When determining tax on US equities in India, dividends paid from US stocks must also be included. This sum is subject to a flat tax rate of 25%. As a result, if the firm announces a $100 dividend, you will get $75. Due to a tax deal between India and the United States, this rate is lower than the ordinary tax rate for foreign investors in the United States. Furthermore, the dividend paid in cash or reinvested is taxed in India according to the appropriate income tax slabs when added to your existing income. However, India and the United States have a Double Taxation Avoidance Agreement that permits you to balance your tax burden in India with the tax withheld in the United States.

As a result, if the corporation announced a $100 dividend, you would get $75. The tax due in India, on the other hand, would be determined on a $100 basis. Assume your tax obligation in India is $30. You will just have to pay $5 in India since you have paid $25 in the United States. Keep in mind that this is only a hypothetical scenario. The real-life calculation will take a little longer since you’ll need to add $100 to your taxable income and calculate your tax due depending on your tax bracket.