I Invest in US Stocks & Gold ETFs: How Are They Taxed on Sale?

I Invest in US Stocks and Gold ETFs – How Are Foreign Shares and Gold Taxed When I Sell?

Summary: Different investment assets are subject to different capital gains tax rules under the Income-tax Act, 1961. The concessional equity tax rates apply only to STT-paid Indian listed equity and equity mutual funds, while foreign shares, gold and REITs follow separate holding periods and tax rates. Foreign listed shares become long-term after 24 months, while Gold ETFs, gold mutual funds and listed REIT/InvIT units become long-term after 12 months, and physical gold after 24 months. Long-term gains on foreign shares, gold and eligible assets are taxed at 12.5% as specified, whereas short-term gains on foreign shares and gold are taxed at the applicable slab rate, and listed REIT/InvIT units at 20%. Sovereign Gold Bonds redeemed on maturity after eight years are exempt from capital gains tax, while exchange sales before maturity are taxed under normal capital gains rules, and annual interest remains taxable at the slab rate. The content also states that US dividends are subject to 25% US withholding tax, for which foreign tax credit may be claimed under the India-US treaty, and that resident and ordinarily resident taxpayers must disclose foreign holdings in Schedule FA. It also refers to the Liberalised Remittance Scheme limit of USD 250,000 per financial year and tax collected at source on larger remittances.

“I hold Apple and Microsoft through a broking app, some gold ETFs, and a sovereign gold bond. When I sell, is it all 12.5% like my Indian shares? A friend said foreign stocks are taxed completely differently.” – A diversified investor who spread beyond Indian equities and now can’t decode the tax

Diversifying into US stocks, gold and REITs is smart investing – but each of these sits in a different tax bucket, and the flat 12.5% equity rate you know does not automatically apply. The reason is simple: the friendly equity rates (20% short-term, 12.5% long-term) are reserved for STT-paid Indian listed equity and equity mutual funds. Foreign shares and gold are other capital assets with their own holding periods and rates under the Income-tax Act, 1961. Here is the map.

The holding-period lines are different

The single biggest surprise for investors: on foreign shares and gold, a short-term gain is taxed at your ordinary slab rate – which can be as high as 30% – not at the comfortable 20% equity rate. Only the long-term gain enjoys the flat 12.5%. Holding-period discipline matters even more here.

Let’s understand this better with a real example: US Stocks

Ananya, in the 30% slab, sells Apple shares in FY 2025-26:

Same Rs 2,00,000 gain, but patience cuts the tax from Rs 60,000 to Rs 25,000 – a Rs 35,000 saving simply by crossing the 24-month line. Remember too that US dividends suffer a 25% US withholding tax; you can claim that as a foreign tax credit in India under the India-US treaty, but you must report the foreign holdings in Schedule FA of your ITR. Non-disclosure there is treated very seriously.

The Sovereign Gold Bond exception worth knowing

Sovereign Gold Bonds are the tax-smartest way to hold gold. If you hold an SGB to its full maturity (8 years), the capital gain on redemption is fully exempt – completely tax-free. If you instead sell it on the exchange before maturity, normal capital-gains rules apply (long-term over 12 months at 12.5%). The 2.5% annual interest, however, is always taxable at your slab rate. For a long-horizon gold investor, holding to maturity is hard to beat.

Putting it together

• Foreign shares: long-term only after 24 months; short-term is taxed at your slab, so time your exit.
• Gold ETFs and gold funds: long-term after just 12 months at 12.5% – more efficient than physical gold’s 24-month line.
• SGBs held to maturity: capital gain is tax-free; interest is taxable.
• Always disclose foreign assets in Schedule FA and claim treaty credit for foreign tax paid.

Diversification is a portfolio strength, but it turns your tax return into a multi-bucket exercise. Match each asset to its holding period and rate before you sell, and your global portfolio will be as tax-efficient as it is well-spread.

The reporting duties that come with going global

Investing abroad carries a compliance dimension that Indian-only investors never face, and it is where I see the most anxiety – and the most avoidable trouble. If you are a resident and ordinarily resident, you must disclose every foreign holding – US shares, foreign ETFs, even a small brokerage balance – in Schedule FA of your income-tax return, whether or not you sold anything during the year. This is a disclosure obligation, not a tax; but the penalties for omitting it under the black-money law are steep and disproportionate to the amounts involved. Alongside that, remember the Liberalised Remittance Scheme cap of USD 250,000 per financial year on money you send abroad to invest, and the tax collected at source that your bank applies on larger remittances – which, like TDS, is merely a prepayment you reclaim at filing. None of this should deter you from a globally diversified portfolio. It simply means the paperwork deserves the same care as the stock-picking. Get the disclosures right once and the routine becomes painless.

This article is for general information based on the Income-tax Act, 1961 (governing Financial Year 2025-26, i.e. Assessment Year 2026-27) and is not a substitute for personalised professional advice.

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About the Author: Sonia Dawar is a Chartered Accountant and the founder of Dawar & Co., Chartered Accountants, based in Mumbai. She advises resident and non-resident investors on capital gains planning, reinvestment exemptions, and stress-free ITR filing. She writes to turn dense tax law into decisions people can actually act on. Reach her at sonia@dawarandco.com.