When most investors first start looking at US stocks, one question comes up almost immediately. 🙂

Will I have to pay tax in both countries?

It is a reasonable concern. After all, you are investing in a company listed in the United States while living in India. It is natural to assume both governments would want a share of the profit.

But this is one of those areas where the system is simpler than most people expect.

The US does not tax your capital gains

When you sell US shares at a profit, the United States does not tax that gain if you are a non-resident investor.

Under US tax law, a non-resident alien selling shares of an American company does not owe capital gains tax to the US government.

So if you buy shares of companies like Microsoft, Apple, or Amazon and later sell them at a profit, the US does not collect tax on that transaction.

The entire capital gains tax belongs to India.

How India taxes gains from US shares buying and selling

In India, the tax depends on how long you held the shares.

If you hold the shares for more than 24 months, the gain is treated as Long-Term Capital Gains (LTCG).

If you sell within 24 months, it is treated as Short-Term Capital Gains (STCG).

The applicable rates today are:

These rates apply to shares sold on or after July 23, 2024, following the changes introduced in Budget 2024.

One detail that is important for tax calculation purposes

Your investment is in US dollars. But your Indian tax calculation happens in rupees.

So the tax calculation involves converting both your purchase value and sale value into INR using specific reference exchange rates.

The rule works like this:

• Sale value is converted using the SBI Telegraphic Transfer (TT) buying rate on the last day of the month before the month of sale 
• Purchase value is converted using the SBI TT buying rate applicable at the time of purchase

So, if you sold in November, you use the 31st October rate. Your purchase cost converts at the rate applicable at the time of purchase. The taxable gain is the difference in rupees, not in dollars. Your taxable gain is then calculated in rupees, not dollars.

A simple example

Say you bought 10 shares of Microsoft in April 2022 at $280 each. You sold them in October 2024 at $410 each. You held it for more than 24 months, so this qualifies as a long-term gain.

The sale happened in October 2024, so you use the SBI TT buying rate as of September 30, 2024, which was approximately ₹83.80. Sale proceeds in rupees: $4,100 x ₹83.80 = ₹343,580.

For the purchase, you use the rate as of March 31, 2022, which was approximately ₹75.80. Purchase cost in rupees: $2,800 x ₹75.80 = Rs 212,240.

Capital gain: ₹343,580 minus ₹212,240 = ₹131,340.

Tax at 12.5%: approximately ₹16,418.

The US takes nothing. That Rs 16,418 is the entirety of your tax bill on that sale.

The 12.5% LTCG rate came into effect on July 23, 2024, as part of Budget 2024. Before that, the rates were different. If you are reviewing past transactions or trying to understand how your older holdings were taxed, the table below lays it out.

For any sale you are making today or planning going forward, the 12.5% and slab rate framework is what applies.