You’ve probably seen the pitch: open an account with a GIFT City platform, send money abroad under the Liberalised Remittance Scheme (LRS), and buy Apple or Nvidia. Some ads call it a tax-efficient way to invest in the US. For a resident Indian, it isn’t.
GIFT City changes who regulates your platform and where your account sits. It doesn’t change how the Income-tax Act, 2025 taxes your US shares.
Here’s how the tax works on each route, with worked examples.
Quick Summary
- The tax on US shares is the same through GIFT City, a direct overseas broker account, or an Indian app with a US partner broker
- US shares become long-term after 24 months and are taxed at 12.5%, with no ₹1.25 lakh exemption on any route
- Moving shares between brokers in kind isn’t a sale, but fractional shares are sold
- Holding NSE IFSC Receipts? They have their own deadlines and tax questions: NSE IFSC Receipts closing: convert by 20 Jan or sell by 29 Jan 2027
Last updated: 30 September 2026, based on the Income-tax Act, 2025 as amended by the Finance Act, 2026 (PDF).
Does buying US stocks through GIFT City save a resident Indian any tax?
No. If you are a resident, your gains, losses and dividends from US stocks are taxed the same way whether you buy through a GIFT City platform or another route.
Under section 5(1) of the Income-tax Act, 2025, a resident’s total income includes income from whatever source, inside or outside India. Where you place the order doesn’t change that.
GIFT City (Gujarat International Finance Tec-City) is India’s International Financial Services Centre (IFSC). A “GIFT City platform” here means a Global Access Provider authorised by the International Financial Services Centres Authority (IFSCA). “Resident” means resident and ordinarily resident under section 6.
GIFT City vs other routes: how the tax compares
Your order still executes on NYSE or Nasdaq, so for tax purposes you own a foreign listed share on any route. GIFT City platforms operate under the IFSCA Global Access framework (circular of 12 August 2025), and where your shares are held depends on the platform. Check its disclosures for the custodian.
The treatment below is the same whether you use a GIFT City platform, a direct overseas broker account, or an Indian app that uses a US partner broker.
| Tax treatment (same on every route) | |
|---|---|
| Long-term after | More than 24 months (section 2(101)) |
| Short-term gains | Taxed at your slab rate |
| Long-term gains | 12.5%, no indexation (section 197) |
| ₹1.25 lakh exemption on long-term gains | Not available (section 198, old 112A) |
| Dividends | Taxed at your slab rate on the gross amount |
| US withholding on dividends | 25% with Form W-8BEN on file |
| Credit for US tax | Section 159 read with Rule 76 (old Rule 128), via Form 44 (old Form 67) |
| TCS on remittance above ₹10 lakh | 20% (section 394, old 206C(1G)), adjustable against your tax |
| Report in Schedule FA (foreign assets) | Yes, for the calendar year |
The dividend rows assume your platform passes US dividends through with US tax withheld.
More detail: What is Form 44?, section 159, Form 44 FAQs from the department (PDF), section 394, TCS on LRS remittances, Schedule FA & FSI and the India-US treaty, Article 10 (PDF).
Why 24 months and not 12? Under section 2(101), the 12-month period applies only to a “security listed in a recognised stock exchange in India”. NYSE and Nasdaq aren’t Indian exchanges, so US shares need more than 24 months to become long-term.
Why no ₹1.25 lakh exemption? Section 198 applies to equity shares only if securities transaction tax (STT) was paid on both purchase and sale. A trade on a US exchange pays no Indian STT, so section 198 doesn’t apply. Section 197 applies instead: a flat 12.5% on the full long-term gain.
Section 198(4) drops the STT condition for trades on an IFSC exchange settled in foreign currency. US shares traded on NYSE or Nasdaq don’t qualify.
What can differ between routes is who regulates the platform, where your shares and cash are held, fees, and how money moves. The tax doesn’t.
For the general rules, see Tax on foreign stocks, MFs/ETFs and ESOPs in India.
Do GIFT City’s tax benefits apply to you?
No. They were written for non-residents, funds and businesses set up in GIFT City. None covers a resident buying US shares on a US exchange.
Two provisions are worth knowing. Section 70(1)(r) treats certain sales on an IFSC exchange as “not a transfer”, but only for non-residents. If a platform tells you GIFT City gains are exempt under “section 10(4D)”, that is the fund-level exemption, now in Schedule VI. It applies to the fund, not to you.
See all the provisions
| Provision (Income-tax Act, 2025) | What it does | Who gets it |
|---|---|---|
| Section 70(1)(r) | Treats certain sales on an IFSC exchange as “not a transfer”, so no capital gain arises | Non-residents only |
| Schedule VI, Sl. No. 1 to 4 (old 10(4D)) | Exempts income of a specified fund to the extent it is attributable to units held by non-residents | Specified funds in IFSC |
| Schedule VI, portfolio income | Exempts income from a portfolio managed for a non-resident, where the account is with an offshore banking unit in an IFSC | Non-residents only |
| Section 147 | Deduction on income from approved business activities | Units set up in IFSC, not their clients |
| Sections 196(3) and 198(4) | Drop the STT condition for trades on an IFSC exchange settled in foreign currency | Not a break as such. US shares traded on NYSE or Nasdaq don’t benefit |
Worked example: tax on US stock gains
Say Rhea, a resident under the new tax regime, has ₹28 lakh of other taxable income. She pays 30% at the margin.
The 2025 Act calls the financial year a “tax year” (section 3). Tax year 2026-27 runs from 1 April 2026 to 31 March 2027.
Rhea bought 25 shares of a US company at $160 each ($4,000) on 10 June 2024. She sells them on 15 September 2026 at $220 each ($5,500). That is more than 24 months, so the gain is long-term and falls in tax year 2026-27.
| Outside GIFT City | GIFT City platform | |
|---|---|---|
| Gain in USD | $1,500 | $1,500 |
| Exchange rate (illustrative) | ₹88.00 | ₹88.00 |
| Gain in INR | ₹1,32,000 | ₹1,32,000 |
| Tax at 12.5% (section 197) | ₹16,500 | ₹16,500 |
| Health and education cess at 4% | ₹660 | ₹660 |
| Total tax | ₹17,160 | ₹17,160 |
Had Rhea sold after 15 months, the gain would be short-term on both routes. She would pay ₹39,600 at 30% plus ₹1,584 cess, so ₹41,184 either way.
A note on the exchange rate. Rule 206 of the Income-tax Rules, 2026 converts capital gains at the SBI telegraphic transfer (TT) buying rate on the last day of the month before the month of sale. For Rhea, that is 31 August 2026. The ₹88.00 is illustrative.
The rule sets one date for capital gains. It doesn’t say whether you convert the net USD gain at that rate, or convert cost and sale price separately. The two methods give different rupee figures, but the same figure on both routes, so the comparison holds. This thread uses one rate for simplicity.
How are US stock dividends taxed in India?
Say Rhea also receives a $100 dividend. The US withholds 25% ($25) and pays her $75, but India taxes the gross $100.
Dividends convert at the SBI TT buying rate on the last day of the month before the month the dividend is paid (Rule 206). At the illustrative ₹88.00, $100 is ₹8,800.
- Indian tax at 30%: ₹2,640, before cess.
- US tax: $25, which is ₹2,200.
- The credit is the lower of the two, so Rhea claims ₹2,200 through Form 44 and pays the remaining ₹440 in Indian tax, plus cess.
If her slab rate were 10%, Indian tax would be ₹880. The credit would be capped at ₹880, and she couldn’t claim the other ₹1,320 of US tax in India.
Form 44 is due within 12 months from the end of the tax year, provided your return was filed within the time allowed under section 263(1) or (4). The department’s Form 44 FAQs (PDF) cover the details.
Is moving US shares to another broker taxable?
Not if you move them in kind. An in-kind transfer moves your shares from one broker account to another without selling them. You remain the owner throughout, and only the account holding the shares changes.
Nothing is sold, exchanged or relinquished, and none of your rights is extinguished, so it isn’t a “transfer” under section 2(109). Your cost and holding period continue as before.
Fractional shares can’t move in kind. They are sold, and that sale is taxable. A sell-and-rebuy is also a sale, so check that your platform uses an in-kind transfer, and keep your purchase records from the old platform.
FAQs
Is there a limit on how much I can send?
Under LRS, a resident individual can remit up to US$250,000 in a financial year. The limit counts all LRS remittances that year, whichever route you use to invest.
Can I set off losses on US shares?
Yes, and the rules are the same on every route. A short-term loss can be set off against short-term or long-term gains. A long-term loss can be set off only against long-term gains. For carry forward, see Set-off and carry forward of losses.
Which period does Schedule FA cover?
The calendar year, 1 January to 31 December, not the financial year. It applies to resident and ordinarily resident individuals, and you report the shares even if you didn’t sell them or receive a dividend.
What this means for you
- Choose between GIFT City and other routes on cost, convenience, regulator and custody. Tax won’t separate them.
- Hold US shares for more than 24 months to get the 12.5% long-term rate. Expect no ₹1.25 lakh exemption on any route.
- If you move platforms, use an in-kind transfer. Fractional shares are sold and taxed.
Old section numbers (Income-tax Act, 1961)
The 1961 Act still governs income up to financial year 2025-26. This thread applies the 2025 Act, which governs tax year 2026-27 onwards.
| Income-tax Act, 2025 | Income-tax Act, 1961 |
|---|---|
| Section 2(101), short-term capital asset | Section 2(42A) |
| Section 2(109), transfer | Section 2(47) |
| Section 3, tax year | Section 3, previous year |
| Section 5, scope of total income | Section 5 |
| Section 6, residence | Section 6 |
| Section 70, transactions not regarded as transfer | Section 47 |
| Section 70(1)(r) | Section 47(viiab) |
| Section 147 | Section 80LA |
| Section 159, double taxation relief | Section 90 |
| Section 196, short-term gains with STT | Section 111A |
| Section 197, long-term gains | Section 112 |
| Section 198, long-term gains with STT | Section 112A |
| Section 394 (LRS remittances, Table Sl. No. 7) | Section 206C(1G) |
| Schedule VI, Sl. No. 1 to 4 | Section 10(4D) |
| Schedule VI, portfolio income | Section 10(4G) |
| Rule 76 | Rule 128 |
| Rule 206 | Rule 115 |
| Form 44 | Form 67 |
Related threads:
- NSE IFSC Receipts closing: convert by 20 Jan or sell by 29 Jan 2027
- TCS on LRS remittances: what Budget 2026 actually changed
- Tax on foreign stocks, MFs/ETFs and ESOPs in India
- Received RSUs from an MNC? How to value them in INR
Holding US stocks through GIFT City? Drop your questions below.