Quick answer: Yes, Indian residents can legally invest in US stocks, ETFs and funds via four main routes—direct LRS to a US broker, NSE IFSC (GIFT City) US stock receipts, India-domiciled international mutual funds/ETFs, and global feeder funds. Know the RBI’s $250,000 LRS cap, the new TCS thresholds from 1 April 2025, and updated capital-gains tax rules (12.5% LTCG) before you start. (Reserve Bank of India, HDFC Bank, Press Information Bureau)
Last updated: 15 August 2025 (IST)
Why look at the US from India?
- Access world-leading sectors (tech, healthcare, consumer), deep liquidity, and broader diversification.
- A natural USD hedge—rupee depreciation can lift INR returns even when USD returns are modest.
- Choice of compliant, low-friction routes tailored to ticket sizes and tax preferences.
The 4 routes to invest
1) Direct LRS → US broker account
How it works: Remit USD under RBI’s Liberalised Remittance Scheme (LRS) to open/fund a brokerage with US market access (e.g., via global platforms or Indian brokers’ international arms). The LRS limit is USD 250,000 per resident per financial year. (Reserve Bank of India)
TCS from 1 April 2025: For most “investment” purposes, no TCS up to ₹10 lakh cumulative LRS per PAN in a FY; 20% TCS on the portion above ₹10 lakh (creditable in your ITR). Education/medical have lower rates. (HDFC Bank)
US paperwork: File Form W-8BEN with your broker to claim India-US treaty benefits on US-source income. (IRS)
Pros: Full market/ETF access, fractional shares, tight spreads.
Watch-outs: Bank fees/FX spread, TCS cash-flow, US dividend withholding, DIY custody.
2) NSE IFSC (GIFT City) US Stock Receipts (UDRs)
How it works: Trade unsponsored depository receipts of select US mega-caps on NSE IX, GIFT City; fractional units, USD-settled through participating brokers. Funding typically happens via LRS. (Zerodha)
Pros: Indian brokerage experience, fractional access, easier ops vs setting up a foreign broker.
Watch-outs: Limited stock list/liquidity vs US exchanges; still under LRS/TCS if you fund in USD. (NSE India)
3) India-domiciled international mutual funds & ETFs
How it works: Buy schemes in India that invest overseas (e.g., US index feeders, global funds). Industry-wide limits apply to how much AMCs can deploy overseas (USD 7 bn overall; USD 1 bn for ETFs), which can affect new flows. (INDmoney)
Tax note (units bought on/after 1 Apr 2023): If the fund holds ≤35% domestic equity, gains are taxed at slab rates irrespective of holding period (i.e., debt-like taxation). This continues post the 2024 LTCG reform. (The Economic Times)
Pros: INR investing, easy KYC, domestic statements.
Watch-outs: Flow caps, expense ratios, slab taxation for many international FoFs.
4) Global feeder funds via Indian platforms
Feeder funds in India route money to a single US/overseas master fund (S&P 500, Nasdaq-100, etc.). Operationally similar to #3 with the same tax treatment and industry caps. (INDmoney)
Taxes & costs: the big picture (FY 2024-25 onwards)
Capital gains in India (residents)
From 23 July 2024, India rationalised LTCG to 12.5% without indexation for most long-term assets (including foreign shares). STCG rates changed for certain listed equity; for foreign shares, short-term gains are taxed at slab rates. Always split transactions before/after 23 July 2024 for correct reporting. (Press Information Bureau, The Times of India)
Rule of thumb (foreign shares):
- LTCG (holding >24 months): 12.5% + surcharge/cess (no indexation).
- STCG (≤24 months): Taxed at slab rates.
(Subject to Finance Act updates and CBDT guidance.) (Press Information Bureau)
US dividend withholding
US dividends to India residents face 25% withholding by default, with a 15% treaty rate only for qualifying “direct dividends” (generally substantial corporate shareholdings—not typical for individuals). You can claim foreign tax credit in India against your dividend tax.
LRS & TCS cash-flow
- LRS ceiling: USD 250,000 per resident per FY. No frequency limit; no corporate/HUF use. (Reserve Bank of India)
- TCS from 1 Apr 2025: ₹0 up to ₹10 lakh cumulative LRS; 20% beyond (investment category). Credit shows in your Form 26AS and is adjustable at filing. (HDFC Bank)
Other costs to budget
- Bank charges & FX spread on outward remittance.
- Brokerage & SEC/FINRA fees (direct US route).
- Expense ratios & tracking difference (fund/ETF routes).
- GST on certain domestic fees, if applicable.
INR vs USD: how currency moves affect returns
INR return ≈ (1 + USD return) × (1 + % change in USD/INR) − 1
Example: S&P 500 ETF +10% in USD; INR depreciates 3% (USD/INR +3%).
INR return ≈ (1.10 × 1.03) − 1 = 13.3%.
Currency can cushion local portfolios when the rupee weakens.
Which route should you choose?
| Investor profile | Suggested route | Why |
|---|---|---|
| DIY, wants full market & ETF menu, >₹10–15L p.a. to US | Direct LRS → US broker | Breadth, tighter spreads; accepts TCS/ops |
| Wants simpler ops via Indian broker, blue-chips only | NSE IFSC UDRs | Familiar experience; fractional access |
| Prefers SIP, INR investing, paperwork-light | India-domiciled international funds/ETFs | Easy on-ramps, but mind slab taxation |
| Large core INR portfolio, satellite US exposure | Feeder funds / passive US index funds | Low maintenance diversification |
Compliance checklist (resident Indians)
- Confirm LRS headroom (per PAN, family clubbing rules apply only if co-owners). (Reserve Bank of India)
- Expect TCS once your aggregate LRS crosses ₹10 lakh in the FY (credit later). (HDFC Bank)
- Submit W-8BEN to reduce US withholding and avoid 30% default. (IRS)
- Report foreign assets (Schedule FA) and claim FTC for US tax withheld.
- Track overseas fund caps if using India-domiciled international funds (AMCs may gate flows). (INDmoney)
Worked example: ₹20 lakh US portfolio via LRS (FY 2025)
- First ₹10 lakh remitted: No TCS deducted.
- Next ₹10 lakh remitted: ₹2 lakh TCS collected (20%). You’ll adjust this against your total tax when filing ITR. (HDFC Bank)
- Dividends received: 25% US withholding; claim FTC in India.
- Sell after 30 months: 12.5% LTCG in India (no indexation). (Press Information Bureau)
Risks & practical tips
- Currency risk: A sharp INR appreciation can drag INR returns.
- Product risk: Read KID/factsheets; check underlying index and securities.
- Liquidity: UDRs and some overseas funds can have wider spreads than NYSE/Nasdaq. (Zerodha)
- Policy drift: RBI is reviewing LRS leakages (e.g., passive deposits). Keep an eye on scope changes, not just limits. (Reuters)
Execution tips
- Remit on low-spread bank windows; compare AD bank and fintech remittance costs.
- Batch remittances to minimise fixed fees; maintain a TCS log across family PANs.
- For fund routes, monitor AMC overseas headroom and subscription status.
FAQs
Is investing in US markets legal for Indian residents?
Yes—via LRS for individuals. Corporates/HUFs cannot use LRS. (Reserve Bank of India)
Do I need to bring back profits to India immediately?
Not if you reinvest. Otherwise, unspent foreign exchange generally must be repatriated within 180 days. (Reserve Bank of India)
What’s the US dividend tax I’ll face?
Typically 25% withholding; the 15% treaty rate is for qualifying direct dividends (substantial holdings). Claim FTC in India.
What changed in 2024 for capital gains?
India introduced a uniform 12.5% LTCG (no indexation) for most long-term assets from 23 July 2024; report transactions split around that date. (Press Information Bureau, The Times of India)
Are international mutual funds still at slab rates?
For units acquired on/after 1 Apr 2023 where domestic equity ≤35%, yes—slab rates apply regardless of holding period. (The Economic Times)
Compliance note & sources
- RBI LRS FAQs (USD 250,000 limit; conditions; repatriation). (Reserve Bank of India)
- TCS on LRS (from 1 Apr 2025)—₹10 lakh threshold; 20% thereafter for “any other purpose”. (HDFC Bank)
- US-India treaty rates (IRS Table 1, May 2023)—25% dividend default; 15% direct dividend rate.
- Capital gains reform (Govt/PIB FAQ, July 2024)—12.5% LTCG without indexation; reporting split. (Press Information Bureau)
- NSE IFSC UDR/US receipts & scope. (Zerodha, NSE India)
- Industry caps for overseas MF/ETF flows. (INDmoney)
This article is general education, not investment or tax advice. Consult your SEBI-registered adviser and tax professional for personalised guidance.