US stocks: You receive $75 on a $100 dividend, but India may tax the full amount again; how to claim relief

Indian residents earning dividends from US stocks generally receive payouts after US withholding tax. The full dividend is again taxable in India. Here's how to claim relief.

Indian investors who hold US stocks can earn dividends, typically drawn from a company's profits or accumulated cash. This periodic payout is usually made in cash per share, though some companies may issue additional shares instead.

However, not all US-listed companies pay dividends. In case a company, let's say Apple announces a dividend, you are required to have ownership of that stock before the record date to be eligible for the payout.

The overall dividend payout is calculated by multiplying the dividend amount by the number of shares you own. So, if the company pays $1 per share and you own 100 shares, you will receive $100 in your account.

If you are an Indian resident for tax purposes and hold US stocks in your portfolio, you would not receive the full dividend income given by a company, as the United States withholds flat 25% tax at source.

This means if a company had declared a $100 dividend payout, then you would receive $75 in your bank account. The levy is lower than the standard tax rate for foreign investors in the US due to its tax treaty with India.

How are dividends from US stocks taxed in India?

Just because the US has withheld tax on your dividend income before it reached your bank account does not mean the amount is exempt from tax in India.