How are international dividends taxed in India?

International dividends received by Indian investors are **fully taxable in India**. They are classified as **‘Income from Other Sources’** and taxed as per the investor’s income tax slab. Additionally, **foreign tax deductions and DTAA (Double Taxation Avoidance Agreement) benefits** may apply to avoid double taxation.

1. Taxation of International Dividends in India

Dividends from foreign stocks are **not tax-free** in India. The entire dividend amount is added to your taxable income and taxed as per your income tax slab.

• Taxable in India: Dividends from foreign companies are taxed as regular income.
• No Special Rate: Unlike Indian dividends (taxed at 10%), foreign dividends follow income slab rates.
• Tax Slab Impact: High-income investors may face **30% tax or more**.

2. Foreign Tax Deduction & DTAA Benefits

Many countries **deduct tax at source** before distributing dividends. To avoid double taxation, India allows foreign tax credit (FTC) under **DTAA agreements**.

• Tax Deduction at Source (TDS): The foreign country may deduct **10%-30% tax** before paying dividends.
• Claim Tax Credit: Investors can offset foreign tax paid against Indian tax liability.
• Form 67 Filing: To claim DTAA benefits, **Form 67 must be submitted** before the tax return filing deadline.

3. Reporting International Dividends in ITR

Indian taxpayers **must declare foreign dividends** in their Income Tax Return (ITR) under the ‘Income from Other Sources’ section.

• Foreign Asset Reporting: Investors with foreign holdings must report them in **Schedule FA** of ITR.
• Convert to INR: Dividends must be reported in **Indian Rupees using SBI’s exchange rate** on the last day of the previous month.
• Avoid Penalties: Non-disclosure of foreign dividends may attract penalties under **Black Money Act**.

4. Impact on High-Income Investors

If your total income, including foreign dividends, **exceeds ₹50 lakh**, an **additional surcharge of up to 37%** may apply.

• 30% Tax Rate: For individuals earning above ₹15 lakh per year.
• 37% Surcharge: If total income exceeds ₹5 crore.
• Higher Tax Burden: Foreign dividends can push investors into **higher tax brackets**.

5. Conclusion

International dividends are **fully taxable in India** under income tax slabs, and foreign tax credit (FTC) can be claimed to avoid double taxation. Proper **ITR filing and Form 67 submission** are necessary to stay compliant and minimize tax liability.