United States: the NRI investment guide

For US-resident NRIs the story is different from the Gulf guides in this series — and it's better to hear it straight: there is no "0% in India" here. The India–US treaty leaves capital gains to each country's domestic law, so India taxes your Indian gains fully, the US taxes your worldwide income, and the relief is a foreign tax credit, not an exemption. The treaty's one genuine win is NRO interest, capped at 15% instead of 30%. The real work for a US-based investor is coordination: FATCA and FBAR reporting, the PFIC regime that treats Indian mutual funds harshly on the US side, and the fact that India-tax-free is not US-tax-free. This guide covers all of it.

At a glance

You can test every number above against your own figures in the DTAA tax visualizer — select United States and switch between the income tabs.

Your India tax position, income by income

Mutual fund units. The India–US treaty has no residual-clause story: Article 13 lets each country tax capital gains under its own domestic law, so India taxes your unit gains at the normal NRI rates — the same numbers the visualizer shows for the domestic route. The US then taxes the same gain as part of your worldwide income, with a foreign tax credit for the Indian tax, subject to US credit rules. The bigger US-side issue is classification: Indian mutual funds are PFICs (passive foreign investment companies) for US tax purposes, a regime with punitive default treatment and Form 8621 filings — the single most important thing for a US-based MF investor to discuss with a US tax professional before investing, not after.

Direct stocks and PMS. The same Article 13 position applies: taxable in India at domestic rates, taxable in the US, credited via the FTC. One structural difference matters specifically for US persons: a PMS holds shares in your own name rather than pooled fund units, so the PFIC regime that complicates mutual funds generally does not apply to direct equity — US-side treatment follows ordinary capital-gains rules instead. That doesn't change the Indian tax bill, but it changes the US paperwork materially.

Dividends and interest. A misread number first: the treaty's famous 15% dividend rate is for companies holding 10%+ voting stock — individuals face a 25% cap, which is worse than the 20% domestic TDS, so the domestic rate simply applies (Section 90(2) lets you use whichever is lower). Interest is the treaty's genuine gift: capped at 15% instead of 30% on NRO balances. And a US-specific trap on NRE interest: it's exempt in India under Section 10(4)(ii) — but that exemption is Indian law only. As a US resident you owe US tax on it; "tax-free NRE interest" is a phrase that does not survive a US tax return.

Claiming what the treaty gives: Form 6166

The treaty benefit worth claiming — the 15% interest cap — still runs through the standard machinery. The US TRC is IRS Form 6166, requested by filing Form 8802 with the IRS (there's a user fee, and processing takes weeks — apply well before your bank needs it). With the 6166 in hand, file Form 10F on the Indian portal for the financial year and share both with your bank so the 15% rate applies at source. On the US side, Indian taxes paid are claimed as a foreign tax credit on your return — note that India's April–March financial year and the US calendar year don't line up, so credit timing deserves attention from your preparer.

Accounts, disclosure & paperwork

The base kit is the same as any NRI — an NRE and/or NRO account, KYC, and the FATCA self-certification — but for US persons this layer is the thick one. Indian institutions report US-person accounts to the IRS under the FATCA agreement, and AMC acceptance varies: some fund houses restrict US investors, others accept them with additional declarations, so the practical fund menu is narrower and worth checking before planning. On the US side, foreign accounts over USD 10,000 in aggregate trigger the FBAR (FinCEN Form 114), Form 8938 applies above its thresholds, and fund holdings bring Form 8621. Typical Indian onboarding documents: passport, US address proof, PAN, visa/green card details, and a photograph; the NRI desk confirms the exact checklist per institution.

Routes available from the United States