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India to Abroad Money Transfer: Where are Indians spending and investing their funds?

Almost every segment including deposits, Purchase of immovable property, Investment in equity, international Travel, Medical Treatment, Studies Abroad showed an increase over previous year.

money transfer, from India, RBI, LRS scheme, Studies Abroad, Travel, Medical Treatment,
If someone has invested across shares and mutual fund schemes abroad, the LRS rules allows the investor to retain and reinvest the income earned in that country.

Indians sending money abroad has seen an increase in the year 2021-22. Almost every segment including deposits, purchase of immovable property, Investment in equity, debt, sending of gifts, donations, international travel, maintenance of close relatives, medical treatment, studies abroad showed an increase over previous year.

In 2020-21 during the Covid-19 times, the outward remittances were about $18760.69 millions which increased to $19610.77 million in 2021-22. The trend in outward remittances also seems to be on, with $ 1968.77 million being remitted in March 2022 as against $1547.80 million remitted in March 2021.

The maximum amount of remittances is governed by RBI’s Liberalised Remittance Scheme (LRS) rules which currently allows any resident individual including a minor to remit up to 2.5 lakh US dollars (USD 2,50,000 ) in each financial year. At an exchange rate of Rs 77 to a dollar, it is about Rs 1,90,25,000 or about Rs 1.92 crore.

Remittance towards international travel has the highest share at $ 6909.04 million while forex used for studies abroad was at $ 5165.33 million.

Purchase of immovable property also showed an increasing trend. From nearly $86 million it rose to $112 million in 2021-22.

Of the total dollars sent abroad, remittances for investments in equity, debt has gone up from $ 431.41 million in 2019-20. to $ 746.57 million in 2021-22. This could be due to rising interest of Indians in buying US stocks and other global stocks.

As an Indian resident, you need to buy dollars using Indian rupees (INR) from an authorised dealer (the bank) in India. The dollars can then be spent abroad or remitted abroad for acquiring property or other assets such as equity shares. Here, the mention of the dollar as a currency is for representational purpose as remittance can be in any freely convertible foreign currency other than dollars.

If someone has invested across shares and mutual fund schemes abroad, the LRS rules allows the investor ( unless it is overseas direct investment ) to retain and reinvest the income earned in that country. It is not necessary for the investor to repatriate the accrued interest or dividends on the deposits and investments made abroad.

Taking some exposure in the US stock market may be explored by those who look to diversify in international stocks. A low correlation between two major economies of the world can provide a high risk adjusted return over a longer period of investing.

You may buy individual US stocks such as Apple, Amazon, Google or Facebook or even invest in various ETFs catering to specific sectors or leading US indices. There are ETFs that track Nasdaq 100 and even S&P 500, the two leading US stock market indices in America.

To start investing in US stocks, you need to open an international trading account and have a US bank account abroad. Also, one may start investing in US stocks from NSE IFSC and India INX international exchanges based in the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City).

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