- Resident Indians can invest up to $250,000 each year in US and European stocks. This is permitted under the LRS scheme, with options including mutual funds, GIFT City platforms, or overseas brokers
- Long-term capital gains get taxed at 12.5% after 24 months. Dividends are subject to US withholding tax, along with Indian tax, though a foreign tax credit is usually available
- Investors need to complete KYC, submit the required forms, and declare foreign assets on their tax returns. You should also consider TCS, conversion costs, and currency risk.
Indian residents can now invest more easily in international stock markets. Investing in places like the US and Europe helps spread risk, lessening reliance on India’s domestic market. It also opens doors to global companies and industries.
This guide covers the practical steps, important rules, and things to consider for new investors getting started. We’re not recommending any specific service provider, though.
The Legal Backbone
Any money you send overseas to buy foreign stocks falls under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). The LRS allows Indian residents, including minors, to send up to USD 250,000 abroad each financial year for approved reasons; investing in foreign shares is one of them.
Keep in mind, this USD 250,000 limit is per person and covers all money you send overseas that year. So, if you’re sending funds for investments, travel, or anything else, you’ll need to track your total.
Taxes are part of this too, and the rules recently changed. For the current financial year, you won’t pay Tax Collected at Source (TCS) on LRS remittances totaling up to ₹10 lakh annually.
If you send more than that, a 20% TCS will apply to the investment transfer amount exceeding the ₹10 lakh threshold. This 20% gets collected upfront. You can claim it back as a credit when you file your income tax return, and you’ll see it on your Form 26AS.
How to Access US and European Markets
New investors can choose between directly owning stocks or using indirect investment strategies, based on how much risk they’re comfortable with and their familiarity with the process.
Going direct means you’ll open an account with an international brokerage, transfer funds from your bank using LRS, and then buy individual stocks or Exchange Traded Funds (ETFs) on exchanges like the NYSE, Nasdaq, or major European markets.
This gives you direct ownership and the freedom to pick specific companies. However, you’ll usually face remittance fees, currency conversion costs, and sometimes higher minimum deposit requirements.
Another option is to use platforms within India’s International Financial Services Centre (IFSC) in GIFT City. These platforms, regulated by the International Financial Services Centres Authority, let investors access US-listed stocks and ETFs.
You’d remit funds under LRS to a GIFT City account, convert them to US dollars, and then buy shares. These shares are held under your beneficial ownership.
Tax Treatment and Reporting Obligations
If you hold investments for over 24 months, capital gains are taxed at a flat 12.5% rate, without indexation. Non-resident investors don’t pay US capital gains tax on publicly traded stocks.
US stock dividends face a 25% withholding tax, per the India-US tax treaty, once you submit Form W-8BEN. Without this form, the rate is 30%. These dividends are also taxable in India based on your income bracket, but you can claim a foreign tax credit by filing Form 67. European dividend withholding tax rates differ by country and their respective tax treaties.
Steps and Considerations for New Investors
Investing abroad can really help diversify your portfolio, but it’s important to understand the regulations, costs, and how to stay compliant. Before you invest, always talk with a qualified tax professional or advisor who knows cross-border investments well.
First, check your remaining LRS limit for the year and estimate how much you’ll want to send. Pick an investment method that fits your comfort with paperwork and the control you want to have.
You’ll need to complete Know Your Customer (KYC) procedures and any tax treaty forms correctly. Only transfer funds through authorized dealer banks, and be sure to keep all transaction records for tax purposes.
Think about costs such as currency conversion fees, platform charges, and how different trading hours might affect your returns. It is usually recommended that you start small and consider broad market ETFs rather than single stocks until you’ve gained more experience.
Don’t forget about currency risks, geopolitical events, and varying regulations. These can all have a big impact.
Indian residents can send up to USD 250,000 per financial year under the Liberalised Remittance Scheme for approved investments and other needs.
Yes, taxpayers who are resident and ordinarily resident need to disclose foreign assets in Schedule FA and any related income in Schedule FSI of their tax return.
Yes, you can buy European stocks under LRS through global brokers, Europe-focused funds or ETFs, and certain depositary receipts.