Why it matters where your money is invested
Twenty Indian stocks are still one bet
We all invest in what we really know: Indian companies, the rupee, SEBI-registered mutual funds. That’s a safe bet. Yet a portfolio of 20 Indian equities and 4 Indian mutual funds still depends entirely on one economy. If the RBI raises rates, the monsoon fails, or the rupee goes into freefall, pretty much everything you own will feel it at the same time.
Foreign markets won’t always be the saviour. In 2008 and again in March 2020, markets fell almost everywhere at the same time. The benefits are most evident in an ordinary year, when countries move at different paces. A flat year at home can be matched by a good year in the US or Europe, and the net result is a more stable outcome.
No market remains on top for long.
Look at the MSCI index returns in USD terms. 2017: MSCI India up 38.76% vs MSCI World up 22.40%. Two years later, the trend reversed: India was up 7.58% vs the World at 27.67%. In 2025, India was up 2.62% and the World was up 21.09%. No one foresaw those swings, and anyone who moved everything into the previous year’s winner invariably regretted it.
The two indices also differ significantly in the businesses they contain. MSCI India in Sep 2026 had 165 constituents with around 30% in banks and other financials. MSCI World had 1,249 constituents across 23 developed countries and the weighting in technology is much higher. You don’t have an Indian equivalent of Apple, Microsoft, Nvidia or ASML. A global fund will let you own them.
One caveat when looking at returns: check the currency. A US fund that makes 10% in dollars could give you 13% or 14% in rupees if the rupee weakens that year, and less if it strengthens. Fees and taxes are deducted after that.
Linking international money to your goals
If it’s in dollars, then save some in dollars.
Suppose your daughter is planning to study in the US. In 2016, a year’s fees and living expenses of $50k would have been around Rs33.5 lakh (the dollar was around Rs67 then). By late 2025, the dollar was at around Rs88, and the same amount would be Rs44 lakh. The weaker rupee alone adds Rs10.5 lakh to that sum, prior to any increase in US fees.
Keep part of your education fund in dollar assets, and you’re protected. The same principle applies if you plan to retire overseas, support your children overseas, or travel overseas every year. You’re holding your money in the currency you will ultimately spend it in.
As the date gets closer, shift to safety. Two or three years before the fees fall due, move that money out of global equity funds into safer dollar holdings, such as short-term deposits or bond funds. A market crash in the final year then can’t derail the plan.
The risk of a bad year just before you need the money
Financial planners refer to this as ‘risk’, i.e. the market dropping sharply at the very moment you need to sell. Diversification across countries will reduce swings, but a global equity fund is still an equity fund and can drop 30% in a bad year. Money you need in the next 3 years shouldn’t depend on the stock market.
Having two markets also makes rebalancing far easier. Work out your mix in advance (say 80% India, 20% abroad). If you then have a strong US year and the foreign share rises to 26%, you simply sell some and bring it back to 20%. With the rule in writing, you’re not going to be bamboozled by the headlines.
How Indian residents can invest abroad
Most retail investors should begin with an international mutual fund or an international fund of funds from an Indian fund house. You invest in rupees through the app or platform you already use; you can run a SIP, and the fund house handles the foreign side. Those units are Indian assets so they won’t be in the foreign asset section of your tax return.
There’s one caveat. Indian mutual funds as a whole are only permitted to invest $7bn overseas (plus another $1bn via overseas ETFs). Once they hit that cap they cease to take new money. This was very much the case in 2022, and in May 2026 Axis Mutual Fund actually suspended new SIPs into three of its global funds of funds. Always check that the fund you are looking at is open to new SIPs.
The other routes suit larger portfolios or more experienced investors:
| Route | Good for | Watch out for |
|---|---|---|
| International mutual fund or fund of funds (Indian fund house) | Beginners, SIPs, small amounts | Pauses on new money. In a fund of funds you pay both the Indian fund’s fee and the foreign fund’s fee. Returns can lag the index |
| US stocks through an app | Owning a few specific companies | Too much in too few names, currency conversion charges, yearly foreign-asset reporting, US estate tax |
| Foreign-listed ETFs (US or Ireland) | Low-cost, broad exposure | Where the ETF is registered makes a difference: Irish registered funds pay less US dividend tax and are free of US estate tax, remittance costs and reporting. |
| GIFT City (IFSC) platforms | Investing in dollars while staying under Indian regulators | Limited choice of products, platform fees, thinner trading |
| International bonds or bond funds | Dollar income for goals a few years away | Default risk, interest-rate risk, currency movements |
| Foreign property, REITs, private deals | Experienced investors with large portfolios | Hard to sell, local laws, high buying and selling costs |
Building your international allocation
How much should go abroad?
There is no “correct” number. Many Indian financial planners suggest starting with 10% to 25% of your equity portfolio and, of course, going higher if you have big dollar goals. Use that as a guide and adjust it to your own circumstances.
First work out what you already have. RSUs from a US employer, a 401(k) accumulated over years of working overseas, a flat in Dubai etc all count as international exposure. On the other hand, if you only need dollars for one purpose, you can keep most of your retirement pot in India and set up a separate dollar bucket for that purpose.
Step by step
- Write down each goal, the currency you will pay in, when you will need the money and the minimum amount required.
- Add up what you already have overseas (including employer shares and any overseas accounts).
- Pick a range (for example 15% to 20% of your equity) that you could live with in the event of a 30% market fall.
- Pick the route on the basis of its total cost post tax. The expense ratio is only one element of that (see “Count every cost” below).
- Invest via a monthly SIP or fixed transfers rather than a single lump sum. A schedule removes the stress of picking the right day.
- Review once a year. Rebalance if you’ve drifted outside your range and keep every statement for tax purposes.
Rules, tax and reporting
How much you can send abroad
Under the RBI’s Liberalised Remittance Scheme (LRS) a resident individual can remit up to $250,000 abroad in a financial year (April to March). That $250k covers all categories: investment, travel, gifts and education. Your bank will check the purpose prior to the funds being sent.
Watch out for TCS (tax collected at source). From 1 April 2026, the first Rs10 lakh that you send overseas in a year for investments and the like is completely exempt from TCS. Any amount above that is subject to 20% TCS. If you send Rs15 lakh, Rs1 lakh is withheld. You get it back by offsetting it against your tax when you file your return; the money is just effectively ‘stuck’ until then.
Reporting foreign assets: the most expensive mistake.
If you hold foreign shares, foreign ETFs, a foreign bank or brokerage account or property abroad, you must file ITR-2 or ITR-3 and list them all in Schedule FA. That applies even to a Rs5,000 holding in a US stock app. Filing ITR-1 in that situation would be treated as non-disclosure.
The penalty under the Black Money Act is Rs10 lakh per year of non-disclosure. From October 2024, the penalty will not apply if your total foreign assets (excluding property) are below Rs20 lakh, though you will still have to report them. Schedule FA follows the calendar year (Jan to Dec), which catches many people out. If you missed it in prior years, get a CA to advise you on the 2026 foreign asset disclosure scheme for small taxpayers.
How gains and dividends are taxed
For international funds (units purchased after 1st April 2023) and for foreign shares, capital gains on holdings held for more than 24 months are taxed at 12.5%. Gains on holdings held for 24 months or less are added to your income and taxed at your applicable slab rate. The rules in this respect have changed numerous times since 2023 so it is essential to check the current rules prior to selling.
US dividends are taxed in both countries initially. The US will take 25%, and India will tax it at your slab rate. You can claim credit for the US tax under the India-US tax treaty, provided you file Form 67 with your income tax return. Keep your broker’s tax statements, as they usually don’t provide all the figures Indian forms require.
US estate tax
If you hold US shares or US-listed ETFs directly and the total value of those crosses the $60k mark, your heirs could be liable to US estate tax of up to 40% on the amount above that $60k. Very few Indian investors know this rule. That’s another reason Indian mutual funds and Ireland-listed ETFs are generally preferred by long-term holders.
Count every cost
A fund’s expense ratio is only one of the costs involved. Other costs include bank currency markups, remittance fees, brokerage, the second set of fees in the case of a fund of funds, US tax on dividends, and your accountant’s fee for the longer tax return. Small regular transfers overseas can actually be the most expensive option as the fixed charges will eat into your returns so much more. Work out the total cost of the arrangement over the period you intend to hold it before you decide.
Your checklist before you invest
Before you open an account or send any money, write a one-page note. In that note, answer the following questions: what is the money for, what currency will it be in, when do you need it, what sort of fall can you bear, which product have you selected and why, what will it cost in total, how will it be taxed, and what do you have to report each year. Who will look after it if you’re no longer with us?
Keep it simple if your requirements are simple. A single broad global fund, a monthly SIP, and an annual review are all most families need. Direct stocks, overseas property, and private deals, on the other hand, bring much more tax and legal work.
Revisit the plan when life changes (a job overseas, a child’s admission letter, a move back to India, etc.). Ask yourself whether each holding is still doing a job. A fund doesn’t just get its place because it’s international.
The bottom line
You don’t have to abandon India to invest overseas. You can have India at the heart of your portfolio and then add a global component for the things that India simply can’t provide on its own (other sectors, other currencies and protection of your goals, which are priced in dollars).
Start small with one broad fund and sort out the tax return in the first year. Most expensive errors in global investing come from paperwork rather than market selection.
Sources and research
- Reserve Bank of India, Master Direction – Liberalised Remittance Scheme, updated 6 September 2024.
- Reserve Bank of India, Data on Overseas Investment, releases available through September 2026.
- Income Tax Department, Schedule FA – Details of Foreign Assets and Income from Any Source Outside India, updated 18 May 2026; and guidance on Schedules FA, FSI and TR.
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- MSCI, MSCI India Index and MSCI World Index factsheets, data as of 30 September 2026.
- SEBI Investor, investor-education material on financial planning, mutual funds, ETFs, REITs and safe investing.
Disclaimer:
Tax and regulatory figures are as at October 2026. The rules are subject to change so always check with your bank or a chartered accountant prior to taking any action. This is for educational purposes only and should not be construed as investment advice.
NS Wealth Solutions Pvt Ltd provides Fee-Based Investment advisory services all over India: Agra | Ahmedabad | Balasore | Bangalore | Bhopal | Bhubaneswar | Chandigarh | Chennai | Chhatrapati Sambhajinagar | Coimbatore | Dehradun | Delhi | Faridabad | Ghaziabad | Greater Noida | Gurugram | Guwahati | Hyderabad | Indore | Jaipur | Jamshedpur | Kanpur | Kolhapur | Kolkata | Lucknow | Ludhiana | Mumbai | Nagpur | Nashik | Navi Mumbai | Noida | Patna | Pimpri Chinchwad | Pune | Rajkot | Ranchi | Sangli | Surat | Thane | Udaipur | Vadodara | Varanasi
Frequently Asked Questions and Answers
Why should Indian investors put some money outside India?
A portfolio of only Indian stocks and funds depends on one economy, so a rate rise, a weak monsoon or a falling rupee hits everything at once. Foreign holdings give exposure to other sectors and currencies, and they help with goals priced in dollars, such as overseas education. They don’t remove risk, since markets can fall together, as in 2008 and March 2020.
How much can I send abroad under LRS, and what is TCS?
Under the RBI’s Liberalised Remittance Scheme, a resident individual can send up to $250,000 abroad in a financial year, covering investment, travel, gifts and education. TCS (tax collected at source) is a tax withheld on the transfer. According to this guide, the first ₹10 lakh a year for investments is exempt from 1 April 2026, and the amount above that attracts 20% TCS, which you can offset against your tax when you file your return.
What is the simplest way for a beginner to invest abroad?
An international mutual fund or fund of funds from an Indian fund house, because you invest in rupees, can run a SIP and the fund house handles the foreign side. Check that the fund is open to new SIPs, because Indian funds have an overseas investment cap and some have paused new money.
Do I have to report foreign investments in my tax return?
Yes. Foreign shares, ETFs, bank or brokerage accounts and property must be listed in Schedule FA, which means filing ITR-2 or ITR-3, even for a small holding. The penalty under the Black Money Act is ₹10 lakh per year for non-disclosure, and Schedule FA follows the calendar year (January to December). Indian mutual fund units are Indian assets, so they are not reported there.
How are foreign investments taxed in India?
For international funds bought after 1 April 2023 and for foreign shares, gains on holdings held more than 24 months are taxed at 12.5%, while shorter holdings are taxed at your slab rate. US dividends face 25% US tax and are also taxed in India, but you can claim credit through Form 67. If you hold US shares or US-listed ETFs directly above $60,000, your heirs may face US estate tax of up to 40%.
