US estate tax situation for Indian residents
If you live in India and own US stocks, you may have an estate-tax problem.
For a non-US citizen who is not domiciled in the US, the US estate-tax filing threshold is generally only $60,000 of US-situs assets. Shares of US companies and US-domiciled ETFs usually fall within this definition. The estate-tax rate can reach 40%.
At ₹95 to a dollar, $60,000 is only ₹57 lakh.
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The $60,000 rule
Who it applies to
The rule applies to people the IRS calls "nonresidents not citizens of the United States".
In plain terms:
you are not a US citizen, and
your permanent home (your domicile) is outside the US.
Most Indian residents fit this description.
US citizens and people domiciled in the US are taxed under a different set of rules, with a far larger exemption but on their worldwide assets. This article is not about them.
There is also no estate-tax treaty between India and the US, so there is no treaty relief to fall back on. You are on the default rules.
Reyman Tips: If you are Returning from the US (or just have heavy US investments), we wrote an article on how to manage US estate taxes that you may find useful.
What counts as a US asset
The legal term is US-situs property, meaning property the US considers located in the US. For investors, the main question is simple: is the thing you own a US company or a US fund?
What you hold | Counted as US property? |
Shares of US companies (Alphabet, Apple, Microsoft, Nvidia) | Yes |
Vested RSUs and ESPP shares of a US employer | Yes |
US-domiciled ETFs (VOO, QQQ, VTI) | Yes |
Ireland-domiciled UCITS ETFs that track US indices | No |
Indian mutual funds and FoFs that invest overseas | No |
Rule of thumb | Look at where the company or fund is set up, not what it invests in |
Where you bought the shares doesn't change this.
The IRS instructions say that the physical location of a stock certificate doesn't matter for stock issued by a US corporation.
Holding through an Indian platform, a foreign custodian or a nominee doesn't automatically change it either.
What happens to ₹5 crore of Google shares?
Assume:
Rohit is an Indian resident and not a US citizen.
You are not domiciled in the US.
You own ₹5 crore of Google shares.
₹5 crore is approximately $526,000.
The first $60,000 is within the usual nonresident threshold. The balance may be subject to US estate tax under the graduated rate schedule.
Particulars | Amount |
Value of Google shares | ₹5.00 crore |
Approximate dollar value | $526,000 |
Threshold | $60,000 |
Amount above threshold | $466,000 |
Illustrative federal estate tax | Approximately $143,000 |
Approximate rupee value at ₹95 | Approximately ₹1.36 crore |
This is only an illustration.
The actual calculation depends on the estate, deductions, prior gifts, marital status, treaty position and the exact assets held.
But the broad point is important: a ₹5 crore holding of direct US shares could create an estate-tax bill of more than ₹1 crore.
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Our team of experts will be happy to help. Reach out to us to get custom planning advice applicable to your situation.
What happens to ₹5 crore of Irish ETFs?
Now assume the same person owns ₹5 crore of an Ireland-domiciled S&P 500 ETF.
The ETF may invest in US companies, but the investor owns units of an Irish fund, not shares of Google, Apple or Microsoft directly.
The result may look like this:
Particulars | Irish-domiciled ETF |
Value of investment | ₹5.00 crore |
Approximate dollar value | $526,000 |
Direct US-situs exposure | Generally none |
US estate tax in this illustration | ₹0 |
Indian tax on future sale or distributions | Still applicable |
Reyman Tips: We did a comparison of Irish ETFs vs US ETFs vs Gift City which a lot of folks may find useful.
Indian and GIFT City brokers: does "omnibus" fix it?
What brokers are saying
Several Indian platforms now tell clients that their accounts are set up differently from a direct account with a US broker. The pitch usually has two parts:
Your account is opened in India or GIFT City.
Your orders go to the US through an omnibus account, which is one pooled account in the platform's name. The US broker never sees your personal KYC details.
Some add that when a client dies, the holdings pass under Indian nominee and succession procedures, not a US probate process.
This can make the paperwork easier. It may also stop a US broker from freezing an account with your name on it. Both are useful. Neither means US estate tax doesn't apply.
Two separate questions
Question | Does the omnibus structure solve it? |
Will a US broker freeze an account in my name? | Maybe |
Will my family have an easier transfer process? | Likely |
Are the underlying US shares still my US property? | Not necessarily |
Is US estate tax removed? | Only if you don't own the US shares at all |
Our view
If the platform simply holds US shares on your behalf, as a nominee or custodian, you are still the real (beneficial) owner.
In that case the shares are likely still US property, and the estate tax exposure stays. The IRS's own guidance treats US company stock as US property regardless of where it's held or whose name is on the register.
It's different if you own an interest in an Indian or IFSC entity, and that entity owns the US shares. Then what you hold may be a claim on a non-US entity, which is closer to the Irish ETF and Gift City Outbound funds case.
Have an Indian Will in place
For accounts opened through platforms like IBKR and Paasa, an Indian will can be part of the estate transfer.
Paasa's published process, for example, asks the family to notify Paasa and IBKR, share the death certificate, and submit executor or court documents.
Paasa also treats UCITS ETFs as non-US assets for estate-tax purposes, separately from US stocks.
What a will cannot do is change US tax law. If you directly owned US shares, your estate may still have to finish the US filings before those shares are released. The will answers who gets it. It doesn't answer how much tax is due on it.
What about a joint (JTWROS) account?
JTWROS stands for Joint Tenants with Right of Survivorship.
If one holder dies, the account passes to the surviving holder automatically, without going through the deceased person's will.
That makes it a good tool for:
spouses who want uninterrupted access to the money;
avoiding an account being stuck for months after a death;
making the handover simpler.
But it is not an estate-tax fix. Under US rules, the whole joint account is generally treated as belonging to the first holder to die, unless the survivor can prove they put in their own money.
So if Rohit funds a joint account entirely from his salary and dies first, the full value can still count in his US estate.
Think of JTWROS as a way to keep access smooth, not as a way to turn US shares into non-US assets.
What each option fixes
Most of the tools people talk about fix the paperwork. Very few fix the tax. Here's how they compare:
Option | Decides who inherits | Speeds up family access | Reduces US estate tax |
Indian will | Yes | Partly | No |
JTWROS account | Yes (the survivor) | Yes | Not by itself |
Indian / GIFT City omnibus platform | No | Possibly | Only if you don't own the US shares |
Irish UCITS ETFs instead of US ETFs | No | Yes | Yes, generally |
Selling down concentrated US shares | No | Yes | Yes |
Reyman Tips | Only changing what you own changes the tax |
The Wrapper Switch
For broad US market exposure, you rarely need to own US-domiciled ETFs.
Ireland-domiciled UCITS ETFs, suitable Indian global funds and some IFSC funds can give you similar exposure without US estate-tax risk.
New money can go into these from now on, even if you don't touch what you already hold.
Sell-Down
For RSUs and other concentrated US stock, sell in stages across financial years and move the proceeds into a non US wrapper.
Staggering helps you manage Indian capital gains tax each year and brings your direct US holding down to a level you're comfortable with.
This also reduces concentration risk, which is a good enough reason on its own.
Start planning this today! Life will always happen and you can't keep waiting.
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