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Indian Investors Face 40% US Estate Tax Shock
30 Jul
Summary
- US estate tax up to 40% applies to non-residents on US assets.
- A $60,000 threshold for non-US citizens is significantly lower.
- Diversifying via mutual funds or GIFT City avoids this tax.
A narrative suggesting Indians face a 40% tax on US stocks is misleading. The actual concern is the US Estate Tax, which is applied only after an investor's death and on wealth exceeding a specific exemption limit. This tax impacts non-US citizens holding US-situated assets, such as stocks or ETFs, if their estate's value surpasses a $60,000 threshold at the time of death. This limit is substantially lower than the $15 million exemption for US citizens as of 2026.
The US Estate Tax can reach up to 40% on US-situated assets exceeding $60,000 for non-residents not domiciled in the US. For instance, a $100,000 portfolio could incur taxes on $40,000, with rates escalating from 18% to 40% based on the excess value. India does not have an estate tax treaty with the US, unlike 15 other countries, leaving its investors more exposed.
Workarounds exist for Indian investors to avoid this tax. Investing in US securities through UCITS-domiciled funds in Ireland or Luxembourg, or utilizing the GIFT City route, can prevent direct ownership of US stocks. This indirect investment strategy helps Indian investors mitigate exposure to the US Estate Tax while pursuing global diversification.
