If you hold US-listed RSU shares for a while, some companies pay dividends. It's not the main event — most growth tech stocks pay little or nothing in dividends, or have only recently started (Meta, for example, began paying dividends in 2024). But the ones that do — Microsoft, Qualcomm, Broadcom — pay meaningful amounts.
And dividends have their own tax story, separate from capital gains.
How Dividends From Us Shares Work for Indian Residents
When a US company pays a dividend, it's processed by your brokerage (Schwab, Fidelity, etc.) and credited to your account. The company doesn't send money directly to you — it goes through a clearing mechanism that includes, at some point, a deduction for US withholding tax.
The standard US withholding tax on dividends for non-residents is 30%.
Under the India–US Double Taxation Avoidance Agreement (DTAA), Article 10, this is reduced to 25% for Indian residents who have submitted Form W-8BEN to their broker.
So if Microsoft pays a $0.83 quarterly dividend per share and you hold 200 shares, the gross dividend is $166. After 25% US withholding, you receive $124.50 in your account.
The Second Tax: India Also Taxes it
As an Indian resident, your global income is taxable in India. That includes dividends received from US companies.
In India, dividends are taxed as regular income — added to your total income for the year and taxed at your applicable slab rate. If you're in the 30% bracket, your total tax on that dividend (counting both countries) could theoretically exceed the gross amount.
This is where the Foreign Tax Credit comes in.
The Foreign Tax Credit (ftc) Mechanism
The DTAA between India and the US prevents genuine double taxation. The mechanism: whatever tax you've paid in the US on the dividend (25% withholding), you can claim as a credit against your Indian tax liability on that same income.
In practical terms: Gross dividend: $166 US tax withheld (25%): $41.50 India tax at 30%: $49.80 (hypothetical) FTC available: $41.50 (what was paid in the US) Net additional tax payable in India: $49.80 − $41.50 = $8.30 + applicable cess
You've paid a total of $49.80 in tax between the two countries — which is your Indian slab rate. The DTAA ensures you don't pay both 25% US tax and 30% Indian tax in full.
Form 67: the Step Most People Skip
To claim the Foreign Tax Credit in India, you must file Form 67 with the Income Tax Department before you file your ITR.
Form 67 is a statement of income from a foreign country and the tax paid on it. It documents the dividend income, the US withholding tax paid, and the FTC being claimed.
If you don't file Form 67, you cannot claim the credit. The US withholding is not automatically deducted from your Indian tax liability — you have to actively claim it.
The deadline: Form 67 must be submitted before or alongside your ITR filing. It cannot be submitted after the ITR due date.
Source: CBDT circular on Form 67 filing: https://www.incometaxindia.gov.in/communications/circular/circular-no-18-2017.pdf
Where it Shows Up in Your Itr
Dividend income from foreign shares is reported in Schedule FSI (Foreign Source Income) of your ITR-2 or ITR-3.
You'll enter: - Country: United States - Income type: Dividend - Gross amount (before withholding, in INR converted at SBI TTBR) - Tax paid outside India (the withholding amount, in INR) - FTC claimed
The Schedule FSI links to the FTC computed from Form 67.
📊 TABLE: "Dividend Tax Calculation — A Worked Example" [Insert here: step-by-step calculation table] Step | Item | Amount (illustrative) 1 | Gross dividend received | $166 ($0.83 × 200 shares) 2 | US withholding (25% per DTAA, with W-8BEN) | $41.50 3 | Net received in brokerage account | $124.50 4 | Convert gross to INR (TTBR ₹86): | ₹14,276 5 | Indian income tax (30% slab): | ₹4,283 6 | FTC available (US tax paid): | $41.50 × ₹86 = ₹3,569 7 | Additional tax payable in India: | ₹4,283 − ₹3,569 = ₹714 + cess
A Note on Meta's New Dividend
Meta (Facebook parent) began paying dividends in early 2024 — $0.50/share/quarter as of Q1 2024, rising to $0.525/quarter by late 2024. For Indian Meta employees holding significant share counts, this is no longer trivial — it creates a new dividend income reporting obligation that didn't exist before 2024.
Source: Meta dividend announcement: https://investor.fb.com/investor-news
How Rovia Can Help
Dividend income is an easy piece of the RSU tax picture to overlook — especially if you've only been thinking about perquisite income and capital gains. Rovia's tax review includes a complete sweep of your brokerage statements to identify dividend income, calculate the FTC, and ensure Form 67 and Schedule FSI are correctly filed.
