Capital gains on US stocks: the 24-month rule nobody expects

Almost everything you know about capital gains from Indian equities is wrong for US stocks. Different holding period, different rate, different section, and none of the exemption you're used to.

The root cause is a single classification: for Indian tax purposes, US-listed stocks are unlisted shares.

Why NYSE and NASDAQ count as "unlisted"

"Listed" in the Income-tax Act means listed on a recognised stock exchange in India. The NYSE and NASDAQ are not recognised Indian exchanges, so Apple, Microsoft and your employer's RSUs all fall into the residual "unlisted shares" bucket — the same category as shares in an unlisted Indian startup.

Every difference below follows from that one fact.

The four differences that matter

24 months, not 12. This is the one that catches people. The Finance Act 2024 reduced the threshold for unlisted shares from 36 months to 24 with effect from 23 July 2024 — but it never came down to 12. Count 24 calendar months, not 730 days; day-counting breaks across leap years.

No ₹1.25 lakh exemption. Section 112A's exemption applies only to STT-paid Indian equities. Every rupee of long-term gain on US stocks is taxable.

Short-term gains are taxed at your slab rate, not 20%. Section 111A requires STT paid on a recognised Indian exchange, which never happens for a US trade. For a 30%-bracket salaried employee, a short-term US stock gain is taxed at 30% plus cess — materially worse than the equivalent Indian trade.

LTCG is 12.5% flat with no indexation. Post 23 July 2024, indexation is gone for shares. The rate dropped from 20% to 12.5% in exchange.

Getting the cost basis right for RSUs and ESPP

This is where real money is lost, and both errors run in the same direction — overpaying.

RSUs: the acquisition date is the vest date, never the grant date. The cost basis is the fair market value on the vest date — the same amount already taxed as a salary perquisite in your Form 16. You are not taxed twice on it: it was salary income at vest, and it becomes your cost when you sell.

ESPP: the cost basis is the FMV on the purchase date, not the discounted price you actually paid. The discount was already taxed as a perquisite. Using what you paid double-taxes the discount — a common and expensive mistake.

If your broker's statement shows a cost basis that looks too low, this is usually why: US brokers often report the actual purchase price, not the Indian perquisite-taxed FMV.

Which lot did you sell?

If you accumulated shares across several vests or purchases, which lot a sale closed against changes both your gain and your holding period. This is a genuine choice, not a fixed rule, for shares held outside an Indian demat account — see lot matching vs FIFO.

The exchange rate: Rule 115

Capital gains are converted at the SBI TT buying rate for the last day of the month preceding the month of sale — Rule 115's convention for income.

Two details people get wrong:

1. Both the sale proceeds and the cost of acquisition use rates tied to their own relevant dates under this convention — you don't convert the whole thing at today's rate, and you don't convert cost at the sale-month rate.
2. This is a different convention from Schedule FA, which uses each amount's own date for balances and values. The same holding legitimately carries different rupee figures in Schedule CG and Schedule FA. That's not an inconsistency — see Rule 115 explained.

The period is the financial year

Schedule CG runs April to March, unlike Schedule FA's January–December. If you export one calendar-year file from your broker and use it for both, your capital gains will be wrong at both ends of the year. You need two exports.

Is there US tax to credit?

Usually no — and this surprises people who expect a Form 67 claim.

The US generally does not tax capital gains of non-resident aliens on stock sales, so there's typically no US tax withheld on a sale and nothing to claim foreign tax credit against. This is the opposite of dividends, where tax is withheld at source and FTC genuinely applies.

So: dividends → FTC paperwork. Capital gains → normally none.

Losses

Short-term capital losses can be set off against both short-term and long-term gains. Long-term losses can only be set off against long-term gains. Unabsorbed losses carry forward eight years via Schedule CFL — but only if you file the return on or before the due date. A late return remains valid for reporting income and still forfeits the carry-forward.