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US stock dividends face double tax: how to claim relief
Indian residents earning dividends from US stocks typically receive payouts after a 25% US withholding tax. On a declared $100 dividend, an investor gets $75 in hand. However, the full $100 is again taxable in India at the investor's income-tax slab rate, depending on the chosen tax regime and total income for the financial year.
A tax treaty between India and the US offers relief from double taxation. Investors can claim a foreign tax credit in India for the tax paid in the US. This requires reporting the dividend in the Indian income-tax return and filing Form 44 with required details and supporting documents.
For example, if Indian tax on the $100 dividend is $30, the investor can claim a $25 credit for US tax paid and pay only $5 in India. The exact outgo depends on the investor's slab rate.
Indian Opinion Analysis
The key takeaway for Indian investors is that US withholding tax does not exempt dividends from Indian taxation, so net returns are lower than the gross dividend suggests. The foreign tax credit process, while straightforward in principle, depends on correct filing of Form 44 and matching the applicable slab rate. Investors must calculate their total taxable income including the gross dividend before claiming credit. The article leaves unclear whether the credit is fully available under both old and new tax regimes, which will matter when investors file returns for FY2026-27.
Source: livemint.com
This brief was synthesised by AI from the source linked above. Methodology and corrections.
