As an Indian investor, you might have heard of the LRS or Liberalised Remittance Scheme that facilitates direct cross-border capital flows and investment. However, did you also know that the LRS sets a limit to buying US stocks? According to LRS, you can remit a maximum of $250,000 annually to buy US stocks.
If you’ve Googled ‘how to invest in the US stock market?’ you must be familiar with the Scheme. With economic liberalisation policies coming into effect from 1990 onwards, the RBI introduced the LRS in 2004 on the recommendation of the Tarapore Committee as the next step to making India an open economy.
Back in 2004, the remittance limit for LRS was $25,000. Given the micro and macroeconomic changes in the country, this limit is now set at $250,000. Thus, resident Indians (including minors) can remit up to $250,000 annually for current and capital account transactions.
Remittances made for buying US stocks come under capital account transactions of the LRS mandate. As such, they are subject to the following rules:
The LRS empowers Indian residents to invest in the US, allowing them to partake in the fruits of a relatively-stable and powerful market. However, most investors question its existence. Here’s why the limit is important:
However, the limit is also set and cannot be altered even if investment proceeds are remitted back to India. Moreover, it also impedes investments of more than $250,000. So, investors looking to remit more funds feel handicapped by the limit.
While the LRS limit’s benefits outweigh its cons, you continue investing in US stocks once you've exhausted the limit with indirect investments like mutual funds and ETFs. However, SEBI has also set an aggregated industry-wide upper limit of $7 Billion for such indirect investments.
No matter how you decide to buy US stocks, the easiest way of doing so is through Fi Money. On this neo-banking app, you can invest in commission-free mutual funds or directly in the raging FAANG stocks through a simple and user-friendly interface.
Yes. Indians can invest in US stocks directly by opening an overseas brokerage account or indirectly via mutual funds and ETFs.
Under the LRS, Indian residents can remit up to $250,000/per financial year to invest in US stocks directly. For the mutual fund route, this limit is an industry-wide aggregated cap of $7 Billion.
You can buy large amounts of shares by following the fractional investment route. Here, you can buy parts of multiple stocks, diversifying your holdings and growing your portfolio.