Indian Investors Turn to LRS for US IPOs as $7 Billion Overseas Fund Cap Bites
Updated
Updated · Rediff.com · Jun 17
Indian Investors Turn to LRS for US IPOs as $7 Billion Overseas Fund Cap Bites
3 articles · Updated · Rediff.com · Jun 17
Summary
SpaceX, Anthropic and OpenAI have intensified Indian demand for overseas investing platforms, but investors using the LRS route are unlikely to get direct US IPO allocations and may need to wait until listing.
The shift is being driven partly by domestic constraints: Indian mutual funds face a $7 billion overseas-investment cap and a separate $1 billion overseas-ETF cap, with many fund houses shut to fresh money.
Some India-listed international ETFs are trading 20%-25% above net asset value, while direct foreign investing offers access to sectors such as AI, semiconductors and EVs that are underrepresented in India.
The route carries hurdles including remittance paperwork, tax filing complexity and extra costs; gains held over 24 months are taxed at 12.5%, while remittances above Rs 10 lakh trigger 20% TCS.
Advisers say the approach best suits larger, risk-tolerant investors with horizons beyond 24 months, who should check broker regulation, SIPC protection, tax-reporting tools and foreign-asset disclosure support.