Common Mistakes Indians Make When Investing in US Stocks

Most of these aren't investment-selection mistakes — they're process and compliance mistakes, which is actually good news, since they're entirely avoidable with the right information upfront.

1. Not Filing Form W-8BEN, or Letting It Lapse

This results in paying 30% dividend withholding instead of the 25% treaty rate — a real, ongoing, entirely avoidable cost. Confirm this is filed and current, and check periodically, since it expires after three calendar years.

2. Forgetting Schedule FA Disclosure

This is likely the single most consequential compliance mistake: US stock holdings must be disclosed under Schedule FA (Foreign Assets) in the Indian income tax return, separate from reporting any income or gains from them. This is a genuinely serious requirement with real penalty exposure for non-disclosure — covered in full detail in a separate article in this series, since it deserves focused attention.

3. Not Claiming the Foreign Tax Credit

Many investors correctly report US dividend income in India but fail to file Form 67 to claim credit for the US tax already withheld — effectively paying tax twice on the same income. This form has its own filing timeline and needs to be submitted alongside or before the ITR, not assumed to happen automatically.

4. Ignoring Currency Conversion Record-Keeping

Calculating capital gains by simply subtracting USD purchase price from USD sale price, and converting the difference to INR at the end, is not the correct method — both the purchase and sale need to be converted to INR at their respective transaction-date exchange rates. Skipping proper record-keeping here can lead to an incorrect (sometimes overstated, sometimes understated) capital gains calculation.

5. Misjudging the TCS Impact on Cash Flow

Some investors are caught off guard by the 20% TCS collected upfront on investment remittances above ₹10 lakh, not realizing it's a cash-flow timing issue (reclaimable at tax filing) rather than understanding it in advance and planning their remittance amounts and timing accordingly.

6. Treating US Stock Investing as "Set and Forget" on the Compliance Side

Even a buy-and-hold investor who never trades still has ongoing obligations: annual Schedule FA disclosure for as long as the holding exists, dividend income reporting each year dividends are received, and W-8BEN renewal every three years. The investment itself can be passive; the compliance can't be.

7. Confusing Direct Holding Rules With Indian Fund Rules

Some investors research US stock taxation extensively and then apply what they learned to an Indian mutual fund with US exposure, or vice versa — these follow genuinely different tax and compliance frameworks, covered in our direct-vs-fund comparison article. Confirm which structure you actually hold before applying tax rules to it.

8. Not Keeping Consolidated Records Across Platforms

If you use more than one platform or broker for US stock investing, remember that thresholds like the LRS/TCS calculation are based on your cumulative remittances across all sources, not per-platform — losing track of this across multiple accounts is a genuine, avoidable planning error.

A Quick Self-Check