US ETF tax for Indian residents
Indian residents can invest up to $250,000 a year abroad under the Liberalised Remittance Scheme. If that money goes into US-listed ETFs, two US taxes come with it.
| US withholding on dividends from US-listed ETFs | 25% (treaty rate, with a W-8BEN) |
| US estate or gift tax treaty | No: only the $60,000 exemption applies |
| Irish UCITS ETF, US dividends | 15% at fund level |
Dividends: 25%, but usually creditable
The India–US treaty cuts US withholding on portfolio dividends from 30% to 25%, once your broker has your W-8BEN. India taxes foreign dividends at your slab rate, and under the DTAA you can usually claim the US tax as a credit against your Indian tax by filing Form 67 before your return.
That changes the UCITS comparison. With a US-listed ETF, the 25% you lose can often be offset against your Indian tax. With an Irish UCITS ETF, the 15% is paid inside the fund, and you can't claim a credit for it. If you are in a high slab and file Form 67, the dividend advantage of UCITS shrinks. The calculator below doesn't model the credit, so treat its dividend result as the upper bound.
Estate tax: the bigger risk
India has no estate tax treaty with the US, and no inheritance tax of its own since 1985. But US estate tax still applies to US-listed ETFs and US shares above $60,000, at up to 40%. Your heirs would also need to file Form 706-NA with the IRS before a US broker releases the assets. Irish UCITS ETFs are not US-situs property, which is why many Indian investors who are building large portfolios through LRS prefer them.
Capital gains: check how your ETF is classified
Gains on foreign-listed shares held more than 24 months are generally long-term and taxed at 12.5%. But some advisers argue that foreign ETFs and funds may count as "specified mutual funds" under Section 50AA, where every gain is taxed at your slab rate. The answer can differ between US-listed and Irish-listed funds. Ask a CA before you choose.
Estimate your US estate tax
On $400,000 of US-situs assets. Above $60,000, so the estate must file Form 706-NA.
| Tentative tax on US-situs assets (§2001(c) rates) | $121,800 |
| Standard non-resident credit (§2102) | −$13,000 |
| Tax without treaty | $108,800 |
India has no estate tax treaty with the US, so only the $60,000 exemption applies. Irish-domiciled UCITS ETFs are the usual way non-US investors avoid this exposure. Compare the dividend side in the UCITS vs US calculator.
Compare a US ETF with its UCITS version
| US-domiciled ETF | Irish UCITS ETF | |
|---|---|---|
| Withholding on US dividends | 25% (treaty rate) | 15% (at fund level) |
| Yearly drag: withholding + fees | 0.355% | 0.265% |
| Value after 20 years | $362,085 | $368,245 |
| US estate tax exposure | Yes, above $60,000 | No |
The figure above covers dividends and fees only. A US-domiciled ETF also exposes you to US estate tax above $60,000, which can matter far more. See the estate tax calculator.
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Rules last checked 2026-10-19. Sources in the methodology. Educational only, not tax advice.