Under the RBI's Liberalised Remittance Scheme (LRS), a resident individual can send up to $250,000 abroad each financial year to invest in foreign stocks, ETFs, mutual funds, bonds and other permitted assets. Investments do not get a separate limit; they share the $250,000 with education, travel, gifts and every other LRS purpose.
Your bank collects TCS of 20% on investment remittances above ₹10 lakh in the year, which you claim back against your income tax. Below is what you can invest in, how the remittance works step by step, and what LRS does not allow.
Table of contents
- Is there a separate LRS limit for investments?
- What can you invest in abroad under LRS?
- Can you invest in foreign bonds under LRS?
- Can you buy property abroad under LRS?
- Can you open a foreign currency account under LRS?
- Can you invest in foreign VC and PE funds under LRS?
- What is not allowed under LRS for investments?
- How do you invest in US stocks and ETFs under LRS?
- Which route does each type of investment take?
- Does LRS apply to GIFT City investments?
- How much TCS applies to investments under LRS?
- How is income from foreign investments taxed in India?
- Does US estate tax apply to investments made under LRS?
Is there a separate LRS limit for investments?
No. Investments use the same $250,000 a financial year as every other LRS purpose, and the limit is per person across all your banks. If you have already sent $100,000 for a child's tuition this year, you have $150,000 left for investments.
Each family member has their own limit, so a couple can each invest up to $250,000 in their own name. For investments, family members can pool their limits in one account only if each of them is a co-owner or co-investor.
What can you invest in abroad under LRS?
For most Indian investors, the starting point is the United States, but LRS lets you invest in listed markets around the world. Each option has its own tax, compliance and estate planning implications.
Here are the main routes available:
1. Direct equities (US and global stocks)
You can buy individual shares of companies listed overseas, most commonly in the US. This includes blue chips like Apple, Microsoft, or Google.
For diversification, you can also access stocks listed in other markets (the UK, Japan, Switzerland, Hong Kong and others) through global brokers.
We’ve created detailed guides on investing in each of these markets from India:
- Invest in US from India
- Invest in Japan from India
- Invest in Switzerland from India
- Invest in China from India
- Invest in Ireland from India
2. Exchange-traded funds (ETFs)
ETFs allow you to gain diversified exposure in a single trade. Under LRS, Indians can buy US-listed ETFs (like SPY, QQQ, VOO) or Europe-domiciled UCITS ETFs (like VUAA, CSPX). Each has pros and cons: US ETFs are liquid but expose you to US estate tax, while UCITS ETFs are built for non-US investors and are often more tax-efficient.
3. American depositary receipts (ADRs)
ADRs let you invest in non-US companies (like Toyota, Samsung, or Alibaba) through instruments listed on US exchanges. They’re convenient for India-based investors who want global exposure without setting up multiple market accounts.
4. UCITS funds (Ireland and Luxembourg)
These funds are popular with global investors outside the US. They come in both index-tracking and actively managed formats. For Indian investors, the big advantage is that they typically avoid US estate tax risk, have favourable tax treaties, and can be accumulating (reinvest dividends) or distributing (payout dividends).
We have published a dedicated guide on why Indian investors should choose UCITS over the US ETFs and how it can help them save up to 40% estate tax.
Can you invest in foreign bonds under LRS?
You can also use your LRS limit to invest in fixed-income products abroad. Options include:
Category | What it is | Why investors consider it |
US Treasuries & Government Bonds | Sovereign debt issued by the US or other developed markets. | A dollar asset that hedges against INR depreciation, often higher yields than Indian FDs. |
Corporate Bonds & Eurobonds | Debt issued by global companies or supranational bodies. | Higher yields, access to global credit markets. |
Bond ETFs & Debt Mutual Funds | Funds or ETFs packaging multiple bonds (e.g., iShares Treasury ETFs). | Easy access, liquidity, diversification with smaller ticket size. |
Private Debt & Credit Funds | Alternative funds investing in private credit or distressed debt. | Higher yields, niche strategies not available in India. |
Structured Notes & Exotic Debt | Debt products combined with derivatives. | Yield enhancement, but higher risk and less clarity under LRS. |
Can you buy property abroad under LRS?
Yes. Buying residential or commercial property outside India is a permitted LRS purpose, with its own purpose code (S0005) and documents. Family members can pool their limits only if each of them is a co-owner. The guide to buying property abroad under LRS covers pooling, payment plans, mortgages and tax.
Can you open a foreign currency account under LRS?
Apart from equities, ETFs, and real estate, LRS also allows resident Indians to open and maintain foreign currency accounts abroad. This route is less about investment returns and more about convenience, diversification, and currency exposure.
It can be a useful way to manage expenses abroad or hold cash for future overseas investments.
Here’s a detailed breakdown:
What are foreign currency deposits?
- Accounts maintained in banks outside India, denominated in USD, GBP, EUR, CHF, JPY, etc.
- Typically used as savings accounts, term deposits, or custodial cash accounts linked to a brokerage.
- Purpose: Holding funds abroad for future investments, education, travel, or expenses in that currency
Compliance rules
- Permissibility: RBI permits residents to open foreign bank accounts under LRS.
- Annual Limit: Remittances count toward the USD 250,000 LRS cap.
- Documentation:
- Form A2 with purpose code (S0023, opening of a foreign currency account abroad with a bank).
- PAN, passport, KYC.
- Declaration of source of funds.
- Restrictions: Accounts must not be used for margin trading or any other remittance LRS does not allow.
Can you invest in foreign VC and PE funds under LRS?
For some investors, venture capital (VC) and private equity (PE) are the next step after listed equities.
Under the Liberalised Remittance Scheme, it is possible to allocate part of your USD 250,000 limit into offshore VC and PE funds. But unlike buying US stocks or ETFs, these investments are subject to the Foreign Exchange Management (Overseas Investment) Rules, 2022 and require a higher bar of compliance.
What counts as VC/PE investment abroad?
- Venture capital funds: Pools investing in early-stage startups abroad. Typically domiciled in the US, Singapore, or Europe.
- Private equity funds: Investments into growth-stage or buyout opportunities, often with 7–10 year lock-in structures.
- Alternative investment vehicles: Hedge funds, private credit funds, and feeder structures that route money into global VC/PE.
What is not allowed under LRS for investments?
While LRS gives you flexibility to invest globally, there are clear restrictions on what Indian residents cannot use their LRS limit for. Knowing these boundaries helps avoid compliance issues, remittance rejections, or even tax penalties.
What LRS does not allow
- Margin trading and leveraged products: Using LRS for leveraged trades, CFDs (contracts for difference), or margin accounts abroad is not allowed. Even if your broker platform offers these features by default, Indian investors cannot activate or use them.
- Derivatives for speculation: the RBI does not permit remittances for margins or margin calls to overseas exchanges or counterparties, which rules out leveraged options and futures trading abroad.
- Lottery or gambling-linked instruments: Any products linked to betting, gambling, or lottery systems are explicitly barred under FEMA.
Grey areas
Some products sit in an ambiguous space where banks may interpret rules differently:
- Cryptocurrency: crypto is not one of the permitted purposes listed under LRS, and most banks refuse remittances meant for crypto exchanges or wallets.
- Structured notes: Yield-enhanced debt products linked to equities or FX. Some banks treat these as derivatives and refuse remittances.
- Feeder funds in tax havens: Offshore funds domiciled in tax-friendly jurisdictions (like Cayman) may face extra scrutiny.
- Pre-IPO shares in foreign private companies: Direct allocations can blur the line between portfolio investment and ODI (Overseas Direct Investment), triggering compliance concerns.
Common mistakes to avoid
- Using wrong purpose codes: Marking remittances for “education” or “travel” when actually investing. Banks and regulators cross-check, and mismatches can raise red flags.
- Routing money via personal foreign accounts: Sending money abroad under one purpose, then moving it into restricted assets. This violates the spirit of LRS and can attract penalties.
- Assuming “if the platform offers it, it must be legal”: Many global brokers allow products Indians cannot use under LRS. Always check RBI’s permitted list before activating features.
How do you invest in US stocks and ETFs under LRS?
You remit money from your Indian bank account to an investing account abroad in your own name, then buy stocks or ETFs in that account. The steps are the same whichever market you invest in:
- Open a global investing account in your own name, such as a Paasa account, and note the funding details it gives you.
- Start an outward remittance from your Indian bank account, online or at the branch, to those funding details.
- Fill in Form A2 and the LRS declaration with your PAN, the purpose code for portfolio investment abroad (S0001 for equity, S0002 for debt) and how much you have already sent under LRS this financial year.
- Pay the TCS, if it applies. The bank converts your rupees, collects 20% TCS on the part of your investment remittances above ₹10 lakh in the year, and sends the money.
- Invest once the money arrives, and keep the Form A2, the bank's debit advice and the TCS certificate for your tax return and Schedule FA.
For a market-by-market walkthrough, see how to invest in US stocks and ETFs from India.
Which route does each type of investment take?
Listed investments go through a brokerage account; funds and property are paid to the fund or seller directly.
Investment Type | Typical Route |
Direct equities (US and global stocks) | Via a global brokerage partner such as Paasa |
ETFs (US or UCITS) | Via a global brokerage partner such as Paasa |
ADRs | Via a global brokerage partner such as Paasa |
UCITS Funds (Ireland, Luxembourg, Switzerland) | Via a global brokerage partner such as Paasa |
Bonds (US Treasuries, corporates) | Through a brokerage account (for listed bonds) or by wire transfer to the custodian (for institutional issues) |
Private Debt / PE / VC Funds | Direct wire transfer to the fund’s designated subscription account |
Real Estate Abroad | Remitted by your bank under S0005 to the seller, developer or escrow account named in the sale agreement |
Foreign Currency Deposits | Direct transfer to your overseas savings account (USD/GBP/EUR) |
Does LRS apply to GIFT City investments?
Yes. Money you send to a fund or brokerage account in GIFT City (IFSC) is an LRS remittance, so it uses your $250,000 limit and attracts TCS like any other investment remittance. The comparison of UCITS ETFs and GIFT City outbound funds covers how the two routes differ on cost, tax and estate tax.
How much TCS applies to investments under LRS?
For FY 2026-27, there is no TCS on the first ₹10 lakh you send abroad under LRS in the year, across all purposes and banks. Above that, your bank collects 20% TCS on investment remittances, under section 394 of the Income-tax Act 2025. Education and medical treatment have lower rates, covered in the guides to LRS for education and LRS for medical treatment.
Example. Suppose you send ₹20 lakh abroad this financial year to invest in global ETFs, and it is your only LRS remittance.
| Item | Amount |
|---|---|
| Total remitted for investments | ₹20,00,000 |
| Threshold with no TCS | ₹10,00,000 |
| Amount above the threshold | ₹10,00,000 |
| TCS at 20% | ₹2,00,000 |
The result: your bank collects ₹2 lakh as TCS, which you claim back against your income tax
TCS is credited to your PAN and set off against your tax when you file your return, and any excess is refunded. You can also adjust it against your advance tax during the year. TCS on US stocks shows how earlier remittances change the calculation.
How is income from foreign investments taxed in India?
Taxation on overseas investments is highly complex. It varies both by instrument (equities, ETFs, UCITS, bonds, real estate, private equity) and by jurisdiction, since India has different tax treaties with different countries.
If you’re exploring global investments, it’s best not to rely on generic assumptions.
The rules for withholding tax, capital gains, and claiming Foreign Tax Credit (FTC) are not uniform: what applies to a US-listed ETF may be very different from a UCITS fund in Ireland or a property in the UK.
The guide to how global stocks and ETFs are taxed for Indian investors covers capital gains, dividends and foreign tax credit in detail.
Does US estate tax apply to investments made under LRS?
It can. If you hold US-listed stocks or ETFs, US estate tax can apply to what your heirs inherit: as a non-resident alien for US estate tax, you get only a $60,000 exemption, and the tax goes up to 40% above that.
Europe-domiciled UCITS ETFs are not US-situs assets, which is one reason many Indian investors prefer them. The guide to US estate tax for Indians covers the rules and ways to reduce the risk.
About Paasa
Paasa is a global investing platform for Indian residents and NRIs. It gives you direct access to stocks on their home exchanges in the US, Canada, the UK, Germany, France, Switzerland, the Netherlands, South Korea, Japan, Hong Kong and Singapore, along with ETFs and UCITS funds.
- LRS and FEMA handled: the remittance paperwork for your investment account is prepared for you, and every INR transfer is tracked for your return.
- India-ready tax reports: capital gains, dividends, TCS and Schedule FA workings for your global portfolio, through Paasa's tax tool.
- UCITS ETFs and mutual funds: buy UCITS ETFs and UCITS mutual funds in any trading currency, with a dedicated relationship manager.
