If you live outside the US and own US shares or US-listed funds, the first thing that can surprise you is the dividend that arrives smaller than the one announced. The US takes tax at source on most dividends paid to foreign investors, at a rate that can be 30%, 25%, 15% or lower depending on where you live and what paperwork your broker has: 15% for a UK resident, 25% (not 15%) for an Indian resident and 30% for a Pakistani resident on ordinary dividends. This guide explains the rule, shows the treaty rates for some common countries, and walks through the W-8BEN step at brokers such as Zerodha.
This is general information, not financial, tax or legal advice. Treaty terms are detailed and change, and your home country will also have its own rules. Facts were checked on 3 November 2026 against the sources listed at the end. Where we could not confirm a point from an official source, we say so in the text.
Last updated 3 November 2026. This piece sits in the Grow section.
The short answer
The US charges 30% withholding on US-source dividends paid to non-US persons unless a tax treaty reduces it. To get the treaty rate, your broker needs a valid Form W-8BEN claiming it. The treaty rate is the one for dividends to individuals, which is not always the headline rate people quote: for an Indian resident it is 25%, not 15%. Pakistan’s treaty rate for individuals is 30%, so a W-8BEN there does not lower the rate on ordinary dividends.
What is withheld, and on what
The IRS treats dividends paid by US companies to foreign persons as fixed, determinable, annual or periodical income, often shortened to FDAP income. IRS Publication 515 says most US-source income of a foreign person is taxed at 30%, reduced or eliminated by a treaty. The IRS says the 30% applies to the gross amount, with no deductions or netting against losses, and that dividends and dividend equivalents are in this category.
The payer, or a broker acting for it, withholds the tax before the money reaches you. You do not file anything with the IRS to have it taken. You provide the paperwork that proves you are entitled to a lower rate.
Treaty rates for common countries
The IRS publishes a treaty table (Table 1) listing the withholding rates for different income types in each treaty country. These are the rates it shows for dividends to individuals in the general case, as of its table dated May 2023 on a page last reviewed 23 February 2026:
| Country of residence | General dividend rate for individuals |
|---|---|
| Australia | 15% |
| Canada | 15% |
| Germany | 15% |
| India | 25% |
| Ireland | 15% |
| Japan | 10% |
| Mexico | 10% |
| Pakistan | 30% |
| Philippines | 25% |
| South Africa | 15% |
| United Kingdom | 15% |
| Countries without a treaty | 30% |
Three notes on the table. First, the IRS table also shows lower rates for companies that hold at least 10% of the paying company (for example the UK 5%, India 15%, Pakistan 15% and the Philippines 20%). Those do not apply to you as an individual investor. Second, the IRS says its table is not comprehensive, and the treaty text itself is what counts; some treaties have special rules for funds and real estate investment trusts. Third, Pub 515 says the US has suspended treaties with Russia (from 16 August 2024) and Hungary (from 1 January 2024), so the treaty rate does not currently apply to residents of those countries.
A worked example
Suppose a US stock pays you a gross dividend of US$1,000. With no valid W-8BEN claiming a treaty, the withholding is 30%, or US$300, and you receive US$700. With a valid form at 25% (India, Philippines) you receive US$750. At 15% (for example the UK, Canada or Ireland) you receive US$850. At 10% (Japan, Mexico) you receive US$900. Those amounts are before any tax your home country charges, and before any credit it allows for the US tax.
Why India is 25%, not 15%
A common mistake is to assume that Indian investors get the 15% rate that many US treaties give. In the IRS table the India row shows 25% for the general dividend rate, and 15% only for a company shareholder holding at least 10%. Zerodha’s own guide agrees: it says the standard 30% is reduced to 25% for eligible Indian residents when a valid Form W-8BEN is on file. Before you rely on any number, check the IRS table and the treaty text.
The W-8BEN: what it does and what can go wrong
Form W-8BEN is a declaration you give to the broker or payer that says you are not a US person and, if you claim it, names the treaty. The IRS instructions for Form W-8BEN include these points:
- Line 9 is where you identify the country whose treaty you claim.
- Line 10, the special-rates section, is generally not needed for dividends under most treaties, except where a treaty gives a preferential rate based on how much of the company you own.
- To claim certain treaty benefits you need a US taxpayer identification number (line 5), or a foreign tax identifying number (line 6a). If your broker accepts the form without one, you may not get the rate you expect.
- If you move outside the country whose treaty you claimed, that is a change in circumstances. Tell the broker within 30 days and give it a new form.
Our guide to the W-8BEN for freelancers living abroad covers the form’s three-year validity, the 24% backup withholding rate and the fact that the form goes to the payer, not to the IRS. We do not repeat that here. If you do not give the broker a valid form, expect the full 30%.
Funds and ETFs: where the withholding happens
Whether you hold a US-domiciled fund or a non-US fund that owns US shares changes where tax is taken and at what rate. That is a big enough topic to have its own guide: accumulating versus distributing ETFs for non-residents explains the 30% rule, the Ireland 15% route and a worked example, so we do not duplicate it.
Capital gains are treated differently
The IRS says a non-resident alien who is present in the US for fewer than 183 days in the year is generally not taxed on US capital gains, with exceptions. At 183 days or more, net capital gains from US sources can be taxed at 30% (or the treaty rate). Spending that long in the US also changes your tax-residence position, so check the substantial presence rules before you plan around this. Your home country may still tax your gains.
Example: Indian residents and Zerodha
Zerodha’s support guide on US investing describes the following, for a resident Indian investor. The page is undated and says US investing is currently in beta on Kite web, and the support pages can change, so check the current status and terms before you act.
- Who can use it. Resident Indian individuals only. Joint accounts, HUFs, companies, LLPs, partnerships and NRIs are not supported.
- What you can buy. Up to about 2,000 US stocks and about 1,000 ETFs, according to Zerodha.
- How you fund it. Through the Liberalised Remittance Scheme, which has a limit of US$250,000 per financial year (April to March) across all purposes. Zerodha also describes tax collected at source on remittances above a threshold; we do not give those rates here because they are Indian tax rules that change, so check them with Zerodha and an Indian tax adviser.
- Brokerage. Zerodha’s charges page quotes 0.10% per order, with a minimum of US$0.01 and a maximum of US$10, as shown on 3 November 2026.
- Withholding. Zerodha says 25% is deducted in the US before a dividend is credited, and that a valid W-8BEN is needed for that rate. It says the form stays valid for the calendar year in which you submit it plus the next three calendar years, and becomes invalid if you become a US citizen, obtain a Green Card or spend more than 183 days in the US in a calendar year.
- Paperwork afterwards. Zerodha says it provides Form 1042-S each year, a US statement of dividends paid and tax withheld.
- Claiming credit in India. Zerodha says the US tax withheld can be claimed as a foreign tax credit when you file your Indian income tax return, limited to the lower of the US tax withheld and your Indian tax on that dividend, by filing Form 67 before the return and entering the credit in Schedule TR.
- Capital gains. Zerodha says that for a resident, gains on US stocks are taxed in India. We did not check the Indian side against an Indian government source, so treat it as Zerodha’s description. On the US side, the IRS says capital gain income is not usually taxable to a non-resident alien whose days of presence in the US do not reach 183.
The same pattern (broker holds your W-8BEN, withholds at the rate it supports, issues a year-end statement, and you claim credit at home) applies to other brokers and other countries. The details of the credit depend on your country’s tax law. For Indian investors, check the Income Tax Department’s guidance on foreign tax credit and Form 67; for UK investors, HMRC says you can usually claim Foreign Tax Credit Relief when you report your overseas income in your tax return. We did not open the Income Tax Department’s page on Form 67, so for India rely on Zerodha’s description above and check the guidance yourself.
A checklist before you buy US-listed assets
- Which country’s treaty applies to you, and what does the IRS table show for individuals?
- Does your broker have a valid W-8BEN that names that treaty?
- Do you have a taxpayer number the broker accepts for the claim?
- When does the form expire, and have you diarised it?
- Will you get a year-end tax statement, and does your home country let you claim credit?
- Have you moved country recently? A change of residence can invalidate the form (see what happens to your brokerage account when you move country).
- Do you need a broker that works across borders? See a brokerage account when you are not in one tax jurisdiction.
Frequently asked questions
Why is 30% withheld on my US dividends?
The US treats dividends paid to foreign persons as FDAP income and withholds 30% on the gross amount unless a treaty reduces the rate. Without a valid W-8BEN claiming a treaty, the broker withholds the full 30%.
What is the treaty rate for dividends in my country?
Check the IRS treaty table (Table 1) for your country of residence and read the individual rate for dividends, not the company rate. The table is not comprehensive, so read the treaty text if your case is unusual.
Why is India’s rate 25% and not 15%?
The IRS table shows 25% as the general dividend rate for individuals under the India treaty. The 15% in that row is for a company that owns at least 10% of the paying company.
Does a W-8BEN reduce the rate if my country’s treaty rate is 30%?
No. If the treaty rate for dividends to individuals is 30%, as the IRS table shows for Pakistan, a W-8BEN gives no reduction on ordinary dividends. You may still need the form to avoid backup withholding and to meet your broker’s requirements.
How long is a W-8BEN valid?
Zerodha says its form lasts for the year you submit it and the next three calendar years. A change in circumstances, such as moving to another country, means you must tell the broker within 30 days and provide a new form, according to the IRS instructions.
Can I get the withheld tax back?
You may be able to claim a credit in your home country, depending on its law. Zerodha describes this for Indian residents using Form 67 and Schedule TR. A refund of excess US withholding from the IRS is a separate process that we do not cover here.
Are capital gains on US shares taxed in the US for non-residents?
The IRS says a non-resident alien present in the US for fewer than 183 days is generally not taxed on US capital gains, with exceptions. Your home country may tax them.
Can I use this guide to avoid the withholding?
No. Treaty rates are claimed by honest declaration on the form, and only if you are entitled to them. If you are unsure whether you qualify, ask a cross-border tax adviser.
For related reading, see tax residence versus where your client is, which currency to measure your portfolio in and a low-cost portfolio when you are not in one tax jurisdiction.
What this guide does not cover
It is not tax, legal or financial advice. We do not cover your home country’s tax on dividends or gains, or the rules for US citizens and Green Card holders. We do not cover US estate tax on US shares held by non-US persons, which is a separate regime with its own rules, so ask a cross-border adviser if you hold large US positions. We have not covered reclaiming excess withholding, treaty limitation-on-benefits tests, or special rules for particular fund types. We have not checked the rules of any broker other than the Zerodha page described above.
Sources
- IRS: Tax treaty tables (Table 1, rates of withholding), table revised May 2023, page last reviewed 23 February 2026, checked 3 November 2026
- IRS: Fixed, determinable, annual or periodical (FDAP) income, checked 3 November 2026
- IRS Publication 515: Withholding of tax on non-resident aliens and foreign entities, checked 3 November 2026
- IRS Publication 901: US tax treaties, checked 3 November 2026
- IRS: Instructions for Form W-8BEN, checked 3 November 2026
- Zerodha Support: Investing in US stocks through Zerodha, a complete guide, page undated, checked 3 November 2026
- Zerodha Support: Charges for investing in US stocks, page undated, checked 3 November 2026
- GOV.UK: Foreign Tax Credit Relief (paying tax twice), checked 3 November 2026
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