Why Indian Investors Are Looking Abroad
The Nifty 50 has delivered strong returns over the last decade. But the US S&P 500 has done so too — in dollars. Adding a global dimension to your portfolio means exposure to Apple, Microsoft, and Google at their origin, in a currency that has historically appreciated against the rupee.
More importantly: when Indian markets fall, US markets don't always follow — and vice versa. That's diversification working in your favour.
The Liberalised Remittance Scheme (LRS) — Your Gateway
The Reserve Bank of India allows resident Indians to remit up to USD 2,50,000 per financial year for permitted purposes under the Liberalised Remittance Scheme (LRS). Investing in foreign stocks and mutual funds is an explicitly permitted use.
The ₹7 Lakh TCS Threshold
Effective October 2023, if you remit more than ₹7 lakh in a financial year under LRS for purposes other than education/medical treatment, the bank deducts Tax Collected at Source (TCS) at 20% on the amount above ₹7 lakh.
Important: TCS is not an additional tax. It is an advance tax payment that you can claim credit for when filing your ITR. It does NOT increase your tax liability — it only affects cash flow.
| Annual Remittance | TCS Rate | TCS Deducted |
|---|---|---|
| Up to ₹7 lakh | 0% | ₹0 |
| ₹7 lakh to ₹10 lakh | 20% on excess | ₹60,000 (on ₹3L excess) |
| ₹15 lakh (example) | 20% on ₹8L | ₹1,60,000 |
How to Actually Invest: Three Routes
Route 1: Indian Platforms with Direct US Access
Apps like INDmoney, Vested Finance, and Groww allow you to buy fractional US stocks and ETFs directly. They handle the LRS remittance and account opening with a US broker (typically DriveWealth or Alpaca). Setup takes 2–3 days.
- Best for: Direct stock picking (Apple, Tesla, Nvidia, etc.)
- Minimum investment: As low as $1 (fractional shares)
- TCS handling: Platform deducts at source automatically
Route 2: Feeder Funds / International Mutual Funds in India
Many Indian AMCs offer funds that invest in US markets — Mirae Asset NYSE FANG+ ETF, Motilal Oswal NASDAQ 100 FoF, Franklin Templeton US Feeder Fund. You invest in INR, no LRS or TCS applies.
- Best for: Passive, low-hassle international diversification
- No LRS paperwork or TCS concern
- Expense ratios slightly higher than direct US ETFs
Route 3: International ETFs via NSE/BSE
Several international ETFs now trade on Indian exchanges — Mirae Asset Hang Seng Tech ETF, Motilal Oswal S&P 500 ETF, etc. You can buy them like any Indian stock in your demat account. No LRS required.
Taxation on US Stock Investments for Indians
This is where many investors get confused. Here are the exact rules:
Capital Gains Tax
- Short-term (held <24 months): Taxed as per your income slab (can be up to 30%)
- Long-term (held ≥24 months): 12.5% without indexation (post-Budget 2024)
Dividend Tax
- US companies withhold 25% tax on dividends at source for Indian residents (due to DTAA treaty)
- You can claim credit for this US tax against your Indian tax liability under DTAA (Double Taxation Avoidance Agreement)
- File Form 67 along with your ITR to claim the foreign tax credit
PFIC Rules (for US-listed funds)
If you invest in US-domiciled ETFs (like VOO or QQQ directly via a US brokerage), be aware of PFIC (Passive Foreign Investment Company) rules under US tax law. This doesn't affect you from India's side, but complicates things if you hold US-domiciled funds. Better to use Indian feeder funds if you want passive exposure.
Practical Tips Before You Start
- Start with ₹7 lakh or less annually to avoid TCS complexity while you learn
- Use Indian feeder funds first — simpler taxation, no LRS paperwork
- File Form 67 if you received dividends with US tax withheld — claim that credit back
- Track cost basis in INR — both exchange rate at purchase and at sale matter for LTCG calculation
- Don't over-allocate — 10–20% of equity portfolio in international assets is a reasonable starting point
The rupee has depreciated against the dollar at roughly 3–4% per year historically. So even a flat US market return translates to 3–4% in rupee terms before any actual stock gains.
Related Reading
- New vs Old Tax Regime FY 2025-26: Which Is Better? — Foreign income and dividend tax from US stocks can affect which tax regime is more beneficial for you.