Updated August 2026.
This is the least discussed aspect of US investing for Indian residents, and above a certain portfolio size it is the most consequential. India abolished estate duty in 1985, so the concept is unfamiliar. The United States did not.
The headline: US-situs assets above a USD 60,000 exemption can attract US estate tax at rates rising to 40% on the death of a non-resident alien owner. India has no estate tax treaty with the United States that raises that threshold.
Why the threshold is so low
US citizens and residents get a very large lifetime estate tax exclusion — in the millions of dollars. Non-resident aliens do not.
For someone who is neither a US citizen nor domiciled in the US, the exemption on US-situs assets is USD 60,000. An Indian resident holding US shares falls into this category.
Some countries have negotiated estate tax treaties with the US that give their residents access to a larger exemption. India is not among them. The India–US DTAA covers income tax; it does not address estate tax.
What counts as a US-situs asset
Situs rules determine which assets fall inside the US net. For a typical Indian investor:
| Generally US-situs | Generally not US-situs |
|---|---|
| Shares of US-incorporated companies, wherever held | Shares of non-US companies |
| US-domiciled ETFs and mutual funds | Non-US-domiciled funds, even those holding US shares |
| US real property | Bank deposits in certain circumstances |
Two points that surprise people:
Where the account is held does not determine situs. What matters is where the issuer is incorporated or the fund is domiciled. Holding US shares through a GIFT City-based account does not, by itself, move the underlying shares outside US situs.
A fund's domicile matters more than its holdings. A US-domiciled ETF tracking a global index is generally US-situs. A non-US-domiciled fund holding US shares generally is not. This distinction is the basis of most planning in this area.
The rates
US estate tax for non-resident aliens is graduated, reaching 40% at higher amounts, applied to the value of US-situs assets above the USD 60,000 exemption.
An illustration, using indicative figures: a US-situs portfolio of USD 300,000 would have roughly USD 240,000 exposed above the exemption, and the tax on that could run to a substantial share of it under the graduated rates. The precise figure depends on the applicable rate bands and the facts of the estate.
There is also a filing obligation. Form 706-NA is generally required where US-situs assets exceed the USD 60,000 threshold, and a transfer certificate may be needed before the broker will release the assets to heirs.
Who this actually affects
It is worth being proportionate. An investor with USD 20,000 in US shares is well below the threshold and has nothing to plan around.
It becomes relevant when the US-situs holding approaches or exceeds USD 60,000 — a level a committed investor can reach within a few years of regular remittances. Because the threshold is fixed in nominal dollars and does not adjust, portfolios grow into it.
The practical risk is not the tax alone. It is that heirs discover the obligation at the worst possible moment, without documentation, and find the assets frozen pending compliance.
What can be done about it
This is an area where advice is genuinely required, because the options have trade-offs and interact with Indian tax and succession rules. In outline:
- Non-US-domiciled funds. Gaining US equity exposure through a fund domiciled outside the US generally moves the asset outside US situs, at the cost of a different fee, liquidity and tax profile.
- Spreading holdings across family members. Each individual has their own USD 60,000 exemption, as they have their own LRS limit.
- Keeping US-situs exposure below the threshold and taking further international exposure through non-US-situs routes.
- Documentation. Whatever the structure, ensure heirs know the account exists, who the custodian is, and what the compliance path looks like.
Each of these has costs. Restructuring purely to avoid estate tax can be worse overall than accepting the exposure, particularly at moderate portfolio sizes. This is a calculation to do with a professional, not a default to adopt.
What this is not
- Not a reason to avoid US investing. It is a reason to know where your threshold sits.
- Not an annual tax. It arises on death, not each year.
- Not covered by the income tax treaty. The DTAA does not help here.
- Not solved by nomination alone. A nominee facilitates transfer; it does not extinguish a US tax obligation.
Conclusion
US estate tax is a genuine and under-discussed consideration for Indian investors, with a low fixed threshold, no Indian treaty relief, and rates up to 40%.
For most investors starting out it is not yet relevant. For anyone whose US-situs holdings are approaching USD 60,000, it is worth a specific conversation with an advisor who handles cross-border estates — and worth having before the threshold is crossed rather than after.
See also Tax on US Stocks in India and International Stocks Beyond the US.
Disclaimer: This article is for educational purposes only and is not tax, legal or estate planning advice. US estate tax rules, situs determinations, exemption amounts and rate bands are set by US law and can change; their application depends on individual facts, domicile and the structure of holdings. Figures are stated as of August 2026 and are illustrative. Please consult a qualified cross-border tax and estate advisor, and read our Risk Disclosure and Disclaimer.