Tax on Sale of US Stocks for Indian Residents

An Indian investor investing in or planning to invest in US stocks must be aware of the tax implications of selling US stocks from India. Indian investors are taxed exclusively in India for gains from US stocks. This article will help Indian investors investing in US stocks understand different types of capital gains and taxation around them.

Capital Gain Tax on US Stocks

Capital gain is the profit an investor earns when they sell an asset (stocks) at a price higher than the purchase price. However, if the selling price is lower than the buying price, it is termed a capital loss.

For example, if you bought shares of Apple in April 2025 at $180 per share and sold them in September at $230 per share, your capital gain per share is $50.

An important point to note here is that the capital gain for an Indian resident, even though it is on US stocks, is only taxed in India and not in the US. This is due to the tax treaty between India and the United States. The India–US Double Taxation Avoidance Agreement (DTAA) ensures that Indian investors are not taxed twice on the same income, allowing them to pay taxes only in India.

Types of Capital Gains

Similar to what we have for Indian stocks, there are two types of capital gains that Indian residents experience when they sell US stocks. The division happens based on the holding period. Let us look at the two categories.

Long Term Capital Gains: Indian residents have long-term capital gains from US stocks when the holding period is more than 24 months (or 2 years). For example, you bought Apple's share on 1 September 2023 at $175 per share and sold it on 12 September 2025 at $235 per share. In this scenario, your capital gain is $60 per share, and since the holding period is more than two years, it comes under Long Term Capital Gain. Long-term capital gains are taxed at 12.5% (post 2024 budget, earlier it was 20%).

Short Term Capital Gains: If your holding period is less than 24 months, the capital gains are called Short Term Capital Gains. In the above example, if you had sold Apple shares in December 2024 at $250 per share, the capital gains would have been $75, and since the holding period is less than 24 months, you would have attracted short-term capital gains.

STCG from the sale of US stocks is added to the total taxable income of an Indian resident and taxed according to the individual’s applicable income tax slab. This means the rate is not fixed but depends on the person’s overall income level. For instance, if an investor falls under the 20% income tax bracket, the short-term capital gains will also be taxed at a rate of 20%. Similarly, if the investor is in the 30% bracket, the gains will be taxed at 30%, plus applicable surcharge and cess.

Example of Tax Calculation

For tax purposes in India, you need to convert the sale amount into Indian rupees. You must use the exchange rate (telegraphic transfer buying rate provided by the State Bank of India) on the last day of the month prior to the month in which the sale happened.

So, in our example of Apple and LTCG, an Indian resident made a capital gain of $60 per share. Let us assume the investor held 10 shares, which means the overall LTCG is $600. The share was sold on 12 September, and to calculate tax, the investor needs to know the telegraphic transfer buying rate on 31st August 2025. Let us assume it was $1 = Rs 87. So, now the capital gains for an Indian resident in INR would be: 600 * 87, which is Rs 52,200. The tax would be 12.5% of profits, which is Rs 6,525.

What Happens When Loss is Incurred?

If an Indian investor incurs a loss from selling US stocks, the loss can be adjusted against other capital gains while filing taxes in India. The treatment depends on whether the loss is short-term or long-term:

Short-Term Capital Loss (STCL): A short-term loss from US stocks can be set off against both short-term capital gains (STCG) and long-term capital gains (LTCG). For example, if you sold US shares at a loss within 24 months but earned a profit from selling property or Indian equities, you can adjust the US stock loss against those gains.
Long-Term Capital Loss (LTCL): A long-term loss from US stocks can only be set off against long-term capital gains. It cannot be adjusted against short-term gains.

An important point is that the asset class does not matter for set-off. This means a short-term loss on US stocks can be offset against gains from Indian shares, mutual funds, or even real estate, and vice versa. Additionally, if the losses cannot be fully adjusted in the same financial year, they can be carried forward for up to eight assessment years, provided the income tax return is filed within the due date.

Summary

Capital gains from the sale of US stocks by Indian residents are taxable in India under the country’s income tax laws, with the classification into short-term or long-term determining the applicable tax rate. While the India–US tax treaty prevents double taxation, investors must carefully account for currency conversion, holding periods, and applicable set-off rules for losses. Proper compliance and accurate reporting ensure that global investments remain both rewarding and tax-efficient.