What is the LRS limit for investing in US stocks?
Under the Reserve Bank of India’s Liberalised Remittance Scheme, resident individuals can remit up to US$250,000 per financial year, from April 1 to March 31, for permitted transactions, including overseas investments, subject to applicable regulations.
The limit is cumulative across eligible remittances during the financial year. Money sent abroad for buying US stocks, along with other remittances covered by LRS, may count towards the same annual ceiling.
How does the ₹10 lakh TCS threshold work?
Under the rules applicable from April 1, 2025, TCS generally applies at 20% on the amount exceeding ₹10 lakh in a financial year for LRS remittances other than specified education and medical treatment purposes. Overseas investments, including purchases of US-listed shares, generally fall within this category.
For example, if an investor remits ₹12 lakh to purchase US stocks during a financial year and has made no other relevant LRS remittances, TCS would generally apply to the excess ₹2 lakh.
At a rate of 20%, the TCS would amount to ₹40,000.
|
Particulars |
Amount |
|---|---|
|
Total annual remittance |
₹12,00,000 |
|
TCS threshold |
₹10,00,000 |
|
Amount attracting TCS |
₹2,00,000 |
|
TCS rate |
20% |
|
Total TCS payable |
₹40,000 |
If qualifying remittances do not exceed ₹10 lakh during the financial year, TCS would generally not apply under this provision. The calculation must account for the aggregate eligible remittances, rather than transfers made through a single investment platform.
Is TCS an additional tax?
TCS is generally a tax credit rather than a separate final tax on the investment. Investors can claim the amount collected against their income-tax liability while filing their income-tax returns, subject to applicable rules and the credit reflected in their tax records.
If the TCS paid exceeds the final tax liability, the excess may be claimed as a refund. However, investors should account for the temporary cash-flow impact because the amount is collected at the time of remittance and may be recovered only later through the tax-return process.
What else should investors consider?
Apart from TCS, investors should factor in brokerage, foreign-exchange conversion costs, applicable regulatory fees and taxes. They should also retain remittance documents and check their tax-credit records before filing returns.
The key distinction is that the US$250,000 LRS limit governs annual remittances, while the ₹10 lakh threshold determines when TCS generally applies. Understanding both can help investors estimate the upfront cost of buying US stocks without confusing tax collection with their final income-tax liability.