What is the US withholding tax rate on dividends for Indian investors?

The default rate for a non-resident is 30%. With Form W-8BEN on file, the India-US treaty rate of 25% applies to ordinary dividends for eligible Indian residents. The 15% treaty rate requires holding at least 10% of the voting stock of the paying company and is not available to retail investors.

Do I pay tax again in India on the same dividend?

India taxes the gross dividend — the full amount before US withholding — at your slab rate, and you then claim a foreign tax credit for the US tax already withheld. The credit is capped at the Indian tax on that dividend, so where your slab rate is 25% or more you generally bear roughly your slab rate in total; below 25%, part of the US tax cannot be recovered.

Do I report the gross or net dividend?

The gross amount, before US withholding. Reporting the net amount received is one of the most common errors and understates both the income and the credit you can claim.

What if my Indian tax rate is lower than 25%?

The foreign tax credit is generally capped at the Indian tax attributable to that income. Where the Indian rate is lower than the US withholding rate, the excess is typically not refundable, so US dividend income is less efficient for lower-slab taxpayers.

How do I claim the credit?

By filing Form 67 and completing Schedule FSI and Schedule TR in your return. For income earned from FY 2026-27 onwards, Form 67 is replaced by Form 44.

Dividend Tax on US Stocks for Indian Investors

Updated October 2026.

Dividends are the one part of US investing where both countries tax the same income. For ordinary shares and most ETFs, capital gains are taxed only in India; dividends are withheld in the United States and then taxed again in India, with credit available for the first.

Understanding the sequence matters, because the arithmetic looks alarming until you see where the credit lands.

The three steps

1. The US withholds at source

When a US company pays a dividend to a non-resident, tax is withheld before the money reaches the investor. The default rate is 30%.

Under the India–US Double Taxation Avoidance Agreement, that rate drops to 25% on ordinary dividends for eligible Indian tax residents, provided Form W-8BEN is on file with the broker. Otherwise it stays at 30%.

Filing W-8BEN is a one-off administrative step with a recurring benefit, and it needs renewing periodically. Not filing it means paying 30% instead of 25% for no reason at all. See Form W-8BEN Explained.

A note on the 15% rate

The India–US treaty does contain a 15% dividend rate, and it is often quoted in error. It applies where the recipient holds at least 10% of the voting stock of the paying company. That is a corporate shareholding threshold. Retail investors get 25%, not 15%.

2. India taxes the gross dividend

Here is the part people find counter-intuitive. India taxes the gross dividend — the full amount before US withholding — not the net amount that arrived in your account.

The gross figure is added to your total income and taxed at your applicable slab rate. There is no separate concessional rate for foreign dividends.

3. You claim credit for the US tax

To prevent the same income being fully taxed twice, you claim a foreign tax credit for the US tax withheld, under Section 90 read with the DTAA.

The credit is claimed by filing Form 67 (Form 44 from tax year 2026-27) and completing Schedule FSI and Schedule TR in your return. See The India–US DTAA and Foreign Tax Credit for the mechanics, including the Form 67 to Form 44 transition.

A worked example

Assume a US dividend of USD 1,000 and an investor in the 30% slab, with W-8BEN on file. Figures are base tax, before surcharge and cess, and are illustrative.

Step	Amount
Gross dividend declared	USD 1,000
US withholding at 25%	−USD 250
Received in account	USD 750
Taxable in India on gross	USD 1,000
Indian base tax at 30% slab (before surcharge and cess)	USD 300
Less foreign tax credit for US tax paid	−USD 250
Net additional Indian base tax payable	USD 50
Total base tax borne	USD 300

The effective outcome is that you pay tax at your Indian slab rate overall — the US simply collects part of it first. The credit is generally capped at the Indian tax attributable to that income, so where the Indian rate is lower than 25%, the excess US withholding is typically not refundable.

That last point is worth sitting with: for an investor in a lower slab, US dividend withholding can exceed the Indian liability on the same income, and the surplus is not recovered. The credit arithmetic therefore works out differently for investors in different tax slabs.

Converting the amounts

Dividend income is converted to rupees for Indian tax purposes. The Income-tax Rules set the SBI telegraphic-transfer buying rate; agree the method with your CA.

Both the gross dividend and the tax withheld should be converted consistently, so that the credit claimed matches the income reported.

What this means for how you invest

None of this is a reason to avoid dividend-paying US holdings. It is a reason to be aware of a few consequences:

Withholding is a real drag on total return for dividend-focused strategies, and it does not appear in an ETF's expense ratio.
The credit needs claiming. It is not automatic. Miss Form 67 (Form 44 from tax year 2026-27) and you have simply paid twice.
Documentation matters. Keep dividend statements and withholding certificates from the broker; the credit claim depends on them.
Accumulating structures behave differently from distributing ones. Where a fund reinvests internally rather than distributing, the investor-level dividend event may not arise in the same way — but the treatment depends on the specific structure, and is worth checking rather than assuming.

Common mistakes

Reporting the net dividend received instead of the gross.
Not filing W-8BEN, and paying 30% instead of 25%.
Expecting the 15% treaty rate as a retail investor.
Forgetting Form 67 (Form 44 from tax year 2026-27), which forfeits the credit.
Assuming dividends are exempt because capital gains are not taxed in the US.

Conclusion

US dividends are withheld at 25% with W-8BEN on file, taxed in India on the gross amount at your slab rate, and relieved through a foreign tax credit. Done correctly, you bear roughly your Indian slab rate in total. Done carelessly — no W-8BEN, no Form 67 — you can end up meaningfully worse off than the rules require.