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US dividend withholding tax for Indian investors
When a US company pays you a dividend, the US keeps part of it before the money reaches your broker. India then taxes the full dividend again at your slab rate. Here is what is withheld, why, and how much of it you get back as credit.
At a glance
Applies to FY 2025-26 (AY 2026-27) · Last updated
| US withholding with W-8BEN | 25% under the India–US tax treaty (Article 10) |
|---|---|
| US withholding without W-8BEN | 30% |
| Tax in India | Full (gross) dividend added to your income, taxed at your slab rate, plus 4% cess |
| Credit in India | Lower of the US tax paid (up to 25%) and the Indian tax on that dividend, claimed with Form 67 |
| Extra 5% if no W-8BEN | Not creditable in India. Claim it back from the IRS |
Why the US withholds tax from you
The US taxes dividends paid by US companies to foreign investors at 30%, collected at source by your broker. India has a tax treaty with the US that lowers this to 25% for Indian residents. To get the lower rate, you must give your broker a valid Form W-8BEN. Most Indian brokers ask for it when you open the account. It is generally valid for three years, so renew it before it expires.
What India does on top
India taxes your worldwide income. The dividend is added to your total income at the gross amount, that is before the US took its share, and taxed at your slab rate. You then claim credit for the US tax by filingForm 67before your return.
The credit is the lower of the US tax you paid (counted up to 25%) and the Indian tax on that same dividend. It never reduces tax on your capital gains.
Worked example in rupees
You receive dividends of $200 in a year, converted at ₹85 to the dollar, so the gross dividend is ₹17,000. You are in the 30% slab.
| With W-8BEN | Without W-8BEN | |
|---|---|---|
| US withholding | 25% = ₹4,250 | 30% = ₹5,100 |
| Received in your account | ₹12,750 | ₹11,900 |
| Indian tax at 30% + 4% cess | ₹5,304 | ₹5,304 |
| Credit via Form 67 | ₹4,250 | ₹4,250 (capped at 25%) |
| Tax still payable in India | ₹1,054 | ₹1,054 |
| Total tax, US plus India | ₹5,304 | ₹6,154 |
Without a W-8BEN you pay ₹850 more, because the extra 5% withheld is not creditable in India.
What to keep for your return
- Your broker's dividend statement showing the gross dividend and the tax withheld, for each payment.
- The SBI TT buying rate on each payment date, to convert both amounts to rupees.
- The Form 67 you filed, with its acknowledgement.
- Report the dividends under Income from Other Sources, and the shares in Schedule FA.
Check your own numbers
The calculator takes your dividends, applies the 25% credit limit and shows the Form 67 figures.
This guide is general information, not tax advice. Confirm your own case with a chartered accountant before you file.