US stocks from India: the LRS limit, TCS on the remittance and tax when you sell (2026-27)

Three separate sets of rules apply when you buy US shares from India. The RBI's Liberalised Remittance Scheme (LRS) caps how much you can send abroad. The Income-tax Act, 2025 makes your bank collect tax (TCS) when the money goes out above a threshold. The same Act taxes your long-term gain when you sell. This post takes each one in turn for financial year 2026-27, with one investor's numbers so you can check every step.

The LRS limit: how much you can send

RBI's FAQ says all resident individuals, minors included, can freely send up to USD 2,50,000 per financial year (April to March). The money can go to any permitted current or capital account transaction, or a mix of both. The scheme is not open to corporates, partnership firms, HUFs, trusts and similar entities. You must give your PAN for every LRS transaction. There is no limit on how many times you send money. But everything you send or buy in foreign exchange in a financial year, from all sources in India, has to stay within USD 2,50,000 in total. Once you have used the full limit, you cannot send more that year, even if you bring your investment money back to India.

Source: RBI, FAQs on the Liberalised Remittance Scheme (updated 6 April 2023), Q1, Q2, Q7, Q8

A few rules in the same FAQ matter directly to share investors. LRS money cannot be sent to pay margins or margin calls to overseas exchanges or counterparties. RBI sets no rating or quality rules for what you buy, but the investment must follow the Overseas Investment Rules and Regulations, 2022. Family members can combine their limits in general, but not for investments unless they co-own the investment. You can keep and reinvest the income your investments earn. Foreign exchange you receive, realise or leave unused has to be repatriated and surrendered to an authorised person within 180 days unless you reinvest it. As of November 2026, RBI's Master Direction on the LRS (updated as on 6 September 2024) still sets the limit at USD 2,50,000 per financial year and the same 180-day rule. Confirm both with your bank before you send.

Source: RBI, FAQs on the Liberalised Remittance Scheme (updated 6 April 2023), Q2, Q4, Q5, Q15

Source: RBI, Master Direction - Liberalised Remittance Scheme (LRS), updated as on 6 September 2024: USD 2,50,000 per financial year; 180-day repatriation

The limit is set in dollars. What it comes to in rupees depends on the exchange rate on the day you send the money. The RBI states it only in dollars.

TCS: what your bank collects when the money goes out

Section 394 of the Income-tax Act, 2025 sets the rule (Table, entry 7). The authorised dealer, which is your bank, collects tax at source on LRS remittances once the amount, or the total for the financial year, goes above ₹10 lakh. The rate is 2% if the money is for education or medical treatment. It is 20% for any other purpose. Buying US shares is neither education nor medical treatment, so the 20% row applies. The bank collects the tax when it debits your account or receives your money, whichever comes first. The 2% rate replaced 5% from 1 April 2026 (Act No. 4 of 2026). The 20% row did not change.

Source: Income-tax Act, 2025, section 394(1), Table entry 7, with footnote 88b (Act No. 4 of 2026, w.e.f. 1-4-2026)

The Budget 2026 papers describe this as cutting TCS on LRS money for education and medical treatment to 2% from 5%, and TCS on overseas tour packages to 2%. They announce no change for LRS money sent for investment.

Source: Ministry of Finance, Budget 2026 Tax Reforms: List & Gist (February 2026), 'TCS Rationalization'

The tax department's TCS rates page explains how the 20% works. No TCS applies if your remittances do not go above ₹10 lakh. For purposes other than education or medical treatment, the page says the bank collects 20% of the amount above ₹10 lakh. The department's TCS guide adds that the ₹10 lakh threshold counts the year's total across all purposes, in the order the money is sent. So if you have already sent ₹6 lakh for a child's fees, only ₹4 lakh of the threshold is left before TCS starts on your share money. The guide explains the old Act's section 206C(1G); the rates page describes the same rule. Two cautions. Section 394 says the rule applies to remittances 'exceeding ten lakh rupees', but it does not say in so many words that the 20% applies only to the part above ₹10 lakh. And the rates page still shows the old 5% rate for education, so it has not been updated for 2026. Read the 'only on the amount above ₹10 lakh' point as the department's explanation, and confirm it with your bank.

Source: Income Tax Department, TCS Rates (uploaded 30 April 2026), Category-4, notes (a) and (b)

Source: Income Tax Department, Tax Collection at Source (TCS) guide, 'TCS on Remittance under LRS': amount on which TCS applies

Worked example: sending ₹15 lakh in financial year 2026-27

The example uses one simple case. A salaried resident has sent no other money under LRS this financial year. She sends ₹15,00,000 in one go to her US broker to buy shares. We assume ₹15 lakh is within USD 2,50,000 at that day's exchange rate; check this with your bank on the day. The sums below assume the 20% applies only to the amount above ₹10 lakh, as the department's rates page explains.

• Amount sent under LRS: ₹15,00,000
• Threshold with no TCS: ₹10,00,000
• Amount above the threshold: ₹15,00,000 − ₹10,00,000 = ₹5,00,000
• TCS at 20%: ₹5,00,000 × 20% = ₹1,00,000
• If she had sent ₹10,00,000 or less in the year: TCS = ₹0
• If she sends another ₹2,00,000 later in the same financial year, the threshold is already used up, so all of it is taxed: ₹2,00,000 × 20% = ₹40,000

Section 394 does not say whether the bank adds the TCS on top of the ₹15 lakh or takes it out of it. Ask your bank before you send, so you know how many dollars will reach the broker.

TCS is not an extra, final tax. The department's TCS guide says you get credit for it once the bank deposits it and files its TCS statement. For overseas remittances, the credit is given in the year the tax was collected. It shows up in Form 168 (earlier Form 26AS). The guide tells you to get a TCS certificate to check it. You cannot apply for a lower TCS certificate on LRS money. So the ₹1,00,000 counts towards her tax for 2026-27; she should check that it appears in her Form 168 (earlier Form 26AS). The guide describes the 1961 Act's rules, so check the credit when you file under the new Act.

Source: Income Tax Department, TCS guide, 'Credit of TCS' and 'Certificate for Collection of TCS at a Lower Rate'

Tax when you sell: US shares count as unlisted

Section 197 of the Income-tax Act, 2025 taxes long-term capital gains at 12.5%. For that section, 'listed securities' means securities listed on a recognised stock exchange in India. Everything else counts as unlisted. On that definition, a share listed only on Nasdaq or the NYSE is not listed on an Indian exchange, so it falls on the unlisted side. Section 197(2) also gives resident individuals a relief. If their other income is below the amount that is not taxed at all, the long-term gain is reduced by the shortfall.

Source: Income-tax Act, 2025, section 197(1), (2) and (6)

The holding period decides which kind of gain you have. The tax department's capital gains pages say unlisted equity shares become long-term if held for more than 24 months, against 12 months for listed shares (for sales on or after 23 July 2024). Short-term gains are taxed at normal rates. Long-term gains on sales from 23 July 2024 are taxed at 12.5% with no indexation. The ₹1.25 lakh exemption is only for long-term gains on listed equity shares, equity-oriented fund units and business trust units where STT is paid. A US share is not listed in India, so the exemption does not apply. Brokerage and commission on the sale can be deducted from the gain; STT cannot. The 24-month and 12-month periods and the ₹1.25 lakh limit come from department pages that explain the 1961 Act. We did not read the 2025 Act's own wording on them. The long-term gains page says it explains the 1961 Act as amended by the Finance Act, 2026. The sale-of-shares page does not say which version of the law it reflects.

Source: Income Tax Department, Sale of Shares: holding-period table, tax rates on capital gains, expenditure on transfer

Source: Income Tax Department, Tax on long-term capital gains (1961 Act as amended by Finance Act, 2026): short-term and long-term capital assets, 12.5% rate, health and education cess illustrations

Worked example: selling after more than 24 months

Same investor. Her shares cost ₹15,00,000 in rupees. We assume the full ₹15,00,000 reached the broker, which holds only if the bank collected the TCS on top. If the bank takes the TCS out of the ₹15 lakh instead, only ₹14,00,000 would reach the broker. She sells the shares after more than 24 months for ₹21,00,000 in rupees. To keep the sums simple, we assume no brokerage or other sale costs. The example starts from rupee figures; the conversion of dollar prices into rupees has its own rules, so check the rate your broker's tax statement uses.

Dividends from US shares

Dividends from a US company follow different rules: the US usually keeps back tax before paying you, and you then claim credit for it in India. This post covers the remittance and the gain on sale; check the dividend treatment with a tax adviser before you file.

If you'd rather have a CA file it (useful with capital gains, foreign assets or a notice), paid services such as TaxBuddy do assisted filing; the e-Filing portal route costs nothing. (affiliate link: PaisaTools may earn if you sign up; it doesn't change what we write)