The US imposes an estate tax of up to 40% on US-situated assets held by nonresident foreigners once the value crosses $60,000, a threshold significantly lower than the $15 million exemption available to US citizens. According to reports from The Financial Express, this tax applies only upon the investor's death and gets triggered on a tiered basis when the deceased's wealth exceeds certain exempted limits. The tax applies to US stocks, listed ETFs, ADRs, and real estate property, meaning Indian investors holding US stocks directly could face this tax liability upon death, even though they were never US citizens or residents.
An executor for a nonresident must file an estate tax return if the fair market value at death of the decedent's US-situated assets exceeds $60,000. As reported by The Financial Express, the tax rate is tier-based, starting at 18% for amounts between $0 and $10,000 (after exempting $60,000), rising by 2% increments, and reaching 40% for amounts over $1,000,000. The tax is levied on the aggregate value of US-situated assets, with fair market value used rather than acquisition cost. For example, a $100,000 US stock portfolio would be exempt from tax on the first $60,000, with the remaining $40,000 potentially subject to taxation.
The estate tax applies to US citizens and residents but has a much higher exemption limit of $15 million as of 2026. According to The Financial Express, this represents a massive gap of $60,000 versus $15 million, existing purely because of citizenship and domicile status rather than investment size. Estate tax treaties between the US and other countries often provide more favorable treatment to nonresidents, but such treaties stand with only 15 countries, excluding India. The tax is determined based on the decedent's domicile at the time of death, with nonresident status determined by neither being domiciled in nor a citizen of the United States.
If buying US stocks or ETFs on international brokerage platforms, the estate tax applies, but investors can avoid exposure through international mutual funds or the GIFT City route. As reported by The Financial Express, UCITS-domiciled funds located in Ireland or Luxembourg allow international investors to indirectly invest in US securities by owning fund units rather than US stocks directly. This structure helps investors avoid US estate tax exposure, though international investing remains subject to complex rules depending on individual circumstances and treaty applicability.
International investing is gaining traction among Indian investors, with $1,487 million already invested in overseas markets during the first five months of 2026. According to The Financial Express, the total dollars under the RBI LRS sent abroad for equity and debt investments amounted to $2,652 million for fiscal year 2025-26. The US Estate Tax is quietly becoming one of the factors shaping how and where Indian money is being routed as more investors look beyond domestic markets for global diversification strategies.
