Capital gain and federal tax withholding

The 24% deduction is US backup withholding applied because the broker lacked a valid W-8BEN or cost-basis data. Because the India-US DTAA allocates taxation rights for these capital gains exclusively to India, this withholding cannot be claimed as a Foreign Tax Credit (FTC) in the Indian ITR. To get the money back, the individual must apply for an ITIN and file a US non-resident tax return (Form 1040-NR) with the IRS to claim a full refund, while simultaneously filing a W-8BEN with their broker to prevent it from happening again.

Thank you so much for the prompt reply sir, really appreciate the same

The guidance on filing 1040-NR for the IRS refund is correct. Two India-side points to add if you are a tax resident of India for FY 2025-26:

Schedule FA (Foreign Assets): If you held the US shares at any point during FY 2025-26, you are required to disclose them in Schedule FA of your Indian ITR. This applies even if you sold them during the year. Schedule FA covers foreign equity, accounts, ESOPs, and other assets held abroad. Failure to disclose attracts penalties under the Black Money Act (not just income tax), so this is not optional.

Form 67 for DTAA credit: Even though the India-US treaty gives India the primary taxation right on these capital gains, the 24% US backup withholding creates a foreign tax situation. File Form 67 on the income tax e-filing portal before filing your ITR to formally claim the DTAA benefit or document the foreign tax paid. If you ultimately get a full IRS refund, the Form 67 amount becomes nil, but the form itself serves as a declaration of the foreign income and treaty position.

For residents with foreign capital gains, this [NRI and resident capital gains guide](https://taxgarden.in/blog/nri-capital-gains-tax-property-shares-tds-itr-india-guide) covers the Schedule FA obligation and DTAA credit process.

Thank you for the reply.

 IRS refund, the person doesnt have enough details to file 1040-NR (like ITIN and other documents). He has to gather the same and file. 

Have a query in this. file form 67 for claiming the DTAA credit of 24%? since India US DTAA treaty rate is 0% for capital gain, as per the above expert advise also, we cannot take the credit of it. can you please explain?