no specific rule requiring FIFO for listed foreign equities.

Practically, to use specific lot identification:

• Maintain clear records of each acquisition date and cost per share (in USD and INR)
• When you sell, specify to your broker which lot you are selling (if the broker supports this)
• Report the acquisition date and cost of the specific lot in your ITR Schedule CG filing

Rovia's tax report provides a lot-by-lot breakdown of all your acquisitions and their INR cost basis, making specific lot identification straightforward.

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6. Dividend taxation in India

US withholding tax: 25% under the DTAA

When a US company pays a dividend to an Indian resident shareholder, the US imposes withholding tax (WHT) on the dividend before it reaches you.

Under US domestic law, the standard WHT rate for non-resident shareholders is 30%. However, the India-US Double Taxation Avoidance Agreement (DTAA), signed in 1989 and amended subsequently, provides that dividends paid to Indian residents are subject to a maximum WHT of 25% at source in the US.

To be eligible for the 25% DTAA rate (rather than 30%), your broker must have filed the appropriate US tax forms (W-8BEN) on your behalf establishing your Indian residency. Reputable brokers including Rovia handle this automatically. The dividend you receive (net of 25% WHT) will show up in your account, and you will receive a Form 1042-S (or its equivalent in your annual tax statement) showing the gross dividend and tax withheld.

Indian taxation of the dividend

In India, dividends from foreign companies are included in your total income under the head "Income from Other Sources" (Section 56 of the Income Tax Act). They are taxed at your applicable slab rate — not at any concessional rate.

Unlike dividends from Indian listed companies (which have the dividend distribution tax legacy and the ₹10 lakh threshold from earlier years), foreign dividends have always been taxable as ordinary income in India.

So the full chain is:

1. US company declares $X dividend per share
2. US withholds 25% → you receive $0.75X net
3. In India, you report the gross dividend (i.e., $X converted to INR, not just the net $0.75X you received) as income under "Other Sources"
4. Indian income tax applies at slab rate on the gross INR dividend amount
5. You claim a Foreign Tax Credit (FTC) for the 25% US WHT paid, which is set off against your Indian tax liability on that income

This means the FTC effectively eliminates double taxation up to the extent of the Indian slab rate. If your Indian slab rate is 30% and US WHT was 25%, your net Indian liability on the dividend is effectively 5% (30% Indian tax − 25% FTC credit). If your Indian slab rate is lower than 25% (e.g., you are in the 20% bracket), the FTC credit will exceed your Indian tax on the dividend, but you cannot claim a refund for excess FTC — it can be carried forward in some cases (see Section 90/91 and Rule 128 for carryforward mechanics, which are complex and best handled with a CA).

Example of dividend tax computation:

You hold 200 shares of a US company that pays a quarterly dividend of $0.50 per share.

• Gross dividend = 200 × $0.50 = $100
• US WHT at 25% = $25
• Net received = $75
• INR conversion (say ₹84/USD on dividend payment date): Gross = ₹8,400 | WHT = ₹2,100 | Net = ₹6,300
• Gross INR dividend reported in ITR = ₹8,400 (under "Other Sources")
• Indian tax at 30% slab = ₹2,520
• FTC for US WHT = ₹2,100
• Net Indian tax liability = ₹2,520 − ₹2,100 = ₹420
• Plus cess 4% = ₹437 total

If you receive dividends from multiple US stocks across the year, aggregate all gross dividends and all WHT amounts per country (USA) for the Form 67 calculation.

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7. Form 67: claiming the Foreign Tax Credit

Form 67 is the mechanism by which you claim credit for taxes paid in a foreign country (in this case, US withholding tax on dividends) against your Indian income tax liability.

Key procedural rules:

• Form 67 must be filed before the due date of filing your ITR — typically 31 July for non-audit cases (or 31 October for audit cases). If you file Form 67 after the ITR due date, the FTC claim can be denied, even if the ITR itself is filed late.
• Form 67 is filed on the income tax portal (incometax.gov.in), under "Forms" → "File Income Tax Forms" → "Form No. 67"
• You must file a separate Form 67 for each foreign country from which you received income with taxes withheld. If you have dividend income and separately have some other foreign-source income both from the US, you file one Form 67 for the USA.

Information you need to fill Form 67:

Field	What to enter
Name of country	United States of America
Article of DTAA	Article 10 (Dividends) of the India-US DTAA
Corresponding section of Indian Act	Section 90 (for DTAA countries)
Nature of income	Dividends
Gross income from that country (INR)	Total gross dividend income in INR (before US WHT deduction)
Tax payable in India on that income	Indian tax computed on the gross INR dividend at slab rate
Tax paid in foreign country (INR equivalent)	Total US WHT deducted, converted to INR
Foreign tax credit to be claimed	Lower of: Indian tax on foreign income OR foreign tax paid
Evidence	Form 1042-S or annual tax statement from your broker showing gross dividend and tax withheld

Step-by-step process:

1. Download your annual tax statement from Rovia (or your broker) — this will show total gross dividends received and total US WHT deducted for the financial year.
2. Convert gross dividends and WHT to INR using SBI TT rates applicable on each dividend payment date (Rovia's tax report provides these).
3. Log in to incometax.gov.in, go to "e-File" → "Income Tax Forms" → "File Income Tax Forms" → Form No. 67.
4. Fill the fields as above, attach your broker's tax statement as evidence.
5. Submit Form 67 (it can be submitted with DSC or EVC — same e-verification methods as ITR).
6. Note the acknowledgment number. You will reference this when filling Schedule TR in your ITR.
7. Then file your ITR-2 with the FTC amount populated in Schedule TR.

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8. Which ITR form to use — and why ITR-1 is off the table

This is a common source of errors. Many individual salaried taxpayers default to ITR-1 (Sahaj) because it is the simplest form. ITR-1 cannot be used if you hold any foreign asset or have any foreign-source income.

ITR Form	Who can use it	Who cannot
ITR-1 (Sahaj)	Resident individuals with salary, one house property, other sources (no foreign assets/income)	Anyone with US stocks (foreign assets), foreign dividends, or capital gains from foreign equity
ITR-2	Individuals/HUFs with capital gains, foreign assets, foreign income — but NO business/professional income	Those with business income (use ITR-3)
ITR-3	Individuals/HUFs with business or professional income, plus any other income including foreign assets	None of the above disqualify ITR-3; it covers everything
ITR-4 (Sugam)	Presumptive income under sections 44AD/44ADA/44AE	Cannot have foreign assets or capital gains from foreign sources

Almost all Rovia investors filing as resident individuals with salaried income (and no business income) will file ITR-2.

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9. The four schedules you must fill in ITR-2

Schedule CG: Capital Gains

This is where you report your actual capital gains from US stocks. The schedule is divided into sub-sections based on the nature and holding period of the asset.

For short-term capital gains on US stocks:

• Section A5: "Short-term capital gains on assets other than at A1, A2, A3, A4 and A4a" — this is the catch-all STCG section for assets taxed at slab rate
• Gains here flow to your total income and are taxed at your applicable slab rate

For long-term capital gains on US stocks (post 23 July 2024 sales):

• Section A14: "Long-term capital gains on assets other than at A7, A8, A9, A10, A11, A12 and A13" — this is the section for LTCG at 12.5% on unlisted/foreign assets
• Note: A7–A13 cover Indian listed equity, equity MFs, and other specific categories; A14 is residual and covers foreign equity

For each transaction (or each lot sold, if you're doing lot-specific identification), you will fill:

• Date of purchase (acquisition)
• Date of sale (transfer)
• Full value of consideration (INR proceeds from sale)
• Cost of acquisition (INR cost basis)
• Cost of improvement (enter NIL — stocks don't have improvement costs)
• Indexed cost of acquisition (enter NIL for post-23 July 2024 sales — indexation no longer applies)
• Net capital gain/loss = Proceeds − Cost

If you had many transactions (say, multiple monthly purchases and several sales), you can either enter each one individually or aggregate them by lot if using FIFO. Entering each transaction individually is more defensible in scrutiny.

Schedule FSI: Foreign Source Income

Schedule FSI requires you to declare income that arose outside India — both dividends from US stocks and capital gains from US stock sales qualify.

For each type of foreign income:

• Country code (USA = US)
• Taxpayer identification number in that country (your US TIN, if you have one — otherwise leave blank or enter NA)
• Nature of income (Dividend / Capital Gain)
• Amount in foreign currency (USD)
• Amount in INR
• Tax paid outside India (the US WHT withheld, in INR)
• Tax payable in India on this income
• Relevant DTAA article (Article 10 for dividends; Article 13 for capital gains — though capital gains from Indian residents on US stocks are primarily taxed in India under the India-US DTAA Article 13(6))

Schedule TR: Tax Relief

Schedule TR is where you claim the actual Foreign Tax Credit computed in Form 67. The amounts from Schedule FSI flow here, and you claim the credit. The net tax relief computed here reduces your total Indian tax liability on foreign income.

Schedule FA: Foreign Assets

Schedule FA is a disclosure schedule — it does not compute tax. You must list all foreign assets held at any point during the previous year, including US stocks held in a foreign brokerage account.

For each US brokerage account and the stocks within it, you report:

• Name and address of institution/entity
• Country (USA)
• Account/ISIN/identification number
• Date of acquisition
• Initial value (at acquisition or beginning of year)
• Closing value (end of year or date of disposal)
• Gross income from the asset during the year

A separate and detailed guide on Schedule FA is available at /posts/schedule-fa-us-stocks-india-complete-guide.

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10. Worked examples

Example 1: Long-term gain on ETF (VOO)

Scenario: You bought 5 units of Vanguard S&P 500 ETF (VOO) on 10 January 2023 at $400 each. SBI TT buying rate on 10 January 2023: ₹82.40/USD. You sold all 5 units on 18 March 2025 at $480 each. SBI TT buying rate on 18 March 2025: ₹87.60/USD.

Holding period: 10 January 2023 → 18 March 2025 = 26 months and 8 days → more than 24 months → Long-term

Cost of Acquisition:

• USD cost = 5 × $400 = $2,000
• INR cost = $2,000 × ₹82.40 = ₹1,64,800

Sale Proceeds:

• USD proceeds = 5 × $480 = $2,400
• INR proceeds = $2,400 × ₹87.60 = ₹2,10,240

LTCG:

• ₹2,10,240 − ₹1,64,800 = ₹45,440

Tax (post 23 July 2024):

• 12.5% × ₹45,440 = ₹5,680
• Cess 4% = ₹227
• Total tax = ₹5,907

ITR entry: Schedule CG → Section A14. Proceeds = ₹2,10,240. Cost = ₹1,64,800. Net LTCG = ₹45,440.

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Example 2: Short-term gain on Apple

Scenario: You bought 8 shares of Apple (AAPL) on 5 July 2024 at $210 each. SBI TT buying rate: ₹83.70/USD. You sold all 8 shares on 22 December 2024 at $255 each (holding = 5 months and 17 days). SBI TT buying rate on sale: ₹84.90/USD.

Holding period: 5 months and 17 days → less than 24 months → Short-term

Cost of Acquisition:

• 8 × $210 × ₹83.70 = ₹1,40,616

Sale Proceeds:

• 8 × $255 × ₹84.90 = ₹1,73,556

STCG:

• ₹1,73,556 − ₹1,40,616 = ₹33,000 (approximately — use exact figures)

Tax: STCG is added to your total income and taxed at slab rate. If your total income puts you in the 30% bracket:

• 30% × ₹33,000 = ₹9,900
• Surcharge (if applicable based on total income) + cess 4%

ITR entry: Schedule CG → Section A5 (STCG at slab rate). Proceeds = ₹1,73,556. Cost = ₹1,40,616. Net STCG = ₹32,940.

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Example 3: RSU vest, then sold long-term

Scenario: 100 RSU shares vest on 15 February 2024 at a stock price of $200. SBI TT buying rate on vest date: ₹83.50/USD. The employer has already withheld TDS on the perquisite income of ₹16,70,000 (100 × $200 × ₹83.50). You sell all 100 shares on 20 February 2026 at $280. SBI TT buying rate on sale date: ₹87.00/USD.

Holding period: 15 February 2024 → 20 February 2026 = exactly 24 months and 5 days → more than 24 months → Long-term

Cost of Acquisition:

• RSU basis = FMV at vest × rate at vest = $200 × ₹83.50 × 100 shares = ₹16,70,000

Sale Proceeds:

• $280 × ₹87.00 × 100 shares = ₹24,36,000

LTCG:

• ₹24,36,000 − ₹16,70,000 = ₹7,66,000

Tax:

• 12.5% × ₹7,66,000 = ₹95,750
• Cess 4% = ₹3,830
• Total tax on LTCG = ₹99,580

Note: The perquisite tax paid at vest (via employer TDS) is completely separate and has already been accounted for in your salary taxation. It does not affect this capital gains computation.

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Example 4: Dividend with US withholding tax and FTC

Scenario (full year): During FY 2025-26, you receive dividends from various US stocks totalling $500. US WHT at 25% = $125. Net dividends received = $375. Weighted average SBI TT rate for dividend payment dates = ₹85/USD. Your total income puts you in the 30% bracket.

INR computation:

• Gross dividends (INR) = $500 × ₹85 = ₹42,500 (report this in ITR)
• US WHT (INR) = $125 × ₹85 = ₹10,625
• Net received (INR) = $375 × ₹85 = ₹31,875

Indian tax on gross dividend:

• 30% × ₹42,500 = ₹12,750
• Cess 4% = ₹510
• Indian tax gross = ₹13,260

FTC claim (Form 67):

• US WHT = ₹10,625
• Indian tax on this income = ₹13,260
• FTC = lower of (₹10,625, ₹13,260) = ₹10,625

Net Indian tax liability on dividends:

• ₹13,260 − ₹10,625 = ₹2,635

The remaining ₹2,635 is what you actually pay to the Indian government on top of the US WHT. The total tax burden on the $500 dividend is $125 (US) + ~₹2,635 (India) = approximately ₹13,260 total — essentially the Indian slab rate applied once, with no double taxation.

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11. Loss harvesting with US stocks

Set-off rules

Capital losses from US stocks follow the same set-off hierarchy as all capital losses under the Income Tax Act:

Loss type	Can be set off against
Short-term capital loss (STCL) from US stocks	Any STCG (from any asset class) or any LTCG (from any asset class)
Long-term capital loss (LTCL) from US stocks	Only LTCG (from any asset class) — cannot be set off against STCG

This means if you have LTCL from US stocks, you cannot use it to reduce your STCG from, say, Indian equity or US stocks held short-term. But you can use it to offset LTCG from Indian listed equity, Indian property, or other foreign equity.

STCL is more flexible — it can reduce both your STCG and your LTCG in the same assessment year.

Loss carry-forward

Unabsorbed capital losses (losses that could not be fully set off in the current year) can be carried forward for up to 8 assessment years.

Critically: you must file your ITR on time (by the due date) to be eligible to carry forward capital losses. If you file a belated return (after the due date), you forfeit the right to carry forward losses for that year, even if you have losses to report.

The carry-forward applies whether or not your total income exceeds the basic exemption limit. Even if you have no other income and would not normally need to file, if you have capital losses you want to preserve, file your ITR by the due date.

Practical loss harvesting

Loss harvesting — selling positions that are in a loss to crystalise the loss for tax purposes, then potentially re-entering the same position — is legal under Indian tax law for US stocks. There is no specific wash-sale rule in India comparable to the US wash-sale rule. This means you can sell and immediately repurchase the same US stock to crystalise a loss.

However: each repurchase creates a new lot with a new acquisition date and a new cost basis. The loss you harvested resets your holding period — relevant if you were approaching the 24-month long-term threshold.

Rovia's tax report includes a loss harvesting analysis that identifies which of your current US stock positions are in a loss and quantifies the potential tax saving from realising that loss against existing gains. See the dedicated guide at /posts/rovia-for-rsu-holders-india for how to read and act on this report.

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12. Advance tax on US stock gains

The four instalment schedule

If your total tax liability for the year (after TDS) exceeds ₹10,000, you are required to pay advance tax during the year in four instalments:

Instalment	Due date	Cumulative percentage of total tax liability
1st instalment	15 June	15%
2nd instalment	15 September	45%
3rd instalment	15 December	75%
4th instalment	15 March	100%

Advance tax is computed on your estimated total income for the year, including estimated capital gains from US stocks.

The US stock advance tax problem

Capital gains from US stocks create a specific challenge for advance tax planning:

• You may not know how much you will sell during the year
• Markets fluctuate, so even if you know the number of shares, you don't know the INR value
• US stock gains can be lumpy — a single large sale late in the year can spike your liability

This means advance tax estimates for US stock investors are inherently imprecise. The practical approach:

1. By 15 June: Pay 15% of any gains already realised in April–May, plus a rough estimate for the remainder
2. By 15 September: Reconcile with actual gains April–August; update estimate
3. By 15 December: Reconcile with actual gains April–November; update
4. By 15 March: Pay 100% of total estimated liability for the full year

If you under-estimate and underpay, the following interest applies:

• Section 234B: Interest at 1% per month (simple) on the shortfall if advance tax paid is less than 90% of assessed tax. This runs from 1 April of the assessment year until the date of payment.
• Section 234C: Interest at 1% per month (simple) on the deferment of each instalment. Computed separately for each instalment that was less than required.

For capital gains recognised after 15 March (i.e., in the last two weeks of the financial year), you are required to pay the full tax by 31 March — the 15 March instalment deadline has passed, but 234C interest will not apply if the shortfall arises from capital gains arising after 15 March (there is a specific carve-out under Section 234C for capital gains arising after the last instalment date, provided the remaining tax is paid before 31 March).

How to pay advance tax

Advance tax is paid through Challan ITNS 280 on the income tax portal or through authorised banks. Select "Advance Tax" (Code 100), enter the amounts, and keep the challan counterfoil for your records. These payments are reflected in your Form 26AS and in the Annual Information Statement (AIS) and should be entered in the "Taxes Paid" section of your ITR.

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13. ESPP and bonus shares

ESPP: two tax events, two dates

An Employee Stock Purchase Plan (ESPP) — offered by some US employers — allows employees to purchase company stock at a discount, typically 10–15% below market price, sometimes with a "lookback" provision that calculates the discount from the lower of the price at the beginning or end of the purchase period.

For Indian tax residents, ESPP triggers two separate tax events:

Event 1 — Purchase (perquisite): The discount you receive at purchase is a perquisite under Section 17(2). If you pay $85 for a share worth $100, the $15 discount is taxable as salary income in the year of purchase. The taxable amount = (FMV at purchase − amount paid) × number of shares × applicable SBI TT rate. Your employer deducts TDS on this amount.

Event 2 — Sale (capital gains): When you subsequently sell the ESPP shares, you have capital gains. The cost of acquisition for capital gains purposes is the FMV at the time of purchase (i.e., $100 in the example above, not $85 you paid). The holding period for capital gains starts from the ESPP purchase date.

ESPP shares are treated as a foreign equity acquisition for capital gains purposes — the same 24-month threshold applies. If you hold the ESPP shares for more than 24 months from the purchase date, the gain is long-term at 12.5%.

Bonus shares

Some US companies issue bonus shares, stock splits, or scrip dividends. For Indian tax residents, the cost of acquisition of bonus shares received from a foreign company is nil (zero). This is the same principle as bonus shares in Indian companies — they are received at no cost to the shareholder.

Consequently, when you sell bonus shares:

• The entire sale proceeds (INR) is your capital gain
• If held more than 24 months from the date of allotment, the entire proceeds are LTCG at 12.5%
• If held 24 months or less, the entire proceeds are STCG at slab rate

The holding period for bonus shares starts from the date of allotment of the bonus shares — not the date you acquired the original shares.

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14. LTCG vs STCG — the quick reference

	STCG (≤ 24 months)	LTCG (> 24 months)
Applicable rate	Slab rate (5% / 20% / 30%)	12.5% flat
Surcharge	Yes, based on total income	Yes, based on total income
Cess	4%	4%
Indexation	Not available	Not available (post 23 July 2024)
Basic exemption	Part of total income (uses basic exemption)	No separate exemption for foreign equity LTCG
Set-off allowed	Against any CG	Only against LTCG
Carry forward	8 years	8 years
ITR schedule section	CG → A5	CG → A14
Advance tax	Yes, included in total income	Yes, included in total income

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15. Key documents and records to maintain

Good record-keeping is the foundation of accurate capital gains computation and surviving scrutiny. For each US stock transaction, maintain:

1. Trade confirmation — date, quantity, price per share in USD
2. SBI TT buying rate on the transaction date (print from RBI DBIE or save Rovia's transaction report)
3. For RSUs: vest letter or brokerage statement showing vest date, number of shares, FMV at vest
4. For ESPP: purchase confirmation showing purchase date, FMV at purchase, price paid
5. Form 1042-S (or equivalent tax statement from Rovia) showing annual dividends and WHT
6. Form 26AS and AIS — cross-check TDS on RSU perquisites with what your employer deposited
7. Advance tax challans — keep the counterfoils

Retain these records for at least 6 years from the end of the assessment year (since the IT Department can open assessments up to 6 years old in normal cases and up to 10 years in cases involving undisclosed foreign assets).

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Summary: the checklist for filing season

When you sit down to file for the assessment year:

• Confirm you are filing ITR-2 (not ITR-1)
• Download Rovia tax report — all transactions, cost basis, SBI TT rates, lot-level detail
• Identify each sold lot as STCG or LTCG based on 24-month rule
• Compute INR cost basis and INR proceeds for each lot
• Aggregate STCG lots → Schedule CG A5
• Aggregate LTCG lots (post 23 July 2024 sales) → Schedule CG A14
• Compile annual gross dividends and US WHT paid → file Form 67 before ITR
• Populate Schedule FSI with all foreign-source income (dividends + capital gains)
• Claim FTC in Schedule TR using Form 67 acknowledgment
• Fill Schedule FA for all foreign assets held during the year
• Verify advance tax challans match taxes paid in Form 26AS
• Compute any remaining self-assessment tax and pay before filing ITR
• e-Verify ITR within 30 days of filing

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Disclaimer: This article is written for educational purposes and reflects the authors' understanding of applicable Indian tax laws as of 19 July 2026. It does not constitute tax advice. Tax laws change frequently, and the application of these rules depends on your individual facts and circumstances. Verify all computations and positions with a qualified chartered accountant before filing your income tax return. Neither Rovia nor the authors accept any liability for errors or for outcomes arising from reliance on this article.