Introduction
As global markets become more accessible, many Indians are choosing to invest in US stocks from India to diversify their portfolios. However, investing internationally is not just about selecting the right stock—it’s equally about understanding legal and regulatory obligations.
This article outlines the legal and regulatory framework that governs US stock investment from India, helping you invest with confidence and compliance.
1. Is It Legal to Invest in US Stocks from India?
Yes, it is completely legal for Indian residents to invest in US equities.
This is made possible under the Liberalised Remittance Scheme (LRS) by the Reserve Bank of India (RBI). It allows Indian residents to remit up to $250,000 per financial year for permitted purposes, including foreign investments.
Therefore, when you invest in US stocks from India, you’re doing so within a fully authorized and government-approved framework.
2. What Is the Liberalised Remittance Scheme (LRS)?
The LRS is the backbone of legal cross-border investing. Key points include:
- Annual limit: $250,000 per person per financial year
- Purpose: Investment, education, travel, etc.
- Route: Money must go through authorized dealers or banks
You’ll need to complete KYC formalities and fill out the necessary LRS forms before sending funds to your international brokerage account.
3. SEBI Guidelines and Your Responsibilities
Though you’re investing in foreign markets, the Securities and Exchange Board of India (SEBI) still plays a role. SEBI has regulations for Indian brokers who offer international investment services.
As an investor, your responsibilities include:
- Ensuring funds are sent through proper LRS-compliant channels
- Reporting foreign holdings in your tax returns
- Avoid schemes that promise guaranteed returns without appropriate licenses or regulatory oversight
4. International Brokers and Compliance
Many platforms offer access to the US stock market for Indian investors. Some Indian brokers have tie-ups with US brokers. If you choose a US-based platform directly, you must still remit funds via the LRS route.
Make sure the broker is:
- Registered with a regulatory authority (e.g., FINRA in the US)
- Transparent about fees and tax compliance
- Providing comprehensive documentation required for Indian tax filing and compliance
This ensures your US stock investment from India remains above board.
5. TCS (Tax Collected at Source) on Foreign Remittance
Since 2020, the Indian government has introduced a TCS of 5% on foreign remittances above ₹7 lakh in a financial year under LRS. This is not a tax on your investment—it’s a tax advance. You can claim it as credit when filing your income tax return.
For example, if you remit ₹10 lakh in a year, 5% of ₹3 lakh (the amount above ₹7 lakh) is collected as TCS.
6. FATCA Compliance and Reporting
FATCA (Foreign Account Tax Compliance Act) is a US regulation that affects global investors.
Indian investors opening a US brokerage account must:
- Submit a W-8BEN form (declares you’re not a US citizen or resident)
- Ensure FATCA compliance through your Indian bank or brokerage partner
This form ensures you’re taxed correctly on dividends and that your information is reported properly between US and Indian authorities.
7. RBI and FEMA Regulations
The Foreign Exchange Management Act (FEMA) governs all foreign exchange transactions from India. The RBI, under FEMA, allows foreign equity investments like US stocks—but with certain conditions:
- No investment in margin trading or derivative products in foreign markets
- Investments must be in equity (stocks, ETFs, etc.), not leveraged products
- All investments must be routed through RBI-authorized dealers, such as banks or SEBI-regulated brokers
Violating FEMA norms can attract penalties, so make sure your US stock investment from India stays within guidelines.
8. Reporting Foreign Investments in India
It’s mandatory to report your foreign assets when filing your income tax return:
- Use Schedule FA (Foreign Assets) in ITR-2 or ITR-3
- Report details of stocks, dividends, and capital gains
- Maintain records of all remittances and broker statements
Non-disclosure may result in strict penalties under India’s Black Money (Undisclosed Foreign Income and Assets) Act.
9. Protecting Yourself Legally
Follow these best practices to protect your investment legally:
- Always use RBI-approved remittance routes
- Avoid unregistered brokers or apps offering US stock access
- Maintain secure records of all remittance receipts, broker statements, and W-8BEN documentation
- Consult a financial advisor or CA to stay compliant
By following the law, you protect your capital and reputation while investing overseas.
Conclusion
While it is entirely legal to invest in US stocks from India, it is important to understand and follow the regulatory requirements carefully. From remitting funds through the LRS to filing taxes correctly, your responsibilities are clear. Regulatory bodies like the RBI, SEBI, and FEMA offer the framework – and as long as you operate within it, your US stock investment from India can grow securely and legally.
Stay informed and compliant, and your US stock investment from India will be both secure and rewarding.