iShares Says Indian Capital Gains Taxes Help Explain Why INDA Trails Its Index: 5.96% vs. 7.20% a Year Over 10 Years

BlackRock iShares puts a warning on its own fund page that most holders never read: “Performance for this iShares ETF may differ from the benchmark due to accrued capital gains taxes in the fund that are not reflected in the index.” iShares reports that the iShares MSCI India ETF (CBOE:INDA) returned 5.96% a year at net asset value (NAV, the per-share worth of its holdings) over the 10 years ended September 30, 2026. Over the same period, the MSCI India Index returned 7.20% a year. Part of that shortfall is a tax paid inside the fund. It never shows up on a fee line or on your 1099.

INDA Has Trailed Its Index Over Every Long Stretch

The 10-year number fits a wider pattern. iShares reports three-year average annual returns of 2.07% for the fund and 2.79% for the index as of September 30, 2026. Over five years, iShares shows 0.61% for the fund against 1.50% for the index. Since inception, iShares reports 5.26% for the fund versus 6.30% for the index.

The calendar years show how steady the pattern has been. Per its fact sheet, iShares reports fund returns of 22.41% in 2021, -9.38% in 2022, 17.49% in 2023, 8.99% in 2024, and 2.47% in 2025. For those same years, the index returned 26.23%, -7.95%, 20.81%, 11.22%, and 2.62%.

Why the Index Never Pays This Bill

The summary prospectus shows the index returns “do not reflect deductions for fees, expenses or taxes except for withholding taxes on reinvested dividends.” The benchmark exists only on paper. It never sells a share, so it never owes India a rupee in capital gains tax. INDA is a real investor that buys and sells real Indian stocks, and India taxes the gains it makes.

You Pay India’s Tax Through a Lower NAV

Under the fund’s investment advisory agreement, BlackRock Fund Advisors pays the fund’s operating expenses with a few exceptions, and “taxes” appear on that list of exceptions. In plain terms, the fund itself pays the tax. That makes shareholders the ones who pay, because the money comes out of the fund’s assets and brings down the NAV before you see any return.

Taxes Are One Disclosed Cause Among Several

Taxes explain only part of the gap. BlackRock iShares lists the fund’s expense ratio at 0.61%. iShares prospectuses also name other causes of tracking error, including transaction costs, uninvested cash, and differences in valuation timing. Recent results add pressure.

iShares reports a year-to-date NAV return of -13.81% as of October 26, 2026, and lists net assets of $5,830.68 million and 165 holdings.

Other India Funds Can’t Dodge the Tax Either

Every fund that owns Indian shares directly faces Indian tax on its gains. One such example is the Franklin FTSE India ETF (NYSEARCA:FLIN).

Switching funds lets you choose a different fee and tracking method, but the tax stays. INDA has still produced positive long-term returns, and BlackRock reports this cost openly.

What INDA Holders Should Take Away

Judge INDA against what an investor in India can actually keep after paying local tax. A shortfall of a fraction of a point a year is the expected price of owning Indian shares through a U.S. fund. Before you assume any single-country fund will match its benchmark perfectly, review its fund page for the expense ratio and any note about local capital gains taxes. Those lines tell you more about the gap than the index does.

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