LRS: how Indians invest in US stocks and what protects them

The Liberalised Remittance Scheme, or LRS, is a facility run by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999. It allows every resident individual, including a minor through a guardian, to send money out of India each financial year for permitted purposes such as travel, study, gifts and investment abroad. As of November 2026, the limit is US$250,000 per person per financial year, which runs from 1 April to 31 March.

Buying shares of a company listed in the United States is one of the permitted uses. An Indian investor cannot simply swipe a rupee card at a US exchange. The money has to leave India through an authorised dealer, which is usually a bank, and arrive in an account that can hold or trade foreign securities. Indian apps that offer US stocks are mostly an easier front door to that same route.

One recent live case is Stockal, a Bengaluru fintech registered with SEBI that lets Indian retail investors buy US stocks and ETFs through partner brokers, where investors have alleged unauthorised sales of their US holdings.

The usual path has four steps. The investor completes KYC with an Indian app and links a bank account. The investor then sends rupees under LRS to a foreign broker or its partner, and the bank converts them into dollars. The foreign broker buys the shares on a US exchange and holds them in custody. When the investor sells, the dollars come back to the investor's account, and the investor is responsible for bringing the proceeds home if the rules require it.

• Onboarding: KYC and an LRS declaration, including a statement of the purpose of the remittance.
• Remittance: rupees go out through an authorised dealer bank, with the foreign exchange rate and bank charges applied.
• Purchase: a registered foreign broker places the order and holds the shares in custody.
• Sale: proceeds are credited in dollars, and gains may be taxable in India.
• Reporting: the investor lists foreign assets in the income tax return.

The ceiling is US$250,000 per financial year for each resident individual, and it covers all permitted purposes together. If a person sends money for travel or a gift and then also invests, the total counts against the same limit. A family of four can therefore send much more than one person, because each member has a separate limit, but each person's declaration has to be genuine.

LRS is not meant for every kind of money transfer. Some transactions are barred or restricted, such as remittances for margin trading or certain speculative uses. A company, a partnership or a startup cannot use LRS. Those entities use a different set of rules, the Overseas Investment Rules, 2022, which apply to overseas direct investment by Indian businesses.

Tax collected at source, or TCS, is a tax a bank deducts when it sends money abroad. It is not an extra cost in the end, since it appears in the investor's tax statement and can be adjusted against tax owed or claimed as a refund. It does tie up cash for a while.

Rates have changed several times in recent years, so the current figures must be checked. As of November 2026, bank and tax sources describe the position for investment remittances as no TCS up to ₹10 lakh in a financial year and 20% on the amount above that. Remittances for education and medical treatment have lower rates. The tax provisions moved into the Income-tax Act, 2025, which applies from 1 April 2026, so the section numbers differ from older articles.

• Annual LRS limit: US$250,000 per person.
• TCS on investment remittances: nil up to ₹10 lakh a year, 20% above, as described in bank guides for 2026.
• The 20% TCS is a collection in advance, not a final tax.
• Capital gains on foreign shares are taxed in India as per the holding period rules, and a foreign tax credit may be available.

Several regulators each cover a slice. The RBI and the government control the money leaving the country through FEMA and the LRS directions. The Securities and Exchange Board of India (SEBI) regulates Indian intermediaries that act as advisers, distributors or brokers for Indian investors, but its power over a US-listed share itself is limited. The foreign broker is regulated in its own country, in the US mainly by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

An app may also use the International Financial Services Centre at GIFT City, where some Indian brokers run foreign-securities accounts under IFSCA rules. The structure behind each app differs, so it is worth reading who holds the shares and in whose name.

A gap can appear between these regulators. When something goes wrong between an Indian app, its partner and a foreign custodian, each regulator may say the problem sits in another jurisdiction. This is the part of the system that headlines on unauthorised trades keep returning to.

Three layers of protection exist. First, a US broker is normally a member of the Securities Investor Protection Corporation, which can restore assets if the broker fails, up to a cap. It does not cover a fall in the share price. Second, a registered Indian intermediary must follow SEBI conduct rules, keep records and handle complaints. Third, the investor has ordinary legal remedies, such as a complaint to the app, to SEBI's complaints system, to an ombudsman or to a court.

None of these layers protects against a fall in price, a currency move, or a loss caused by the investor sharing a login. Two-factor authentication, a unique password and a check of account activity remain the investor's job.

Most charge a mix of a flat or per-trade fee, a currency conversion margin and sometimes a subscription. Some earn a share of the foreign broker's fees. The conversion margin can matter more than the visible fee, because every rupee sent and every dollar returned passes through it. Comparing the effective rate against the market rate on a small test remittance reveals the real cost.

Sections on how Indian discount brokers earn show a similar pattern, with low headline fees and income from other services.

A headline on US stocks can mean different things. Check whether the story is about a limit, a tax change, a broker failure, a fraud claim or a regulator order, and who is quoted as saying what. An allegation is not a finding, and a regulator's notice is not a penalty. Look for the name of the foreign custodian, the Indian entity involved and the date of the first complaint.

This page explains the system in general terms. Rates, limits and rules change, so confirm them with a chartered accountant or a SEBI-registered adviser before sending money.