The LRS explained: how Indians invest USD 250k/yr abroad

If you live in India and you want to buy a single share of an American company, the door you walk through is called the Liberalised Remittance Scheme. It's the RBI rule that lets resident individuals send money abroad for permitted purposes — including buying foreign stocks.

This post is the working version of what the LRS means in 2026, not the formal one.

The headline numbers

What is often the binding constraint is TCS (Tax Collected at Source):

• The first ₹10 lakh per year of LRS remittances for investment is TCS-free.
• Anything above ₹10 lakh attracts 20% TCS at the time of remittance.

TCS is not a tax. It's a credit you'll claim back when you file your ITR. But it does park your money with the government for several months, which is annoying if you're trying to deploy it.

The mechanics

You don't transact with the RBI directly. The flow looks like this:

1. You open a US brokerage account — directly with Interactive Brokers, or via an Indian platform like Vested or INDmoney that opens an account at a partner US broker.
2. You move INR from your Indian bank to the broker, using Form A2 (the LRS declaration).
3. Your bank converts INR to USD and credits the brokerage account.
4. You buy shares.

Form A2 asks you to declare the purpose of the remittance ("Investment in equity / debt") and confirm you haven't exceeded the USD 250,000 limit across all sources this year. If you've remitted from another bank for a separate trip or course already, count it.

Where most people get tripped up

Schedule FA. If you hold any foreign asset at any point during the financial year — including a single share of AAPL — you must disclose it in Schedule FA of your ITR. Skipping this is treated extremely seriously under the Black Money Act. If you remit money to a US brokerage, you have a Schedule FA obligation. Period.

Dividends. US-listed companies withhold dividends at 25% under the US-India treaty (provided you've signed a W-8BEN). That 25% is a foreign tax credit you can claim in India via Form 67 — but only if you file Form 67 before your ITR. Miss the deadline, lose the credit.

Capital gains. Gains on US stocks are taxed in India as unlisted foreign equity:

• Long-term (held > 24 months): 12.5% (post Budget 2024) plus surcharge and cess, with indexation no longer available.
• Short-term (held ≤ 24 months): your slab rate.

Note that "long-term" is 24 months for foreign equity, not 12 months like Indian listed shares. Lots of people get this wrong.

So is the LRS worth using?

For most working Indian professionals: yes, with caveats.

You get access to the world's deepest capital market, the best tech companies, and a natural rupee hedge. The cost is paperwork (Form A2 once per remittance, Schedule FA once per year, Form 67 if you have dividends), TCS drag above ₹10 lakh, and the meaningful capital gains tax.

What you should not do is treat your US portfolio like trading capital. The friction — TCS, brokerage FX spreads, Indian tax treatment of short-term gains — punishes high turnover. The LRS rewards a multi-year, ETF-heavy, low-touch approach.

Future posts will dig into the brokerage comparison, the W-8BEN, and how to structure a US portfolio that doesn't generate paperwork hell at year-end.