The biggest barrier to global investing is not knowing what to buy (we covered ETFs in Module 7), but knowing how to buy it. How do you get Rupees from your HDFC or SBI bank account into a US Brokerage account to buy Apple shares?
The answer lies in an RBI regulation called the Liberalised Remittance Scheme (LRS). Introduced in 2004, this scheme is the gateway for Resident Indians to send money globally. Without understanding LRS, you cannot invest directly in foreign markets.
1. What is the LRS Limit?
Under LRS, every Resident Individual (including minors) can remit up to USD 250,000 per financial year (April to March).
At ₹83/$, that is roughly ₹2 Crores per person per year.
Family Pooling: Since the limit is "per person," a family of four can remit $1 Million (₹8 Crores) per year. This limit covers investing in shares, buying property, travel, and education.
2. The Transfer Process (Step-by-Step)
Sending money abroad involves a few more hops than a domestic UPI transfer. Here is the architecture:
The Platforms: Modern apps like Vested, IndMoney, and Stockal have simplified this. They partner with Indian banks (like SBM Bank or IDFC First) to make the "Form A2" submission digital. You no longer need to physically visit a branch.
3. The TCS Rule (Tax Collected at Source)
This is the most confusing part for new investors. In the Budget 2023, the government increased TCS rates, but after backlash, they moderated it.
Current Rule (As of Oct 1, 2023):
TCS is NOT a tax cost. It is an advance tax. It gets deposited against your PAN. You can claim it back as a refund when you file your Income Tax Return (ITR), or adjust it against your total tax liability.
| Transaction Type | Amount (in Financial Year) | TCS Rate |
|---|---|---|
| Investments / Stocks | Up to ₹7 Lakhs | 0% (Nil) |
| Investments / Stocks | Above ₹7 Lakhs | 20% on excess |
| Education (Loan) | Above ₹7 Lakhs | 0.5% |
| Education (Self) | Above ₹7 Lakhs | 5% |
• First ₹7 Lakhs: No TCS.
• Remaining ₹3 Lakhs: 20% TCS = ₹60,000.
• Total deducted: ₹10.6 Lakhs.
• Impact: You invest ₹10L, but need ₹10.6L liquidity. You get the ₹60k back only next year after filing ITR.
4. The Hidden Costs of LRS
Investing abroad is not free. There are leakage costs you must account for.
Cost Breakdown (Example Remittance: ₹1 Lakh)
Pro Tip: Don't send small amounts like ₹5,000. The fixed wire fee (₹500-1000) will eat 10-20% of your capital. Accumulate at least ₹50,000 or ₹1 Lakh before transferring to minimize the % impact.
5. Regulatory Compliance (Schedule FA)
This is the most critical part. Ignore this at your peril.
If you own even one share of Apple or hold $1 in a foreign bank account, you MUST fill Schedule FA (Foreign Assets) in your Income Tax Return (ITR). This applies even if you have zero income or zero profit from these assets.
- The Risk: Non-disclosure of foreign assets falls under the Black Money Act. The penalty is ₹10 Lakhs per year of non-disclosure, regardless of asset value.
- The Solution: Your broker (Vested/IndMoney) provides a "Tax Report" at year-end. Give this to your CA. Ensure they fill Schedule FA, not just the Capital Gains section.
6. Repatriation (Bringing Money Back)
Bringing money back to India is simpler. You sell your US stocks, the Dollars settle in your US brokerage account. You request a withdrawal. The money is wired back to your linked Indian bank account and converted to Rupees at the prevailing buying rate.
Note: According to RBI rules, if you remit money abroad but do not invest/spend it, you must bring it back within 180 days. Do not let idle cash sit in a foreign bank account for years.
Summary of Module 8
The LRS route empowers you to become a global citizen. While the 20% TCS is a temporary cash flow hurdle for large investors, it should not stop you from diversifying.
Checklist before starting:
1. Have a PAN and Aadhar linked.
2. Open an account with a platform like Vested or IndMoney.
3. Ensure you file ITR strictly (Schedule FA).
Now that the logistics are clear, we must address the risks that are out of your control. Wars, trade bans, and elections. In the next module, we discuss Geopolitical Risks.