US stocks from India

The plain answer

You can invest in US stocks from India, legally and through regulated routes, but the shares never sit in your Indian NSDL or CDSL demat account. The two practical routes are LRS-enabled international platforms, where a US custodian holds the shares, and the GIFT City route, where depository receipts sit in a separate international demat account. Everything else on this page follows from that structural fact.

The numbers that frame the decision: remittances run under a $250,000 per person per financial year limit. Remittances above ₹7 lakh in a year attract 20% tax collected at source, which is creditable against your tax. US share holdings of over 24 months are taxed at 12.5% without indexation on sale, and the holdings are reported as foreign assets in Schedule FA of your return regardless of size.

This page works through the framework, the two routes, the exact steps, the taxes, and one exposure most Indian investors only learn about late: US estate tax. DematOpen is an Authorized Person of Upstox and does not provide investment advice.

Who each route suits is a mechanics question, not a quality question. The LRS platforms serve people who want the full US market, fractional shares and an app they already know; the GIFT City route serves people who want their ownership in a demat ledger they can see. Both charge for the plumbing, both settle in the same time zones, and both leave the Indian tax and reporting obligations exactly where they started: with you.

The LRS framework

The Liberalised Remittance Scheme is the RBI framework that lets resident individuals send money abroad for permitted current and capital account purposes, including buying listed overseas securities. The limit is $250,000 per individual per financial year, April to March, and it is shared across everything you remit: foreign travel, education, gifts, property purchases and stock investments all draw from the same pool.

Every remittance runs through your own bank account with an authorised dealer bank, under a Form A2 declaration. The bank converts rupees at its card rate, so the forex spread is part of the cost of every purchase and every eventual sale, and retail spreads are wider than the wholesale rates institutions get.

Remittances above ₹7 lakh in a financial year attract tax collected at source at 20%. TCS is not an extra tax: the amount sits as a credit in your Form 26AS and offsets your final tax bill, or refunds if you have no liability. What LRS does not allow matters as much as what it allows, because the scheme is built for investing, not speculation.

• Allowed: listed equity and debt of overseas companies, including US stocks, ETFs and mutual funds, plus overseas bank accounts, property, education and gifts within the same $250,000 pool.
• Not allowed: margin trading on overseas positions, leveraged foreign exchange products, and remittances to entities the RBI has flagged.
• One pool: the limit is per person, not per purpose. A heavy travel year directly reduces what is left for stocks.

Tracking the pool is straightforward: every remittance shows in your bank records, the TCS shows in Form 26AS, and the financial year resets the counter every April. The limit is a ceiling, not a target, and exceeding it is not a paperwork detail, because remitting beyond the scheme makes the transfer non-compliant under FEMA. The discipline that works is the same one used for any budget: know what the year has already consumed before you add to it.

The process, step by step

Opening takes the KYC you already know: PAN, Aadhaar and a video check. The genuinely foreign part is the W-8BEN, the US tax form where you certify non-US status and claim the India-US treaty, which cuts US withholding on dividends from the default 30% to 25%. Without the form, the platform applies the default rate.

Funding runs under LRS through your own bank account. Transfers take one to three working days, and the dollar balance that lands in the platform is what your buy orders draw on. Trading happens in US market hours, which fall in the evening for India: roughly 7:00 pm to 1:30 am IST during US summer time and an hour later in winter. The US moved to T+1 settlement in May 2024, so a filled order settles the next US business day with the custodian.

From then on the flow repeats: dividends land in the platform account, statements show every position, you either keep the dollars or pull them back to India through another LRS conversion, and every holding lands in Schedule FA at filing time. The platform handles custody and withholding; the Indian reporting obligations stay with you.

Two operational details complete the sequence. First, fractional shares: several LRS platforms let you buy a dollar amount rather than whole shares, so a $100 order in a $380 stock still executes. Second, dividends: the 25% treaty withholding applies before the money reaches you, and you choose at the platform level whether dollar dividends stay in the account or convert and return to India. Every conversion is another LRS remittance event, which is worth remembering when the year-end totals are checked against the limit.

The two practical routes

On the LRS platforms, a partner US broker, commonly DriveWealth or a comparable FINRA-regulated custodian, holds the securities in an omnibus account, with your holdings tracked at the platform level. Custody sits in the US, statements come from the platform, and SIPC protection covers a broker failure in the US, which protects against custody failure, not against market prices falling.

The GIFT City route runs through the NSE International Exchange in Gujarat International Finance Tec-City, where US shares convert into depository receipts held in your own demat account maintained with the international depositories. Ownership sits in your name in a demat ledger, which is the structure closest to the Indian demat experience, at the cost of a narrower stock list than the full US market. Both routes are regulated; they differ in custody and coverage, not in legality.

The cost structure in a concrete frame: on a ₹5,00,000 remittance, a 1.5% round-trip forex spread across the buy and the eventual sale conversion is about ₹7,500, before any platform fees. That spread is the largest cost in the direct route and the one that never appears as a line item, because it hides inside the conversion rate. Comparing platforms on the spread, not just on the headline account fee, is where the real price difference lives.

Why not your Indian demat

The Indian demat system settles Indian-listed securities. A US share settles in the US through DTCC and a US custodian, under US law, with US tax documentation. The two systems do not connect at the custody layer, which is why every route into US stocks builds its own custody: an omnibus account abroad, or depositary receipts in the international jurisdiction.

The distinction to keep straight is depository versus custodian. NSDL and CDSL hold Indian securities and settle them against Indian exchanges through Indian clearing corporations. A US custodian holds US securities for a platform and settles them against US exchanges through DTCC. Your Indian demat account has no pipe into the US settlement system, and no amount of paperwork changes that.

The answer to the headline question is structural, not a restriction: the demat account holds what Indian depositories can settle, and US shares are not that. Any service that claims your US shares will sit inside your Indian demat account is describing something that does not exist.

The rupee alternatives

If you want US exposure without remittances, foreign custody or Schedule FA entries, India-domiciled international funds and fund of funds give it to you in rupees. You invest like in any mutual fund, the fund does the remittance and the custody, and your holding is fund units in an Indian folio or demat, with no foreign asset reporting for the underlying stocks.

The constraint is structural: the industry-wide RBI cap on overseas investment by Indian funds has kept most of these funds closed to new money for years, and the listed international ETFs that remain trade at prices that can sit well above or below their net asset value. The route exists; its constraints are the reason the direct routes remain popular.

The premium question deserves one precise explanation. A listed international ETF has two prices: the NAV of the underlying US stocks it holds, and the exchange price in India. When subscriptions into the fund are capped by the industry limit, demand that cannot flow into the fund flows into the listed units instead, and the exchange price can sit several percent above the NAV. Buying at a premium means you pay more than the basket is worth, which is a real cost with no guarantee of being repaid. The gap is published, so reading it before ordering is the entire defence.

Taxes and reporting

• Capital gains: over 24 months is long-term, taxed at 12.5% without indexation; under 24 months is added to income and taxed at slab. No STT applies to US holdings.
• Dividends: 25% US withholding under the India-US treaty, gross dividend taxed in India at slab, with a foreign tax credit claimed through Form 67.
• TCS: 20% on remittances above ₹7 lakh a year, credited against your final tax.
• Reporting: foreign assets in Schedule FA and gains in Schedule CG of the ITR, regardless of amount.

Dates matter here. The 24-month holding period and 12.5% rate apply to transfers on or after 23 July 2024; sales before that date fall under the older three-year, 20%-with-indexation rules. The platform statements record the dates, and your CA applies whichever regime each trade falls into.

The filing mechanics are concrete: foreign assets sit in Schedule FA of ITR-2 or ITR-3, with the country, the account and the peak balance through the year, and gains sit in Schedule CG. The two schedules serve different rules: Schedule FA reports existence, Schedule CG reports the taxable result. Missing the first while filing the second is the classic filing error on this route, because the platform supplies the gain numbers but nothing supplies the Schedule FA rows except you.

A worked example

You remit ₹5,00,000 under LRS and the bank converts it at ₹83.30 to the dollar, so about $6,000 minus the conversion spread lands in the platform. Because your total remittances for the year stay under ₹7 lakh, no TCS applies on this transfer.

You buy 40 shares of a US company at $150. Twenty-seven months later the price is $200 and you sell for $8,000. Converting back at ₹85 gives ₹6,80,000. The gain is ₹1,80,000. Held over 24 months, it is long-term, taxed at 12.5%: ₹22,500 before any losses or credits. Had you sold at 18 months, the same gain would be short-term and taxed at your slab.

The example exposes the two silent costs: the spread on two currency conversions, and the tax arithmetic of the holding period. Both move with your choices, and neither appears on the broker screen at the moment you buy.

The TCS variant changes the cash flow but not the economics. Say the same year you remit ₹8,00,000 instead of ₹5,00,000. TCS applies at 20% on the amount above the ₹7 lakh threshold, so ₹20,000 is collected at the transfer, ₹8,20,000 leaves the bank, and the ₹20,000 sits as a credit in Form 26AS against your final tax. The credit is the point: TCS shifts the timing of tax, not its size, and the shift is the piece that shows up as a surprise cash requirement only if the credit is forgotten.

The US estate tax exposure

The least discussed cost of direct US investing is US estate tax. The US taxes US-situs assets, including US-listed shares, in the estate of a non-resident. Because India and the US have no estate tax treaty, Indian residents get only a $60,000 exemption, and assets above it face US estate tax at graduated rates from 18% to 40%.

The mechanics: the executor files US Form 706-NA within nine months of death, and the tax runs on the value above the $60,000 exemption. The India-US treaty covers income tax, not transfer taxes, so there is no credit to claim in India. This is neither a reason to avoid US stocks nor a reason to ignore the topic; it is a structural fact of the route.

What people usually get wrong

Questions people ask

Sources

• Reserve Bank of India. Liberalised Remittance Scheme documentation. Accessed 16 August 2026.
• Income Tax Department. Capital gains taxation FAQs, post-July-2024 rules. Accessed 16 August 2026.
• Financial Express. “Up to 40% tax on US stocks? The hidden $60,000 estate tax trap many Indian investors overlook.” Accessed 16 August 2026.