Foreign Dividends and Gains on US Stocks After You Move Home: Why Your Apple Shares Are Not Taxed Like Your Reliance Shares

You spent eight years in San Francisco, you built a position in US tech stocks and a pile of vested RSUs in your employer's parent, and now you have moved your family back to Bengaluru. You already know how Indian shares are taxed, because every Indian investor does: long-term gains at 12.5 per cent over a Rs 1.25 lakh exemption, short-term at 20 per cent, dividends at your slab. So you assume your Apple shares and your Vanguard funds will be taxed the same way once you are resident. They will not. The rules you know come from Section 112A and Section 115AD, and those sections only ever look at one thing: shares listed on an Indian exchange. Your foreign portfolio lives in a different part of the Act entirely, with a longer holding period, a different rate mechanism, and a foreign withholding tax sitting on top that you have to claw back yourself.

The 30-second answer: Once you become Resident and Ordinarily Resident (ROR), India taxes your worldwide income, including your foreign dividends and gains on foreign shares. Foreign dividends (US stocks, foreign funds) are added to income and taxed at slab rates up to 30 per cent, not the 112A regime, which is reserved for Indian listed shares. Gains on foreign shares fall under Section 112, not 112A or 115AD: the long-term holding period is 24 months, long-term gains are taxed at 12.5 per cent without indexation (transfers on or after July 23, 2024), and short-term gains are taxed at slab. You claim credit for US/foreign withholding through Form 67 (Form 44 from April 1, 2026). While RNOR in your first two to three years back, all of this foreign income stays exempt and Schedule FA does not apply.

This guide walks through the whole arc: why the RNOR window shields your foreign income first, what switches on the day you become ROR, exactly how foreign dividends and foreign share gains are taxed once they enter the Indian return, how the foreign tax credit on US withholding works in practice, and what Schedule FA demands of you the moment you are ordinarily resident. It assumes you already know your residency status; if you do not, fix that first with NRI residency and the RNOR rules, because residency decides whether any of this applies to you at all. For the full filing picture, the hub is the NRI ITR filing guide for AY 2026-27.

The single mistake almost every returning NRI makes

The mistake is to treat all shares as one asset class for tax. They are not. Indian tax law splits equities into two worlds by a single test, and the test is not "is it a share" but "is it listed on an Indian recognised stock exchange and did it pay securities transaction tax". Everything that answers yes lives in one tax regime. Everything that answers no, which is your entire US and foreign portfolio, lives in another.

This matters because the favourable regime everyone talks about, Section 112A, is built only for the first world. Section 112A gives you the 12.5 per cent long-term rate, the Rs 1.25 lakh annual exemption, and the 12-month holding period to qualify as long-term. It applies to equity shares listed on an Indian exchange, units of equity-oriented mutual funds, and units of business trusts, where STT has been paid. Your Apple shares pay no Indian STT. Your Vanguard fund is not an Indian equity-oriented fund. Your RSU in a Delaware parent is not listed in Mumbai. None of them can ever touch Section 112A.

There is a parallel section, Section 115AD, that sets special rates for Foreign Institutional Investors and certain foreign portfolio investors on Indian securities. That is not you either. You are a resident individual holding foreign securities, and the section that catches you is the general one, Section 112.

So the honest read before any numbers: the moment you became ordinarily resident, your foreign equities did not get worse or better than Indian equities in some vague way. They moved into a different, older, plainer part of the Act, and that part has its own holding period and its own rate. Confusing the two is what produces wrong returns, missed tax, and occasionally a panicked revised return in November.

The RNOR window comes first, and it shields all of this

Before any of the foreign-income rules bite, you almost certainly get a buffer. For roughly your first two to three financial years back in India you will be Resident but Not Ordinarily Resident (RNOR), and an RNOR is taxed almost exactly like a non-resident: only on Indian-source income, plus income from a business controlled in or a profession set up in India.

While you are RNOR, your foreign dividends, your gains on foreign shares, and your gains on foreign mutual funds are all outside the Indian net. India does not tax them, and just as importantly, you are not required to file Schedule FA for the foreign assets that produce them. This is not a loophole. It is the design of Section 6, and it exists precisely to give returning Indians a soft landing before worldwide taxation switches on.

The window is finite and you only get it once. You hold RNOR until your day-count history (broadly, being non-resident in nine of the prior ten years, or in India for 729 days or fewer over the prior seven years) tips you into Resident and Ordinarily Resident (ROR). For a clean returner that is usually the start of the third financial year back, sometimes the second. The exact mechanics, including the FEMA residency mismatch that surprises people, are in NRI residency and the RNOR rules and in the returning NRI account conversion guide.

For the foreign-portfolio investor, the planning point is sharp and time-limited. The RNOR window is the period in which you can sell appreciated foreign shares and funds with no Indian tax on the gain, because the gain is foreign-source and you are not yet ordinarily resident. Sell while RNOR, repurchase if you still want the exposure, and you have reset your cost base to the higher current value before India can ever tax the appreciation. The full mechanics of this reset, and where it interacts with foreign exit taxes, sit in the RNOR window foreign-investment reset guide. Miss the window and every rupee of pre-return appreciation becomes taxable in India when you eventually sell as an ROR.

Once you are ROR, foreign dividends are taxed at your slab, full stop

Here is where returning NRIs reach for the wrong rule. Dividends from Indian companies, since the dividend distribution tax was scrapped from April 1, 2020, are taxed in the shareholder's hands at slab. People assume there must be some special, lower, foreign-dividend rate. For a brief period there was, and it is gone.

Section 115BBD once let Indian companies receiving dividends from foreign subsidiaries pay a flat 15 per cent. The Finance Act 2020 wound it down, and for income arising on or after April 1, 2022 that concessional rate is no longer available. It was, in any case, a corporate provision, not one for individuals. Section 115BBDA, the 10 per cent levy on large dividends, only ever applied to dividends from domestic companies and never touched foreign dividends. So there is no concessional regime left for your US dividends.

The rule once you are ROR is therefore simple and not in your favour: dividends from foreign companies are added to your total income and taxed at your slab rate, the top of which is 30 per cent, plus any applicable surcharge, plus 4 per cent health and education cess. A returning techie sitting in the 30 per cent slab pays an effective 31.2 per cent on US dividends before surcharge. This is materially worse than the way the same dividend would be taxed in the US, and worse than how Indian listed-share long-term gains are taxed, which is exactly why people get it wrong.

The saving grace is that you do not pay this on top of the US tax you already suffered. The US withholds tax on dividends paid to Indian residents, and you credit that against the Indian tax. We come to the mechanics below. The general taxation of Indian dividends, by contrast, is covered in how Indian dividends are taxed for NRIs, and you will notice the foreign side is the harsher one.

Gains on foreign shares: Section 112, 24 months, and 12.5 per cent without indexation

Now the part that surprises people most. Your Indian listed shares are long-term after 12 months. Your foreign shares are long-term only after 24 months. That is because foreign shares are, in Indian tax terms, treated like any unlisted security: the long-term holding period for a capital asset that is not a listed Indian security is 24 months.

So the first question on any foreign share sale is the holding period:

• Held 24 months or less: the gain is short-term. It is added to your total income and taxed at your slab rate, up to 30 per cent plus cess. There is no special short-term rate, because the special 20 per cent short-term rate under Section 111A is, like 112A, reserved for STT-paid Indian listed shares.
• Held more than 24 months: the gain is long-term and taxed under Section 112 at 12.5 per cent without indexation for transfers on or after July 23, 2024.

That 12.5 per cent looks identical to the Indian 112A rate, and that is the trap, because the two get to the same headline number by completely different routes. Section 112A gives you a Rs 1.25 lakh annual exemption and a 12-month holding period. Section 112 on foreign shares gives you no annual exemption at all and demands 24 months. So a Rs 1 lakh long-term gain on Infosys shares is tax-free; the same Rs 1 lakh long-term gain on Apple shares is fully taxed at 12.5 per cent. Same rate on paper, very different bill.

A few finer points worth nailing down:

• Indexation. For resident individuals, transfers on or after July 23, 2024 are taxed at 12.5 per cent without indexation. The Budget did preserve a narrow choice for land and building acquired before that date (the lower of 12.5 per cent without indexation or 20 per cent with indexation), but that relief does not extend to foreign shares. For your US stock, 12.5 per cent flat is the answer.
• RSUs. A vested RSU is just a share you now own. The taxation of the vesting itself, as salary perquisite, is a separate event covered in RSU and ESOP taxation for NRIs. What we are taxing here is the capital gain after vesting: your cost base is the fair market value on the vesting date (the value already taxed as salary), and the gain from there to the sale price follows the same Section 112 rules above, with the 24-month clock running from the vesting date.
• Foreign mutual funds. A fund domiciled abroad, a US-listed ETF or a Vanguard fund, is not an Indian equity-oriented fund, so it cannot use Section 112A and it does not get the debt-fund slab treatment of Indian funds either. Gains on foreign funds follow Section 112: 24-month long-term holding, 12.5 per cent long-term, slab for short-term. This is the mirror image of the problem US-resident NRIs face with Indian funds under the PFIC rules, covered in the US PFIC trap on Indian mutual funds.

The foreign tax credit: how you avoid paying twice on a US dividend

The US does not let your dividends leave untaxed. Under the India-US Double Taxation Avoidance Agreement, the US is entitled to withhold tax on dividends paid to an Indian resident, and the treaty rate for a portfolio investor is 25 per cent. You will see this on your US 1042-S form: gross dividend, 25 per cent withheld, net paid into your account.

India, once you are ROR, taxes that same dividend again at your slab. Without relief you would pay 25 per cent to the US and up to 31.2 per cent to India on the same money, close to 50 per cent stacked. The treaty stops that through the foreign tax credit: India credits the US tax you already paid against the Indian tax on that dividend. The credit is the lower of the foreign tax paid or the Indian tax payable on that same income, it can never exceed the Indian tax, and it is never refunded and never carried forward if the US tax is higher.

You claim it by filing Form 67 before or with the return that carries the foreign income, electronically on the income-tax portal, under Rule 128 and Section 90. From April 1, 2026 the form is renumbered Form 44 under the new Income-tax Rules, 2026, and where your foreign tax for the year is Rs 1 lakh or more it must carry a chartered accountant's certificate. The full mechanics, deadlines and the case law on late filing are in the foreign tax credit and Form 67 guide. One trap worth flagging now: the timing mismatch between the US calendar year and India's April-March year can strand part of your credit, and that is dealt with in the foreign tax credit timing mismatch guide.

The conversion rule matters too. Foreign tax is converted into rupees at the telegraphic transfer buying rate on the last day of the month immediately preceding the month in which the tax was paid or deducted, under Rule 128 read with Rule 115. Foreign income itself is converted under Rule 115 by the nature of the income. Get the dates wrong and your credit will not reconcile against the Indian tax.

A worked example: one year of a returning NRI's US portfolio

Take Priya. She returned to Pune from Seattle in June 2023. For FY 2023-24 and FY 2024-25 she was RNOR. From FY 2025-26 (April 1, 2025 onward) she is ROR, so this is the first year her US portfolio is taxable in India. She is in the 30 per cent slab. Two events happen in FY 2025-26.

Event one: a US dividend of USD 4,000.

• Gross US dividend: USD 4,000. Converted at, say, Rs 84 to the dollar under Rule 115, that is Rs 3,36,000 added to her total income.
• US withholding at the treaty rate of 25 per cent: USD 1,000, which is Rs 84,000 of US tax paid.
• Indian tax on the dividend at her 30 per cent slab plus 4 per cent cess: 31.2 per cent of Rs 3,36,000 = Rs 1,04,832.
• Foreign tax credit, the lower of the US tax (Rs 84,000) or the Indian tax (Rs 1,04,832): she credits Rs 84,000.
• Net additional Indian tax on the dividend: Rs 1,04,832 minus Rs 84,000 = Rs 20,832.
• Total tax on the dividend across both countries: Rs 84,000 plus Rs 20,832 = Rs 1,04,832, which is exactly the Indian 31.2 per cent. She pays the higher of the two rates once, not both stacked. The credit removed the double count; it did not refund the US tax.

Event two: she sells US shares she has held since 2019 for a long-term gain.

• Sale value, converted under Rule 115: Rs 30,00,000.
• Cost base (purchase price for the shares, or vesting-date value for any RSUs), converted at the historical rate: Rs 14,00,000.
• Long-term capital gain (held well over 24 months, so Section 112 long-term): Rs 30,00,000 minus Rs 14,00,000 = Rs 16,00,000.
• No Rs 1.25 lakh exemption applies, because that exemption lives in Section 112A and foreign shares are not in 112A.
• Indian LTCG tax under Section 112 at 12.5 per cent without indexation: 12.5 per cent of Rs 16,00,000 = Rs 2,00,000, plus 4 per cent cess of Rs 8,000, so Rs 2,08,000.
• If the US also taxed this gain (it generally taxes residents on worldwide gains, but for a non-US-person Indian resident the US usually does not tax the gain on US shares), she would credit any US tax suffered, lower-of-two, through Form 67. Assume no US tax here, so the Indian Rs 2,08,000 stands.

Compare that last line to what she would have paid on an identical Rs 16,00,000 long-term gain on Indian listed shares: 12.5 per cent on Rs 16,00,000 minus the Rs 1.25 lakh exemption, that is 12.5 per cent of Rs 14,75,000 = Rs 1,84,375 plus cess. The foreign gain cost her about Rs 16,000 more, purely because the Rs 1.25 lakh exemption does not reach foreign shares. Small on one gain, but it compounds across a portfolio and across years, and it is the kind of difference that returning NRIs never see coming.

The full arithmetic for the Indian-share side of this comparison is laid out in capital gains tax for NRIs on Indian shares and mutual funds.

Edge cases

The exact day RNOR ends. Your foreign income becomes taxable from the first financial year you are ROR, not from a partial-year date. If you sell appreciated US stock on March 25, while still RNOR for that financial year, the whole gain is exempt; sell it on April 5, into a year in which you are ROR, and the whole gain is taxable. The cliff is the financial-year boundary, not a calendar of months. Plan large foreign disposals to fall inside an RNOR year, not after it.

Currency conversion is not optional or cosmetic. Both the foreign income and the cost base must be converted to rupees, but on different dates. Capital gain on foreign shares is computed by converting the sale consideration and the cost of acquisition under Rule 115, at the telegraphic transfer buying rate of the relevant dates, and a depreciating rupee can turn a flat dollar gain into a larger rupee gain that India taxes. Foreign tax for the credit is converted at the last day of the month before it was paid. Mixing these dates up is one of the most common reconciliation failures the department flags. Use the SBI TT buying rate, and document each rate.

Foreign mutual funds are not 112A and not Indian debt funds. This trips up people who held a US bond fund or a global equity ETF. It is neither an Indian equity-oriented fund (so not 112A) nor an Indian specified mutual fund taxed at slab as debt. It is simply a foreign capital asset under Section 112: 24-month long-term holding, 12.5 per cent long-term, slab for short-term. Do not import the Indian-fund taxation logic onto it.

Schedule FA switches on with ROR and is unforgiving. The moment you are ordinarily resident, you must report every foreign bank account, every foreign holding, every RSU and every foreign fund in Schedule FA of your ITR, regardless of whether you sold anything or earned a rupee of income from it. Schedule FA runs on the calendar year (January to December) that ends within the relevant financial year, not the April-March year your income runs on, so you report holdings as at December 31. Vested RSUs and foreign shares go in the foreign-equity table; foreign bank accounts in the bank table. Non-disclosure is not a small-penalty matter: under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 it can attract a penalty of Rs 10 lakh per undisclosed asset plus prosecution exposure, even where the asset produced no taxable income. The detail, table by table, is in Schedule FA and the returning NRI.

The RSU vesting event versus the capital gain. Do not double-count. The value of an RSU on the day it vests is taxed once as a salary perquisite (and may have suffered US withholding then). That vesting-date value becomes your cost base. Only the appreciation from vesting to sale is the capital gain taxed under Section 112. Treating the whole sale proceeds as gain, ignoring the already-taxed vesting value, is a common and expensive overpayment.

FCNR and NRE interest is a separate switch. Returning NRIs often lump their bank interest in with this. The tax treatment of NRE and FCNR interest after you return runs on its own, RFC-linked rules, covered in when NRE and FCNR interest stops being tax-free after return. Do not assume it follows the same RNOR-to-ROR line as your equities, because the FEMA residency trigger differs.

The closing read

The thing to fix in your head is that "shares" is not one tax category in India. The favourable regime you know, Section 112A with its 12.5 per cent rate and Rs 1.25 lakh exemption and 12-month clock, was built for Indian listed shares and reaches no further. Your US stocks, your vested RSUs and your foreign funds live under Section 112: a 24-month holding period, 12.5 per cent without indexation on long-term gains, slab on short-term, and not a rupee of annual exemption. Your foreign dividends are plainer still, taxed straight at your slab with no concession left after Section 115BBD lapsed in 2022.

The two levers that actually change your outcome are timing and credit. The RNOR window is the one period in which you can crystallise pre-return foreign appreciation tax-free, and it closes for good after two or three years. The foreign tax credit through Form 67, soon Form 44, is what stops your US dividends being taxed near 50 per cent across both countries, but it caps at the Indian tax and refunds nothing. Use the window while you have it, file the form before the return that carries the income, report everything in Schedule FA the moment you are ordinarily resident, and the foreign-versus-Indian gap shrinks to the small, predictable cost of a missing exemption rather than a nasty surprise in a tax notice.

Related guides

• NRI residency and the RNOR rules
• The RNOR window: resetting foreign investment basis with little or no Indian tax
• Foreign tax credit for returning NRIs: Form 67 and Form 44
• The foreign tax credit timing mismatch
• Schedule FA and the returning NRI
• Capital gains tax for NRIs on Indian shares and mutual funds
• How dividends from Indian companies and mutual funds are taxed for NRIs
• RSU and ESOP taxation for NRIs
• Why Indian mutual funds are a US tax trap: the PFIC rules
• When NRE and FCNR interest stops being tax-free after return
• Returning to India: NRE, NRO and FCNR account conversion
• The RFC account: keeping foreign currency in India after return
• DTAA relief for NRIs: treaty rates and how to claim
• ITR filing for NRIs, AY 2026-27

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A note on what this is and is not. This guide explains the general Indian tax treatment of foreign dividends and gains on foreign shares for a returning Indian, as the law stands for AY 2026-27, with the Income-tax Act, 2025 and Income-tax Rules, 2026 taking over for tax years from April 1, 2026. It is not personal tax advice. Residency status, treaty positions, the interaction with your country of former residence, and the exact conversion rates for your transactions all turn on your own facts. The Black Money Act penalties for Schedule FA non-disclosure are severe and apply even to assets that earned no income. Before you sell a large foreign position, claim a foreign tax credit, or decide what to report once ROR, confirm your position with a chartered accountant who handles cross-border returns.