You hold VOO, QQQ or another US-listed ETF. You have just found out that the US can tax these holdings when you die, and that UCITS ETFs like CSPX and EQQQ track the same indexes without that risk. Now you want to know if it is worth selling.
Short answer: if your US holdings are above $60,000, or likely to get there, switching usually leaves your family with more, even after the tax you pay to sell. If they are small and likely to stay small, you can keep them and send all new money to UCITS ETFs instead.
This guide shows what selling actually costs you, compares that with the estate tax your heirs could pay, and walks through the switch step by step.
Note: This guide is for resident Indians. If you are moving back to India from the US, read Should You Switch to UCITS ETFs Once PFIC Rules No Longer Apply? first, since your timing and tax position are different.
Table of contents
- Why VOO and QQQ holders are asking this
- What selling actually costs you
- Switch now or hold: what your heirs get
- Your three options
- How to switch on Paasa
Why VOO and QQQ holders are asking this
When a non-US citizen who is not domiciled in the US dies, the US can charge estate tax on their US assets. An estate tax return is required if the value of the person's US-situated assets at death exceeds $60,000. US assets include stock of US corporations, even if you hold it from abroad.
US-listed ETFs like VOO and QQQ count as US assets. Irish-domiciled UCITS ETFs like CSPX and EQQQ do not, even though they hold the same US stocks.
The tax is steep. It runs from 18% to 40% under the unified rate schedule, applied to the full value of your US assets. Non-residents then get a unified credit of $13,000, which is what covers the first $60,000.
Note: The $13,000 credit is a fixed dollar amount. It does not rise with inflation, so a portfolio under $60,000 today may not stay under it as it grows.
For a full walkthrough of the calculation, see How Is US Estate Tax Calculated. For who is covered and how domicile works, see US Estate Tax for Indians.
What selling actually costs you
Switching means selling your US ETF units and buying UCITS ETFs. The sale is the only taxable step. Here is what it costs on each side.
The India view
US-listed ETFs are not listed on an Indian exchange, so the holding period for long-term is more than 24 months.
| Holding period | Tax on the gain |
|---|---|
| More than 24 months (long-term) | 12.5%, no indexation, plus 4% health and education cess |
| 24 months or less (short-term) | Your income tax slab rate, plus cess |
The 12.5% rate and 4% cess are set out in the Income Tax Department's guide to tax on long-term capital gains. If your total income is above ₹50 lakh, surcharge applies on top. On long-term capital gains, surcharge is capped at 15%, so the most you pay is about 14.95% of the gain (12.5% plus 15% surcharge plus 4% cess). You only pay tax on the gain, not on the full sale value.
Your gain is worked out in dollars first and then converted to rupees at the SBI TT buying rate on the last day of the month before the month you sell. Read more in SBI TT Buying Rate Explained and Capital Gains Tax on Foreign Stocks and ETFs.
The US view
The US generally does not tax a non-resident's gains from selling shares unless they were in the US for 183 days or more that year. See "Sales or Exchanges of Capital Assets" in IRS Publication 519. For most resident Indians, the sale costs nothing on the US side.
Money you add later
Selling VOO and buying CSPX in the same account reinvests money that is already abroad, so there is no fresh remittance. New money you send from India goes under the Liberalised Remittance Scheme, which allows up to USD 2,50,000 per financial year.
TCS applies at 20% on the amount above ₹10 lakh in a year. This is not an extra tax. You can adjust it against your tax bill or claim it as a refund. See TCS on Foreign Investments.
Note: If your holdings are short-term today, waiting until they cross 24 months can lower the cost of switching. That has to be weighed against the estate tax risk in the meantime.
Switch now or hold: what your heirs get
Selling costs you a small, known amount today. Holding exposes the whole future value of your portfolio to estate tax. The example below puts the two side by side.
Example. Suppose you are a resident Indian holding $100,000 of VOO, bought for $70,000 more than 24 months ago. You compare two choices:
- Switch: sell VOO, pay tax on the $30,000 gain at 12.5% plus 4% cess (13% in total), and put the rest into CSPX.
- Hold: keep VOO.
Both grow at 10% a year. At the end of the period, the investment passes to your heirs. The UCITS portfolio owes no US estate tax. The VOO portfolio pays estate tax on its full value, less the $13,000 credit.
| Item | Switch to CSPX | Hold VOO |
|---|---|---|
| Tax on selling today | $3,900 | $0 |
| Amount invested | $96,100 | $100,000 |
| Value after 20 years | $646,513 | $672,750 |
| US estate tax | $0 | $206,718 |
| Heirs inherit | $646,513 | $466,032 |
The result: switching leaves your heirs about $180,481 more
The $3,900 you pay today saves your heirs over $200,000 in estate tax. The longer the money stays invested, the wider the gap gets.
| Item | Switch to CSPX | Hold VOO |
|---|---|---|
| Value after 30 years | $1,676,888 | $1,744,940 |
| US estate tax | $0 | $630,776 |
| Heirs inherit | $1,676,888 | $1,114,164 |
Over 30 years, switching leaves your heirs about $562,724 more.
The same holds for a smaller portfolio. Suppose your VOO is worth $70,000, bought for $50,000. Switching costs $2,600 in tax. After 20 years, your heirs inherit $453,433 from CSPX, against $338,010 from VOO after $132,915 in estate tax. That is about $115,423 more from switching.
The risk is not only in the long run. If the $100,000 of VOO passed to your heirs today, the estate tax would be $10,800, nearly three times the $3,900 it costs to switch.
Note: This example assumes all your units are long-term. If you bought VOO or QQQ every month, your holding is made up of many lots, and some may still be 24 months or less. Your broker statement shows the purchase date of each lot. A simple way to decide is to switch the lots held for more than 24 months first, and switch the rest as each lot crosses 24 months.
Note: These figures are illustrative. They assume a constant 10% annual return for both funds, ignore the small difference in expense ratios, and convert tax to dollars for simplicity. Your actual tax is computed in rupees, and surcharge may apply. Estate tax is charged whenever death occurs, not at a fixed date. Try your own numbers with the US Estate Tax Calculator.
Your three options
Switching is not all or nothing. Most VOO and QQQ holders end up in one of these three places.
Sell everything and switch
This fits if your US holdings are well above $60,000 and most of your units are long-term. The tax cost is 13% of the gain (plus surcharge, if it applies to you), and after the switch none of that money is exposed to US estate tax.
Sell part and switch
This fits if you want to keep some US ETFs but limit the exposure. You sell enough to bring your US assets below $60,000 and move the rest to UCITS.
Remember that the $60,000 covers all your US assets, not just ETFs. US stocks and RSUs in a US-listed employer count too. And whatever you keep will grow, so it may cross the threshold again.
Hold and redirect new money
This fits if your holdings are small, or if most of your units are 24 months or less and selling now would be taxed at your slab rate. You stop buying VOO or QQQ and put every new investment into UCITS ETFs.
The trade-off is that your existing holdings stay exposed and keep growing. Many investors use this as a holding pattern, then sell once their units cross 24 months.
Whichever option you choose, the UCITS side is the same. For S&P 500 exposure, see Top UCITS Alternatives to VOO. For Nasdaq-100 exposure, see Top UCITS Alternatives to QQQ.
Note: UCITS ETFs also face lower US dividend withholding at the fund level. See How the 15% US Dividend Withholding Tax Works for Irish UCITS ETFs.
How to switch on Paasa
You can make the switch in one account. Your Paasa account is opened in your own name, with Interactive Brokers as the custodian.
- Open your Paasa account. Complete KYC online. If you already have a Paasa account, skip this step.
- Bring your US ETFs over. If your VOO or QQQ sits with Vested, INDmoney or a US broker, move the units to Paasa through an ACATS transfer. You don't need to sell them first. See How to Transfer US Stocks to Another Broker Without Selling. Broker-specific guides: Vested and IndMoney.
- Sell the units you are switching. Check how long you have held each lot first, so you know which gains are long-term.
- Buy the UCITS ETF. Use the sale proceeds to buy CSPX, EQQQ or another UCITS ETF. Step-by-step order placement is covered in How to Buy UCITS ETFs from India Using Paasa.
- Send new money to UCITS only. Future remittances under LRS go straight into UCITS ETFs. See LRS for Global Investments.
- Report it in your ITR. Show the sale in your capital gains schedule and report your UCITS holdings in Schedule FA. See the Schedule FA Guide.
About Paasa
Paasa is a global investing platform for Indian residents and NRIs.
- One account for the whole switch: Transfer in your existing US ETFs, sell them and buy UCITS ETFs, all in an account in your own name with Interactive Brokers as custodian.
- Access to UCITS ETFs: Buy Irish-domiciled ETFs like CSPX and EQQQ on European exchanges, alongside US stocks and ETFs.
- Tax reporting support: Get the details you need for your capital gains schedule and Schedule FA when you file your ITR.
