How to invest in US stocks from India: LRS, TCS, Schedule FA and the tax treaty

Indian residents have more legal ways into US shares than most investors abroad, but every one of them runs on rules written in Mumbai and New Delhi rather than New York. The Reserve Bank of India caps what you can send, the Income Tax Department collects tax as the money leaves and again on dividends and gains, and a 1989 treaty sets how much the IRS keeps. This page takes each rule in turn as it stands in November 2026, with worked rupee and dollar figures; the guide to investing in US stocks from abroad covers what applies in every country. Indian law decides what you may buy and how it is taxed, so have a chartered accountant who handles foreign assets check your plan before you commit serious money.

How much can you send abroad under LRS?

Every resident individual, including minors, may send up to USD 250,000 per financial year (April to March) under the Liberalised Remittance Scheme, and buying listed foreign shares is a permitted use.

The limit belongs to each person, so a couple has two limits, but relatives can't pool theirs for one investment unless each is a co-owner. A remittance uses up the limit on the day it leaves India: if you sell shares and bring the money back, that doesn't restore your room for the year. Your bank will want your PAN and Form A2, and investment remittances go through one designated branch. If you have banked there for less than a year, expect questions about where the money came from. Banks may not lend you the money to remit, and LRS can't fund margin trading, margin calls or speculative currency trading abroad. Dividends and sale proceeds may stay abroad and be reinvested, though money sent for a purpose and not used for it has to come back within 180 days. The share purchase itself counts as overseas portfolio investment under the Overseas Investment Rules, 2022.

Tax collected at source, or TCS, is the second cost of sending money. Banks collect 20% on LRS remittances above ₹10 lakh in a financial year, for purposes other than education or medical treatment. It is not a final tax. The amount appears against your PAN in your annual tax statement and is set off against your tax bill for the year, or refunded once you file, but the bank itself can't give it back. On large remittances that means a fifth of everything above the threshold sits with the government for months.

Which routes into US shares are open to Indian residents?

Two routes put US shares in your own name and one gives indirect exposure through Indian funds, while GIFT City's receipts on US shares are closing.

A domestic broker's international account. Several Indian brokers and banks partner with US brokers. You remit under LRS into an account in your own name at the US partner, which holds the shares, so the US rules below apply just as they would if you had opened the account yourself. Check who the custodian is and which investor protection covers it; FDIC vs SIPC explains what SIPC does for customers of a US broker-dealer.

A US broker directly. Some US brokers accept Indian residents with a passport, PAN and proof of address. You give the broker Form W-8BEN so it applies the treaty rate, and you fund the account by wire under LRS, which brings bank charges and a conversion margin. Opening an account from outside the US is covered in opening a US brokerage account as a nonresident.

GIFT City. LRS money may also go to the International Financial Services Centre in GIFT City, Gujarat, and since 2022 that has included dollar receipts on large US companies traded on NSE International Exchange (NSE IX). That product is winding down. Under an exchange procedure effective July 30, 2026, only the market maker may buy receipts; holders can sell them until January 29, 2027, or swap whole-share lots for the underlying US shares until January 20, 2027, which needs an account able to receive them. Fractions of a share can only be sold, and the exchange promises no exit for receipts still held after the closure period. Anything else on offer in GIFT City, such as a fund set up there, is a separate product to check on its own terms.

Indian international mutual funds. Fund-of-funds and feeder funds invest abroad for you, so you put in rupees with no Form A2, no TCS and no foreign asset of your own to report. The catch is capacity. SEBI caps the industry's overseas investment at US$7 billion across the industry and US$1 billion per fund house, plus US$1 billion (US$300 million per fund house) for overseas ETFs, and when those limits fill, funds stop taking new money, sometimes for long stretches. Check whether a fund accepts lump sums and monthly SIPs before you rely on it.

The cheapest route depends on account fees, the bank's margin on rupee-dollar conversion and, for funds, the expense ratio. Exchange rate markups shows how a margin of one or two percent compares with the fees you can see.

India and US rules at a glance

The table puts the main rules side by side for a resident and ordinarily resident individual.

How are US dividends taxed for an Indian resident?

The US withholds 25% of each dividend under the India-US treaty, and India then taxes the full dividend at your slab rate, minus a credit for the US tax.

The 25% applies only once your broker holds a valid Form W-8BEN; without one, the default is 30% on US-source dividends, unless a tax treaty sets a lower rate. A signed form stays valid until the last day of the third calendar year after the year it is signed, and the W-8BEN guide explains each line. The 15% column is for companies that own 10% or more of the payer's voting stock, and the treaty keeps dividends from a regulated investment company, which is what a US-listed ETF or mutual fund is, at 25% in all cases. US dividend withholding by country compares India's rate with other treaty partners.

India treats a foreign dividend as ordinary income with no special rate. The credit for US tax can't exceed the Indian tax on the same income, so it never produces a refund. You claim it on Form No. 44, which took over from Form 67 when the Income-tax Rules, 2026 came into force on April 1, 2026. Under Rule 76 you can file it up to 12 months after the tax year ends, provided your return went in on time, and an accountant has to verify the form once the foreign tax claimed reaches ₹1 lakh. Your broker's tax statement covers a calendar year while India's tax year runs April to March, so split dividends by payment date and keep the statements as proof of the tax withheld.

When do gains on US shares become long-term in India?

Shares listed abroad count as unlisted for Indian tax, so a gain becomes long-term only after more than 24 months and is then taxed at 12.5% without indexation.

Surcharge, capped at 15% on capital gains, and 4% cess come on top. The ₹1.25 lakh yearly exemption covers only listed Indian equity and equity funds, so it doesn't shelter gains on US shares. Gains on shares held 24 months or less are added to your income and taxed at your slab rate. The US generally takes nothing from a nonresident's share gains, so there is no foreign tax to credit. Because the gain is worked out in rupees, a weaker rupee raises it even if the dollar price hasn't moved.

Say you sell after 30 months for a gain of ₹4 lakh. At 12.5% plus cess the Indian tax is ₹52,000. Someone in the 30% slab who sold at 20 months would owe ₹1,24,800 on the same gain.

Indian international funds run on different clocks. A fund of funds that invests abroad isn't treated as a debt-type fund, so its units turn long-term after 24 months and pay 12.5%, and an international ETF listed on an Indian exchange gets the same rate after 12 months. Neither qualifies for the ₹1.25 lakh exemption. If you are selling GIFT City receipts before the January 2027 deadlines, ask your adviser which holding period applies to them, since the sale is taxable in India.

What goes into Schedule FA?

If you are resident and ordinarily resident, Schedule FA must list every foreign account and holding you had at any time in the calendar year, whatever its value.

The schedule runs January to December even though your return covers April to March, so the return you file in mid-2027 lists what you held during calendar 2026. A US brokerage account goes in table A2 as a custodial account, and each share or ETF goes in table A3 with its initial, peak and closing values, the income it paid and any sale proceeds. Shares sold during the year still appear. The foreign income and its tax credit go in Schedules FSI and TR. Holding any foreign asset means you must file ITR-2 or ITR-3, even if your income is below the taxable limit. More on how other countries handle this is in reporting US investments at home.

Leaving a holding out can be expensive. The Black Money Act provides a ₹10 lakh penalty, but since October 1, 2024 the penalty doesn't apply when your foreign assets other than property total ₹20 lakh or less, and the 2026 Budget extended the same floor to prosecution.

For past omissions there is a one-time window. The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, known as FAST-DS, accepts online declarations until December 31, 2026. Foreign assets bought from income already taxed in India, or while you were non-resident, and simply left off Schedule FA can be declared for a flat ₹1 lakh fee, charged once per asset, if they total no more than ₹5 crore at March 31, 2026 values. Assets bought from income never taxed, up to ₹1 crore, pay 30% tax plus an equal amount, or 60% in all. A valid declaration brings immunity from further tax, penalty and prosecution under the Black Money Act for what is declared.

Does US estate tax reach Indian investors?

Yes: India has no estate tax treaty with the US, so US shares and US-domiciled funds worth more than $60,000 of US-situated assets can be taxed when you die.

The IRS list of estate and gift tax treaties has 15 countries, and India isn't one of them. Rates climb to 40%, and a nonresident's estate gets a credit of only $13,000, which offsets the tax on the first $60,000 of US assets, compared with an exemption of $15,000,000 per person for US citizens and residents. The executor files Form 706-NA, and heirs usually wait for an IRS transfer certificate before the broker releases anything. The estate tax guide for nonresidents walks through the filing.

Ireland-domiciled funds, compared in US vs Irish-domiciled ETFs, are the other common way to hold US companies without US estate exposure. For Indian investors the dividend comparison is less clear-cut than in many countries: the 25% withheld on a US ETF is creditable in India, while the 15% an Irish fund pays inside the fund isn't, so the result depends on your slab and on whether the Irish fund distributes or accumulates its income.

Rupee risk and other downsides

The exchange rate often moves your result more than fees do. You buy dollars with rupees, and every rupee you get back depends on the rate on the day you sell. The table converts rupee amounts at the current mid-market rate and at typical bank margins; the live pair is on the USD to INR converter.

A weaker rupee lifts the rupee value of US holdings and a stronger one cuts it, so the dollar return shown on a fund page such as SPY is only part of what you earn. Currency risk in US assets looks at the question for investors in every country. Other risks to weigh:

• Cash tied up in TCS. On large remittances, a fifth of everything above ₹10 lakh sits with the tax department until you file and claim it.
• Fund capacity. International funds can close to new money when SEBI's caps fill, so a plan built on monthly SIPs can stall without warning.
• Concentration. A handful of US technology names is a bet on one market, one sector and one currency; types of investment risk sets out the wider picture.
• Fraud. Pitches for US shares in messaging groups, or for currency trading under LRS, are a common route to losses. Money transfer scams lists the warning signs.
• Paperwork. A missed Schedule FA, an expired W-8BEN or a late Form No. 44 each cost real money, so keep remittance advices, TCS certificates and broker statements together.

Indian rules on remittances and foreign income changed several times in 2026 alone, with a new Income-tax Act, new forms and FAST-DS. Ask a chartered accountant who works with foreign assets to confirm how they apply to you.