How Do You Invest Abroad from India Under the LRS? Limits, TCS and Tax Explained

By Chirag Jain, Director of Research and Client Relations, Northbridge Wealth (ARN-41379). Last updated: October 2026.

A resident Indian individual can send up to USD 250,000 abroad each financial year under the Liberalised Remittance Scheme (LRS) and put it into foreign shares, ETFs, bonds and funds. For investment, no tax is collected at source on the first ₹10 lakh. Above that, your bank collects TCS at 20%. TCS is a prepayment of your own tax, not an extra levy. Foreign shares are taxed at 12.5% after 24 months, and the ₹1.25 lakh exemption that Indian equity LTCG enjoys does not apply to them.

Key takeaways

What is the Liberalised Remittance Scheme?

LRS is the RBI framework that lets a resident individual send foreign exchange abroad without case-by-case approval. The limit is USD 250,000 per financial year, April to March. It covers current and capital account transactions together, and it counts all foreign exchange you buy or remit from any source in India during the year. At an illustrative ₹95 per USD, that is about ₹2.375 crore.

Three details catch people out. PAN is mandatory. Minors are eligible, with the natural guardian countersigning the declaration. And once the full limit is used, no further remittance is allowed that year, even if investment proceeds come back to India.

The scheme is not available to companies, partnership firms, HUFs or trusts.
https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=1834

What can you invest in under LRS?

Permitted uses include foreign stocks, ETFs, bonds and mutual funds, and investments in GIFT City. The same USD 250,000 also covers education, medical treatment, travel, gifts and support of close relatives. A child’s overseas tuition therefore uses up the same limit as your portfolio.

Some uses are barred. Crypto and other virtual digital assets are not a permitted asset class. Margin trading, margin calls and forex trading on margin are out. So are lotteries, online gambling, and investment in a foreign entity that trades in real estate.

How much TCS is charged on an LRS remittance for investment?

Your bank collects tax at source when you remit. For FY 2026-27, the rates are as below.

The ₹10 lakh threshold is cumulative per PAN per financial year across all LRS purposes. Tour packages sit outside it.

Worked example. Assume the whole remittance is for investment and you use LRS for nothing else that year. Bank charges and exchange-rate spreads are ignored.

At the full limit, TCS alone is ₹45.5 lakh. That is a large amount to have parked with the tax department.

Is TCS an extra cost or is it refundable?

In most cases it is a prepayment, not a cost. The amount appears as a credit in Form 26AS and your AIS. When you file your return, you set it against your total tax liability. If TCS exceeds the tax you owe, the excess is refunded after the return is processed. Someone who expects a large mismatch can apply to the Assessing Officer in advance for a lower or nil deduction certificate.

The cost is liquidity. Take an investor with ₹40 lakh to remit and ₹5 lakh of tax due for the year. TCS is ₹6 lakh. It more than covers the tax, and the ₹1 lakh balance comes back only after processing, months later. The threshold resets each financial year, so the size and timing of remittances matter. That is a point to settle with your tax professional before you remit, not after.

How are foreign investments taxed in India?

Foreign shares are treated like unlisted securities for Indian tax. The holding period is longer, and the exemption is missing.

Treatment of foreign ETFs and funds can differ from direct shares. Worked example. You invest ₹30 lakh abroad and sell after three years for ₹45 lakh, both figures converted to rupees. The gain is ₹15 lakh. Figures are before surcharge and cess, and assume no other equity LTCG uses the exemption that year.

The gap is ₹15,625, which is ₹1.25 lakh at 12.5%. Small in rupees, but it surprises people who assumed the exemption travels with them. Also note that a weaker rupee raises the rupee value of a foreign asset, and the tax on that rise. https://northbridgewealth.in/capital-gains-tax-mutual-funds-india-2026/

What must you report after investing abroad?

Residents other than not ordinarily resident (RNOR) must disclose foreign assets in Schedule FA. The reporting period is the calendar year, January to December, not the financial year. Disclose every foreign account, including dormant ones with zero balance, and assets such as RSUs or ESOPs in the year of vesting. The Black Money Act carries a penalty of ₹10 lakh per year for an undisclosed foreign asset. https://wm.incometaxindia.gov.in/w/schedule_fa

What do investors get wrong most often about LRS?

Three things, in the order we see them.

One: assuming the ₹1.25 lakh exemption applies to foreign gains. It does not, and the ₹15,625 gap above is the result.

Two: forgetting the limit is shared. A family that sends USD 100,000 for a child’s tuition has USD 150,000 left for everything else that year, not USD 250,000.

Three: treating TCS as lost money. It is not, but it is idle money. The investors who feel it are those with modest annual tax and a large remittance. https://northbridgewealth.in/hni-tax-efficiency-india/
Indian mutual fund schemes that invest overseas do not use your LRS limit. Their tax follows the fund’s own classification.

How we help with this

Northbridge Wealth is a registered mutual fund and SIF distributor, drawing on 26 years in Indian markets, and we help clients understand how international investing through LRS works, assess whether it fits their broader portfolio, choose products aligned to their goals, and handle the execution and servicing that follows. https://invest-global.org/key-global-services/

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Frequently asked questions

What is the LRS limit for FY 2026-27?

USD 250,000 per resident individual per financial year, counted across all permitted purposes together.

Can I buy US stocks under LRS?

Yes. Foreign stocks, ETFs, bonds and mutual funds are permitted, subject to the limit, TCS above ₹10 lakh and Schedule FA reporting.

Is TCS under LRS refundable?

It is a credit against your tax. Claim it when you file. If it exceeds your liability, the excess is refunded after processing.

Can my company or HUF remit money abroad under LRS?

No. LRS is for resident individuals. Companies, partnership firms, HUFs and trusts are outside it.

Do I get the ₹1.25 lakh exemption on foreign stock gains?

No. The ₹1.25 lakh exemption applies to Indian equity LTCG. Foreign shares held over 24 months pay 12.5% on the full gain.

Do I need to report foreign investments in my return?

Yes, if you are a resident other than RNOR. Use Schedule FA, on a calendar-year basis, and include zero-balance accounts.

Disclaimer: Northbridge Wealth (Suskan Finmaart Private Limited) is an AMFI-registered Mutual Fund Distributor (ARN-41379). This article is for information only and is not investment, tax, or legal advice. Tax rates and rules are as understood at the time of writing and may change; treatment depends on your individual circumstances. Please verify current rules and consult a tax professional before acting. Mutual fund and market investments are subject to market risks; read all scheme-related documents carefully. Please consider your own situation before investing.

All figures are illustrative calculations based on stated assumptions and are not projections, forecasts, or guarantees of returns.