Investing in the US from India in 2026: feeder funds, ETFs and the limits

Most Indian portfolios are almost entirely Indian. That's natural, since your income, expenses and goals are in rupees, but it does mean your entire portfolio depends on one economy.

US exposure is the most common way investors spread that bet. There are three routes, and they behave quite differently.

Route 1: international mutual funds and fund of funds

Indian fund houses offer schemes that invest in US stocks directly or through a foreign fund (a "feeder" or fund of funds structure). You invest in rupees, through the same account and SIP you already use.

The catch is a regulatory ceiling. The Indian mutual fund industry as a whole can invest only a fixed amount overseas, and each fund house has its own share of that limit. When the limit is reached, schemes pause fresh subscriptions, sometimes for months, as happened in 2022.

Route 2: international ETFs listed in India

Some Indian ETFs track US indices such as the Nasdaq 100 or S&P 500. You buy them on the exchange through a demat account.

The overseas limit applies here too, through a separate allotment for ETFs. When fund houses can't create new units, an ETF can trade at a premium to the value of what it holds. Paying a 5% premium means you've given up 5% the day you buy. Always check the price against the ETF's indicative NAV before you place an order.

Route 3: direct investment through LRS

Under the RBI's Liberalised Remittance Scheme you can send up to USD 2,50,000 per financial year abroad and buy US stocks or ETFs through an overseas brokerage account.

Points to understand before choosing this route:

• TCS at the bank. Remittances for investment above ₹10 lakh in a financial year attract tax collected at source. It isn't an extra tax, since it can be adjusted against your liability, but it locks up cash until you file.
• US estate tax. For non-US residents, US-listed assets above USD 60,000 can be subject to US estate tax at death. An Indian mutual fund that holds US stocks doesn't create this exposure for you.
• Reporting. Foreign assets must be disclosed in your Indian income tax return every year.

How the routes compare

Tax, briefly

International equity funds have been taxed differently over the last few years, and the treatment depends on when units were bought and sold. Under the rules in force from FY 2025-26, units of most international fund of funds held for more than 24 months are taxed as long-term capital gains at 12.5%. Shorter holdings are taxed at your slab rate.

This area has changed more than once since 2023. Check the treatment that applies to your specific purchase dates before you redeem.

The rupee is part of the return

When you hold US assets, your return in rupees is the US return plus the change in the dollar–rupee rate. Over long periods the rupee has tended to weaken against the dollar, which has added to rupee returns, but that's a history, not a promise. In some years the currency moves the other way.

US exposure doesn't replace your Indian portfolio. It hedges the one assumption that portfolio otherwise makes: that everything goes well in one country.

The short version

1. Mutual funds and FoFs are simplest, but subscriptions can be paused when industry limits are hit.
2. Indian-listed ETFs can trade at a premium, so check the price against NAV before buying.
3. Direct LRS investing has no industry limit, but brings TCS, reporting and US estate tax exposure.