US Estate Tax on American Stocks and RSUs Held by NRIs

There is a tax most NRIs have never heard of. It can take a large bite of their US shares.

Not income tax. Not capital gains. Estate tax.

We raise it carefully, because it sounds alarming.

A reader in Dubai went pale when we first explained it. "You mean if I die owning Apple shares, America taxes them before my family sees a rupee?"

In principle, yes. The United States can tax certain US assets when a non-American owner dies. Your RSUs and US stocks can sit squarely inside that net.

At Belong, we think this is the most overlooked risk in an NRI's portfolio. Everyone plans for income tax. Almost nobody plans for this.

So this guide explains what US estate tax is, why NRIs are exposed, and the legitimate ways to reduce it. No fear-mongering, just the part nobody told you.

What US estate tax actually is

Estate tax is a tax on transferring assets to your heirs when you die. The US levies it, and India does not.

For US citizens and residents, there is a very large exemption. Most never worry about it, because their estate falls well under the line.

For a non-resident, non-American owner, the picture is very different. The exemption on US assets is dramatically smaller, and the rate above it is steep.

That gap is the whole story. An NRI holding US shares gets a fraction of the shelter a US citizen enjoys, on the same assets.

We are deliberately not quoting the exemption figure or the rate, because they can change. Confirm the current numbers with the US Internal Revenue Service or a qualified cross-border advisor.

👉 Tip: This is not about income while you are alive. It is about what the US can take from certain assets after death. Different tax, different rules, different plan.

Why NRIs are exposed: the situs rule

The key concept is "situs," which simply means where an asset is legally located for this tax.

The US taxes the estates of non-Americans only on US-situs assets. So the entire question becomes which of your holdings, as an asset class, count as US-situs.

Shares in US companies are generally US-situs. That includes the Apple, Microsoft or Nvidia stock in your portfolio, and the RSUs your US employer granted you.

This is the part that surprises people. It does not matter that you live in Dubai or hold the shares through a foreign broker. You may never have set foot in America. The shares are US-situs because the company is American.

A member once assumed his shares were "Indian" because he was Indian and traded from India. The shares did not care about his passport. They were issued by a US corporation, so they were US-situs.

Worth noting: owning US shares through a non-US brokerage does not, by itself, move them out of the US net. The situs follows the company, not your account's address.

What is inside the net, and what is safely outside

Let us draw the line clearly, because the good news is real too.

Your Indian assets are generally outside US estate tax entirely. Your NRE, NRO and FCNR accounts, Indian fixed deposits, Indian mutual funds and Indian property are not US-situs. Our note on types of taxable income for NRIs covers how these are treated for income tax. That is a separate matter from estate tax.

India also has no estate or inheritance tax of its own. So those Indian holdings pass to your heirs without this particular worry on either side.

The exposure sits specifically on the US side of your portfolio. US-listed stocks, US-listed funds, US RSUs and US real estate are the assets to examine.

Read that table and a strategy starts to suggest itself. The exposure is concentrated in one corner of your portfolio, and that corner has alternatives.

Our note on reporting foreign assets covers the income-side disclosure, which is a separate matter from this.

The detail that shocks people: no treaty relief

Here is where NRIs from India face a harder version than some other nationalities.

For income tax, India and the US have a treaty, the DTAA. It softens double taxation, and we cover it in our guide on claiming DTAA benefits.

Estate tax is different. India and the US have no estate tax treaty. None.

Residents of some treaty countries can claim a larger US exemption through their treaty. That relief is simply not available to Indian nationals. There is no treaty lever to pull.

We had a long conversation with a US-based reader who assumed the DTAA covered everything. It does not touch estate tax. That misunderstanding is common and expensive.

Worth noting: the DTAA is an income tax treaty. It does nothing for estate tax. Do not assume the protection you have on income extends to this.

When this actually bites

We want to be balanced. For many NRIs, the value of their US assets sits below the threshold, and this never triggers.

If your US holdings are modest, this may be a footnote for you rather than a crisis. Awareness is still worth having, because portfolios grow.

The people who should pay real attention are those with large, concentrated US positions. Heavy RSU holders at US tech firms are the classic case.

Years of vested US employer stock can become a large part of your net worth. It can quietly build an estate tax exposure you never noticed. The position grew by vesting, not by decision, and the risk grew with it.

This connects to a point we make often about concentration risk. A large single-stock US position is risky in life and, it turns out, after it too.

👉 Tip: If a big share of your wealth is in US employer stock, this is not a footnote for you. It is a planning item worth a professional conversation.

The mechanics your family would face

This matters because the burden lands on your heirs at the worst possible time.

The estate of a non-American who dies owning US-situs assets generally has to file a US estate tax return. There is a specific form, and a deadline measured from the date of death.

For US persons, the wider US reporting picture appears in our guides on tax filing for US NRIs and FBAR.

Worse, intermediaries often enforce this in practice. A US broker may refuse to release or transfer the shares to heirs until the estate tax position is cleared.

So the shares can be frozen exactly when your family needs them. Grief, paperwork in a foreign system, and a locked account, all at once.

We think this operational reality is the strongest reason to plan ahead. The tax is one thing. A family stuck in a US probate-adjacent process, in a second language of law, is another.

The legitimate ways to reduce exposure

Now the constructive part. There are well-established, legal ways to manage this, and none of them involve hiding anything.

Get US exposure without holding US-situs assets

You can own the performance of US markets without owning US-situs shares directly. This is the cleanest structural fix.

Funds domiciled outside the US that hold US stocks are generally not US-situs themselves. Some readers use non-US-domiciled funds for their American market exposure for exactly this reason.

GIFT City is particularly relevant here. Investments made through GIFT City's IFSC are not US-situs assets, so they fall outside US estate tax.

That is a genuine advantage for NRIs who want US and global exposure without the estate tax tail. You can review dollar options through the GIFT City mutual funds tool.

For global exposure held this way, look at the DSP Global Equity Fund. For a China and regional tilt, the Edelweiss Greater China Equity Fund is worth a look.

For India exposure held in dollars, consider the Tata India Dynamic Equity Fund and the Sundaram India Mid Cap Fund. Larger allocations sometimes use GIFT City AIFs.

Deposit-style dollar exposure sits outside US-situs too. Compare options with the NRI FD rates tool.

Insure the liability

If you have a reason to keep direct US assets, you can plan for the tax rather than avoid it.

A term life insurance policy can be sized to cover the expected estate tax. It gives your heirs the liquidity to pay without a forced sale. The asset stays, the family is protected.

More complex structures exist, such as trusts that own the policy. These need specialist advice and are not do-it-yourself territory.

Diversify your employer stock down

If your exposure comes from concentrated RSUs, trimming solves two problems at once. It reduces both the concentration risk and the US-situs footprint.

Our guide on whether to sell employer stock and diversify walks through that decision calmly.

Two readers, two very different plans

Concrete makes this real. Here are two shapes we see, described without numbers.

The first reader held a modest amount of US stock, well within the sheltered range. We told her honestly that this was awareness, not action. She kept her holdings and simply noted the issue for the future.

The second reader had years of US employer RSUs stacked up, a large and growing US-situs position. His plan looked completely different.

For him, we discussed shifting future US exposure into non-US-situs routes. We looked at trimming the concentrated stock over time, and insuring what remained. Same tax, opposite responses, because the size of the exposure differed.

That is the honest shape of this topic. It is not "everyone must act." It is "know where you stand, then act if the numbers warrant it."

Decision clarity block

If your US assets are modest, treat this as awareness and revisit it as your portfolio grows.

If you hold large or concentrated US stock or RSUs, your next step is a cross-border estate plan. Not a blog post.

If you want US market exposure without the exposure, favour non-US-situs routes like GIFT City funds.

If you must hold direct US assets, size term insurance to the likely liability. That way your heirs are not forced to sell.

If you assumed the DTAA protects you here, it does not. Plan on the basis that there is no estate tax treaty.

What happens if you ignore it

The cost of ignoring this lands on the people you least want to burden.

Your heirs discover the liability during grief, from a US broker who will not release the shares. The account is frozen at the worst time.

They face an unfamiliar US filing, in an unfamiliar system, on a deadline they did not know existed. Professional help then costs money and time.

In a concentrated case, a meaningful slice of the US holding can be lost to the tax. There is no treaty to soften it.

None of this needs bad luck. It needs only an unexamined pile of US shares and a plan that stopped at income tax. The opportunity cost of that gap falls on your family.

Our roundup of risks NRIs ignore while planning long-term wealth covers the neighbouring blind spots.

A note for resident Indian readers

This is not only an NRI issue. Hold US stocks or US-listed ETFs from India, and the US still treats you as a non-resident alien.

The same situs rules apply to you. Your US-listed holdings are US-situs, and India's lack of an estate tax treaty with the US affects you identically.

Many Indian investors have quietly built US stock portfolios through investing apps. The estate tax angle is rarely mentioned at sign-up, and it applies all the same.

For you, the non-US-situs routes are just as relevant. Our note on why your portfolio needs more than just India covers how to get global exposure sensibly.

Frequently asked questions

Do I really owe US tax if I die owning US shares?

Potentially yes, above a low exemption. It applies to US-situs assets held by non-Americans, including US stocks and RSUs.

Does living outside the US protect me?

No. The tax follows the asset, not your location. US shares are US-situs wherever you live.

Are my Indian investments affected?

No. NRE and NRO accounts, Indian mutual funds, Indian property and GIFT City investments are not US-situs.

Does the India-US DTAA cover this?

No. The DTAA is an income tax treaty. India and the US have no estate tax treaty, so no treaty relief applies.

How can I get US market exposure without the exposure?

Through non-US-situs routes, such as GIFT City funds or non-US-domiciled funds that hold US stocks internally.

Should everyone worry about this?

No. Modest US holdings often fall under the exemption. Large or concentrated US positions are where planning genuinely matters.

Sources and verification

Exemption amounts, rates, forms and situs rules can change, and this is US law rather than Indian law. We have avoided quoting fixed figures throughout.

Verify current positions with the US Internal Revenue Service and a qualified cross-border estate advisor. For the Indian income-tax side, the Income Tax Department is the primary source.

This is genuinely specialist territory. For anything beyond awareness, professional advice is not optional.

Disclaimer

This article is general information, not personalised tax, legal or estate advice. The stories here are illustrative composites drawn from common patterns, not specific individuals.

US estate tax is highly fact-specific and interacts with US law we do not administer. Consult a qualified cross-border advisor before acting.

Investments carry risk, including possible loss of capital. Estate planning errors can be costly and hard to reverse.

Written by Ankur Choudhary, SEBI Registered Investment Advisor and co-founder of Belong, with the Belong research team.

A note on where this fits. If you are moving your US exposure into non-US-situs routes, our GIFT City IPO guide and IPO products page cover the primary market, and our mutual funds page covers the rupee side. To read market sentiment before deploying a lump sum, the GIFT Nifty tool gives a pre-market view. For the income-tax picture on the same shares, see our companion guides on tax on capital gains for NRIs and the wider NRI taxation hub.