Mind the tax! Samir Arora alerts Indian investors to the US estate tax risks

At a time when Indian investors are increasingly tempted to invest in US stocks through Portfolio Management Services (PMS), where professional fund managers invest on their behalf, Samir Arora, founder and fund manager of Helios Capital Management, has underscored the importance of considering the “estate tax” angle, which can significantly impact the actual returns from such investments.

While the Indian stock market has seen muted returns this year, the US stock market is hovering at a record high. The Indian stock market benchmark, the Nifty 50, has gained nearly 5 per cent year-to-date, compared to an over 14 per cent gain in the S&P 500.

The strong outperformance of the US stock market is luring Indian investors, who now find it easier to invest directly through user-friendly broking apps or via portfolio management services.

Avoid getting carried away, says Samir Arora

The founder of Helios Capital took to the social media platform X to underscore that investors should be aware of the 40 per cent estate tax.

"These days, everyone in India wants to invest in US stocks, and fund managers are doing PMS to invest in the US (where stocks will presumably be held in individuals' names). Hope these investors are aware of the 40% estate tax if they pass away (applicable to foreign investors with a low threshold of only US$60,000)," wrote Arora.

What is the estate tax?

The US has an estate tax, which is sort of an inheritance tax. If a foreign investor dies while holding U.S. assets, including stocks, the U.S. government charges a tax before the assets can be passed on to their heirs.

For a non-US person, the exemption is only $60,000. This means if an Indian investor has US stocks worth more than $60,000, his/her heirs may have to pay up to 40 per cent tax to the US government before inheriting those shares.

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