On 5 November 2026 the US Nasdaq Composite fell 5.52%, its worst day in about 18 months, as chip and AI stocks sold off after the US midterm elections. Nvidia fell about 9% and AMD about 17%. Many Indian investors hold US stocks directly through the Liberalised Remittance Scheme, or indirectly through Nasdaq funds and international ETFs, and some of those funds were already down more than 11% in October. This note explains how each route is taxed in India and what to do with the losses.
How each route is taxed
| How you hold the US exposure | Long-term after | Long-term tax | Short-term tax |
|---|---|---|---|
| US shares bought directly through LRS | 24 months | 12.5%, no indexation | Your slab rate |
| Nasdaq or US fund of funds from an Indian AMC | 24 months | 12.5%, no indexation | Your slab rate |
| International ETF listed on NSE or BSE | 12 months | 12.5%, no indexation | Your slab rate |
The ₹1.25 lakh annual exemption on long-term gains applies only to Indian listed shares and equity-oriented funds. It does not apply to any of the routes above. Cess and any surcharge are added on top.
Using the fall: setting off losses
- A short-term capital loss can be set off against both short-term and long-term capital gains in the same year.
- A long-term capital loss can be set off only against long-term capital gains.
- Unused losses can be carried forward for 8 years, but only if your return is filed by the due date.
- A loss exists for tax only when you actually sell. A fall in the price of a share you still hold does not reduce your tax.
Example: you made a short-term gain of ₹3 lakh on Indian shares this year, and your US chip shares bought eight months ago are now ₹1 lakh below cost. If you sell them, the ₹1 lakh short-term loss reduces the taxable gain to ₹2 lakh. Whether you should sell is an investment decision; the tax effect is only one part of it.
US dividends: tax in both countries
The US withholds tax on dividends paid to Indian residents, usually 25% under the India-US tax treaty once you have submitted Form W-8BEN to your broker. In India the full dividend is taxed at your slab rate, and you can claim credit for the US tax. To get that credit you must file Form 67 on the income-tax portal before you file your return.
Schedule FA: the disclosure most people miss
- If you hold US shares directly, you must report them in Schedule FA of your income-tax return, even if you did not sell anything and even if the value has fallen.
- Schedule FA follows the calendar year. For the return filed in 2027, you report holdings for January to December 2026.
- Missing it can attract a penalty of ₹10 lakh under the Black Money Act. Since 1 October 2024 this penalty does not apply where the total value of foreign assets other than immovable property is ₹20 lakh or less, but the disclosure is still required.
- Units of a Nasdaq fund of funds or an international ETF bought in India are Indian assets. They are reported as normal capital gains, not in Schedule FA.
Our US tax compliance guide covers the US side in more detail.
Money you send abroad: TCS
Remittances under LRS for investment attract TCS of 20% on the amount above ₹10 lakh in a financial year. TCS is not an extra tax. It appears in your tax credit statement and is adjusted against your final tax, or refunded when you file your return.
Frequently asked questions
How are US stocks taxed in India?
US shares held for more than 24 months give long-term gains taxed at 12.5% without indexation. If held for 24 months or less, gains are short-term and taxed at your slab rate. The ₹1.25 lakh exemption does not apply.
How are Nasdaq 100 fund of funds taxed in India?
Units of an Indian fund of funds that invests in US shares become long-term after 24 months and are taxed at 12.5% without indexation. Short-term gains are taxed at your slab rate.
Can I set off a loss on US stocks against gains on Indian shares?
Yes. A short-term capital loss on US shares can be set off against short-term or long-term capital gains on Indian shares in the same year. A long-term loss can be set off only against long-term gains.
Do I need to report US shares in Schedule FA?
Yes. Directly held US shares must be reported in Schedule FA for the calendar year, even if you did not sell them. Indian funds that invest in US shares are not reported in Schedule FA.
How Vitt-Marg helps
We handle income-tax returns, capital gains computation, tax planning, GST and ROC compliance for individuals, businesses and companies across Noida, Ghaziabad and Delhi NCR. Send us your broker statements or documents and we will tell you exactly what you owe and how to file it correctly.
General information, current as of 7 November 2026, not advice for a specific case. Due dates and fees change with MCA and CBDT notifications. Check with us before acting on it.