Indian Investors interested in investing in shares and assets located outside India can make use of the Liberalised Remittance Scheme (LRS) which allows Indians to invest in shares listed outside India. The Liberalised Remittance Scheme was introduced by RBI in the year 2004 and several amendments have been made to this scheme since 2004.
The maximum limit on investing abroad was earlier $2,00,000 pa. However, with the Indian rupee weakening against most of the currencies, this limit has been reduced from $2,00,000 p.a. to $75,000 p.a. (Refer : RBI Circular No 24 dated 14th Aug)
This limit of $75,000 per annum can be used to remit funds outside India for the purchase of any asset without any prior approval of RBI except the following:-
- Remittance for the purpose specifically prohibited under Schedule I (like purchase of lottery tickets, sweep stakes etc)
- Remittance for purchase of FCCB’s issued by Indian Companies in overseas secondary markets
- Remittance directly or indirectly to Nepal, Bhutan, Mauritius & Pakistan
Moreover, earlier Investments in Immovable Property located abroad was also allowed but is not allowed anymore. Indians are not allowed to remit money outside India for the purpose of purchasing Immovable Property/Real Estate under this scheme.
There is no limit on the frequency of number of remittances. However, the above limit of $75000 also includes remittances for the purpose of gift/loan/donations.
Moreover, there is no such condition that the amount invested abroad has to be brought back to India and therefore the amount which has been invested abroad can be retained and reinvested in overseas assets.
How to invest in Shares to be listed on US Stock Exchange
With IPO’s of many technology companies (like Google, Linkedin, Zynga) doing good after listing on the US Stock exchanges, there is a renewed interest among Indians to invest in IPO’s which are expected to list on the US Stock Exchanges.
IPO’s of many other companies are expected to be launched soon and Indians are allowed to invest in these IPO’s up to the specified limit of $ 75,000 per annum. Indians are not only allowed to invest in IPO’s but can also directly purchase the shares from the stock exchanges in the secondary market.
Many Indian brokerage houses like ICICI Direct, Reliance Money, India Infoline, Kotak Securities etc have tied up with foreign brokerage houses to facilitate investments and trading in international markets. These Indian brokerage houses act as an intermediary between the investor and the foreign brokerage houses.
An investor would first be required to open an overseas trading account for trading in shares listed in the international market. While opening an overseas trading account, the investor would be required to mention the countries in which he would like to invest and then your application would be sent to the brokerage house of that country for registration.
Along with an international trading account, the investor would also be required to open a bank account in the country in which he intends to invest. He would first be required to transfer funds from the Indian bank account to the foreign bank account by furnishing the A2 Form. Once all the formalities are completed and the funds are transferred in the foreign bank account, the investor is ready to start investing and trading in shares listed in countries outside India.