Direct stocks, a feeder fund, or a UCITS ETF — what's cheapest after tax?
All three give you US exposure and are taxed the same on profit. The difference is the yearly fee and the estate-tax risk — and a low-cost Ireland UCITS ETF usually wins on both.
~2.3% → 0.2%
yearly cost: an Indian feeder fund vs a low-cost Ireland UCITS ETF
For you — resident Indian
Same 12.5% long-term tax on all three — so for a long-term holder, cost and estate-tax risk decide it, not the headline tax rate.
₹50L of US exposure — three ways
| Direct stocks | Feeder fund | UCITS ETF | |
|---|---|---|---|
| Yearly fee | ~0% (just brokerage) | 1.3–2.3% (feeder + master) | 0.07–0.25% |
| Tax on long-term profit | 12.5% (>24m) | 12.5% (>24m) | 12.5% (>24m) |
| Tax on short-term profit | Your slab | Your slab | Your slab |
| Dividend drag | 25% US WHT (reclaim via Form 67) | Handled inside the fund | 15% inside fund · accumulating = no payout |
| US estate tax | Up to 40% (US-situs) | Depends on the underlying | $0 (non-US asset) |
| Effort | US broker · Schedule FA per stock · FX tracking | Buy like an Indian mutual fund | Offshore / IFSC access |
| Diversification | You pick the stocks | One theme / region | A whole index, cheaply |
What to do
- 1
For broad US or global exposure, a low-cost accumulating Ireland UCITS ETF is usually cheapest and estate-safe.
- 2
Choose a feeder fund if you value SIPs and Indian onboarding — and accept the double fee.
- 3
Pick direct stocks only for specific names you want — and budget for Schedule FA and estate-tax exposure.
- 4
Remember: the long-term tax is 12.5% either way, so let cost and estate risk be the tie-breaker.
Ask the AI advisor about your exact situation
It knows your profile and runs the real tax calculations — not a generic chatbot.
Illustrative only · Rules per Finance Act 2025 (FY 2025-26) · Figures are examples, not advice — confirm with a qualified CA / tax advisor before acting.