Global investing is no longer reserved for high-net-worth individuals. In 2025, even average Indian investors are increasingly exploring opportunities abroad — whether in US stocks, global ETFs, or international mutual funds. Diversifying globally can reduce risk and enhance long-term returns, but it also brings specific tax and reporting obligations that must not be ignored.
1. How Can Indians Invest Abroad?
The Liberalised Remittance Scheme (LRS) by the Reserve Bank of India allows resident individuals to invest up to USD 250,000 per financial year in foreign assets.
You can invest globally through:
- International brokerage platforms such as INDmoney, Vested, or Groww Global.
- Indian mutual funds that invest in foreign markets via Funds of Funds (FoFs).
- Global ETFs or index funds tracking international indices.
While the process is simple, you must remember that income and gains from these investments are fully taxable in India.
2. Tax on Foreign Investments
When you invest directly in international equities or ETFs, the taxation rules depend on the nature and duration of your holdings.
a. Capital Gains Tax
- Short-Term Capital Gains (STCG): If you sell shares or ETFs within 24 months, gains are treated as short-term and taxed at your applicable income-tax slab rate.
- Long-Term Capital Gains (LTCG): If held for more than 24 months, the gains qualify as long-term and are taxed at 20% with indexation benefit.
For foreign mutual funds, the same rules as debt mutual funds apply in India — meaning all gains are added to your income and taxed at slab rates (no indexation benefit).
b. Dividends from Foreign Stocks
Dividends received from foreign companies are also taxable in India under the head “Income from Other Sources”. They are taxed at your marginal slab rate, unlike Indian dividends which may have concessional treatment.
However, many foreign countries deduct withholding tax before paying dividends. For instance, the US withholds 25% tax on dividends paid to Indian residents.
3. Using DTAA to Avoid Double Taxation
India has signed Double Taxation Avoidance Agreements (DTAA) with several countries, including the US. This ensures that income taxed abroad is not taxed twice in India.
If foreign tax has already been deducted, you can claim credit for that tax while filing your Indian Income-Tax Return (ITR). For example, if the US withholds 25% on dividends, and you fall under the 30% tax bracket in India, you only need to pay the remaining 5% here after claiming DTAA credit.
4. Mandatory Reporting in ITR
Every Indian resident holding foreign assets or earning foreign income must disclose these details in their ITR under Schedule FA (Foreign Assets).
This includes:
- Bank accounts abroad
- Shares, ETFs, or mutual funds held overseas
- Any foreign income received
Failure to disclose these details can attract penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. Hence, proper compliance is essential.
5. TCS under Liberalised Remittance Scheme (LRS)
From October 1, 2023, a Tax Collected at Source (TCS) is applicable on outward remittances:
- 20% TCS on most foreign investments under LRS.
- 5% TCS for remittances towards education or medical expenses.
This is not an additional tax. You can claim credit for it while filing your ITR, similar to TDS.
6. Key Takeaways
- All global income is taxable in India, regardless of where it is earned.
- STCG and LTCG on foreign shares follow the 24-month rule.
- Dividends are taxed at your income-tax slab rate.
- Use DTAA benefits to avoid paying tax twice.
- Always report foreign assets in your ITR to stay compliant.
- Keep track of TCS deductions when remitting funds abroad.
Conclusion
Investing abroad offers Indian investors a chance to tap into global growth stories — from Silicon Valley tech giants to European blue-chips. But understanding the tax implications is crucial to ensuring those returns are not eroded by penalties or double taxation.
With careful planning, proper documentation, and awareness of DTAA provisions, you can make global investing a seamless part of your wealth-building strategy in 2025.
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