India to USA Investment Guide
Navigate LRS limits, FEMA compliance, and DTAA tax treaty for American investment
India Capital Controls Overview
$250K
Annual LRS Limit
20%
TCS on Remittance
15%
Treaty Dividend Rate
DTAA
Tax Treaty in Place
India's LRS limit of $250,000 per financial year (April-March) is one of the more generous limits in Asia, enabling significant USA investment.
Liberalized Remittance Scheme (LRS)
The LRS allows resident individuals to remit up to USD 250,000 per financial year for permitted current and capital account transactions without RBI approval.
Permitted Uses
- Overseas real estate purchase
- Foreign securities investment
- Business investment abroad
- Education expenses
- Medical treatment abroad
- Gifts to relatives abroad
Prohibited Uses
- Margin trading or lottery
- Crypto purchases (currently)
- Countries under FATF blacklist
- Sending to Nepal or Bhutan
- Capital account to Pakistan
LRS Limit Details
| Aspect | Detail |
|---|---|
| Annual limit | USD 250,000 per person per financial year (April 1 - March 31) |
| Family pooling | Each family member has separate limit |
| Purpose clubbing | All LRS uses count toward single limit |
| Minor children | Separate limit applies |
| NRIs | LRS does not apply (different rules) |
A family of four could potentially remit up to $1 million per year legally under LRS.
FEMA Compliance
Foreign Exchange Management Act Requirements
FEMA governs all foreign exchange transactions in India. LRS transactions must comply with FEMA regulations.
Documentation Required
- Form A2 for remittance
- PAN card copy
- Self-declaration of purpose
- CA certificate for tax compliance
- Bank's application form
RBI Reporting
- Banks report all LRS to RBI
- PAN-linked tracking
- Cumulative limit monitored
- Exceeding limit requires RBI approval
TCS on Remittance
Tax Collected at Source (TCS) Rules
Banks must collect TCS on LRS remittances. This is not an additional tax but an advance collection adjustable against your income tax.
| Purpose | TCS Rate | Threshold |
|---|---|---|
| Education (loan from institution) | 0.5% | Above Rs 7 lakh |
| Education (other sources) | 5% | Above Rs 7 lakh |
| Medical treatment | 5% | Above Rs 7 lakh |
| Other purposes (investment, real estate) | 20% | Above Rs 7 lakh |
The 20% TCS on investment remittances is significant. Plan for this cash flow impact and claim credit when filing IT return.
Claiming TCS Credit
TCS is refundable or adjustable against your tax liability when filing income tax return.
To Claim Credit
- TCS reflects in Form 26AS
- Claim credit in ITR
- Excess TCS = refund
- Keep bank remittance receipts
Cash Flow Planning
- Budget for 20% upfront
- Refund takes 6-12 months
- Split across financial years
- Consider timing of investment
Bank Process
Making LRS Remittance
Any Authorized Dealer Category-I bank can process LRS remittances. Major banks have streamlined online processes.
Process Steps
- 1. Submit Form A2 to bank
- 2. Provide PAN and KYC docs
- 3. Self-declare purpose
- 4. Pay TCS (added to remittance amount)
- 5. Bank processes wire
- 6. Receive confirmation
Processing Time
- Same-day for simple cases
- 1-3 days with compliance check
- Wire reaches US in 1-2 days
- Online apps faster (ICICI, HDFC)
India-USA Tax Treaty (DTAA)
Double Tax Avoidance Agreement Benefits
The India-USA DTAA provides reduced withholding rates and mechanisms to avoid double taxation.
| Income Type | Standard Rate | Treaty Rate |
|---|---|---|
| Dividends | 30% | 15% (or 25% for certain companies) |
| Interest | 30% | 15% |
| Royalties | 30% | 15% |
| Capital Gains (securities) | 0% | 0% (non-USRPI) |
File IRS Form W-8BEN with your US broker to claim 15% dividend withholding rate instead of 30%.
Indian Taxation of US Income
India taxes residents on worldwide income. US investment income must be reported and is taxable in India.
Reporting Requirements
- Schedule FA (Foreign Assets)
- Report all foreign bank accounts
- Report foreign stocks held
- Report foreign property
- Disclose income from each
Foreign Tax Credit
- Claim credit for US taxes paid
- Limited to Indian tax on that income
- Form 67 required
- File before ITR due date
Failure to disclose foreign assets in Schedule FA can result in penalties of Rs 10 lakh under Black Money Act.
Recommended Entity Structures
For US Real Estate
Direct Ownership via LLC
- US LLC in property state
- Indian individual as member
- EIN for US banking
- FIRPTA on sale (15%)
- Report in Schedule FA
Considerations
- US estate tax exposure
- $60,000 exemption only
- Consider life insurance
- Trust structures complex
For US Securities Investment
Direct Investment
- Open US brokerage account
- Fund via LRS remittance
- File W-8BEN for treaty rate
- Report in Schedule FA
Popular Brokers for Indians
- Interactive Brokers
- Charles Schwab
- Vested (India platform)
- INDmoney (app-based)
For Business Investment
E-2 Visa Not Available
- India is NOT E-2 treaty country
- Consider L-1 intracompany transfer
- EB-5 for permanent residency
- O-1 for extraordinary ability
Corporate Structure
- Delaware C-Corp for venture
- Indian parent as shareholder
- ODI approval from RBI may apply
- Transfer pricing documentation
Indians cannot get E-2 investor visas. Plan alternative visa strategies for living in USA.
OFAC and Sanctions Compliance
India is not subject to comprehensive US sanctions. Transfers are processed normally with standard OFAC screening.
Review our OFAC Sanctions Screening Guide for compliance information.