Under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), resident individuals can remit up to $250,000 per financial year, covering investments, travel, education, and medical expenses.
Subho Moulik, founder and CEO of Appreciate, noted that while the framework has eased overseas remittances, the cap can constrain investors seeking larger global allocations. Remittances exceeding ₹10 lakh attract a 20% Tax Collected at Source (TCS), which is adjustable against tax liability but may create short-term liquidity pressure.
Additionally, foreign assets must be disclosed in Schedule FA of income tax returns, with penalties applying for non-compliance.
How cross-border compliance adds complexity
Nikhil Aggarwal, founder and group CEO of Grip Invest, explained that overseas investing involves navigating multiple regulatory frameworks, including India’s FEMA rules and foreign market regulations such as the SEC (US), ASIC (Australia), or FSA (UK).
“Brokers abroad often do not recognize Indian KYC, requiring investors to complete multiple steps—from source-of-fund declarations to account opening—before executing a single trade,” he said.
Operational gaps such as cross-border settlement delays, limited retail derivatives markets, and restricted product availability further complicate direct investing.
Moulik added that platforms like Appreciate are helping investors manage these complexities by integrating KYC, LRS remittance, and tax compliance into a single workflow, significantly reducing friction.
Why tax treaties matter
Moulik emphasised that tax treaties with countries such as the UAE, Japan, and Australia help prevent double taxation.
Under the India–Japan DTAA, dividend withholding is capped at 10% versus Japan’s domestic rate of 15%, with the difference claimable as a foreign tax credit (Form 67) in India. Similar provisions under the India–UAE and India–Australia treaties allow residents to reduce withholding and claim credits, improving post-tax returns.
How investors choose investment routes
Aggarwal noted that international mutual funds or feeder funds simplify compliance and reporting, while India-registered international ETFs keep the entire compliance footprint domestic.
Moulik said direct investing offers more control and broader access to global markets but requires investors to actively manage LRS limits, Schedule FA reporting, Form 67 filings, and currency P&L reconciliation.
Why the US is the preferred gateway
Experts agree that US-listed securities provide Indian investors with broad global exposure under a single regulatory and tax framework. Companies such as Taiwan Semiconductor Manufacturing Company, ASML Holding, Alibaba Group, and MercadoLibre are accessible through US exchanges, allowing investors to consolidate compliance and tax reporting.
Industry participants say that while regulatory and tax obligations remain critical, planning around remittance limits, TCS provisions, and reporting requirements makes overseas investing feasible for disciplined retail investors.
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