US NRIs · Dividend Tax

Dividend tax on Indian shares for NRIs in the US

Dividends from Indian companies are withheld at the non-resident rate before they reach you in the US. Here's the treaty position and how to reclaim any excess.

When an Indian company pays you a dividend while you live in the US, the company withholds tax at source before the money reaches you. India's default withholding on non-resident dividends is 20% under Section 393(2), the successor to Section 195. The India-US treaty position is nuanced: its lower dividend rate is reserved for substantial corporate shareholdings, so individual investors get no reduction and simply pay the 20% domestic rate (Article 10(2)). The lever that does help is the foreign tax credit on your home-country return.

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India-US key facts: dividend tax

Default non-resident TDS rate	20%
What the treaty changes here	It sets no lower rate on this income. What a treaty decides here is which country gets to tax it.
Treaty article / basis	Article 10(2) is bifurcated: 15% only when the recipient is a COMPANY owning ≥10% of the Indian payer's voting stock
Your TRC issuing authority	the Internal Revenue Service (IRS)

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-US treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

Since the 2020 shift back to classical dividend taxation, dividends from Indian companies are taxable in the shareholder's hands and the company deducts TDS before paying. For a non-resident the default is 20% under Section 393(2) (Section 195 until 31 March 2026), plus surcharge and cess, and Section 115A taxes those dividends at 20% of the gross amount with no expenses allowed. A lower rate only ever comes from a treaty, and only where that treaty writes one for individuals: several of India's treaties reserve the reduced dividend rate for companies holding a large stake in the Indian payer, and some countries have no treaty with India at all, so portfolio investors there stay at the domestic rate.

Where a lower individual rate does apply, you claim it with Form 41 (formerly Form 10F) and a Tax Residency Certificate lodged with the company or broker, and any dividend withheld at the higher rate before your paperwork was on file is reclaimed through your Indian return. Where no lower rate applies, the 20% is generally your final Indian tax, so the questions worth asking are whether the payer withheld more than the correct rate and surcharge, and whether the country you live in gives you a credit for that Indian tax.

What changes because you live in the US

US residents are taxed on worldwide income, so this Indian income also lands on your IRS Form 1040, with a foreign tax credit (Form 1116) for the Indian tax paid. On top of that you report your Indian accounts and assets on the FBAR (FinCEN 114) and Form 8938 once the thresholds are crossed, and Indian mutual funds can trigger punitive PFIC treatment. The India-side tax here is only half the picture.

Frequently asked questions

Common questions from American NRIs

India withholds 20% under Section 393(2). For American NRIs, the India-US treaty's lower dividend rate is written for companies holding a large stake in the Indian payer, so individual investors get no reduction and pay the 20% domestic rate. The real relief is the foreign tax credit you claim on your US return for that Indian tax.

Not through the India-US treaty if you're an individual investor, because its lower rate applies only to substantial corporate holdings, so you stay at the 20% domestic rate. What does help is the foreign tax credit: when you report the dividend on your US return, you claim credit for the Indian tax already deducted, so you aren't taxed twice on the same income.

Go further

Read the full guide, or see your country's complete picture

NRI ITR for interest, rent and dividend income US NRI tax guide: every income type and the rates that apply

Dividend Tax sorted, by an Indian CA who works with American NRIs

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