Every year, more US citizens look to invest in India-not just for high returns, but because the country’s startup ecosystem is growing faster than almost any other in the world. In 2024, India attracted over $80 billion in foreign direct investment, with nearly 40% going into tech startups, fintech, and healthtech. If you’re a US citizen wondering how to get in, the good news is: it’s legal, it’s possible, and thousands have done it before you. The hard part? Knowing where to start without getting tangled in rules, taxes, or scams.
Understand the Legal Pathways
There are three main ways a US citizen can legally invest in India: direct investment, mutual funds, and ETFs. Each has different rules, risks, and tax impacts.Direct investment means buying shares in Indian companies directly. This is done through the Portfolio Investment Scheme (PIS), managed by the Reserve Bank of India (RBI). You need to open a designated bank account in India-either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account-with a bank approved by the RBI. Then, you link it to a registered Indian brokerage like Zerodha, Groww, or ICICI Direct. Once set up, you can buy stocks, IPOs, and even private startup shares through platforms like AngelList India or LetsVenture.
Indian mutual funds are the easiest route for beginners. You don’t need an Indian bank account. Companies like Motilal Oswal, Franklin Templeton, and ICICI Prudential offer mutual funds specifically for foreign investors. These funds pool money from people like you and invest in Indian stocks, bonds, or startups. You can buy them through platforms like Fundsupermart or directly from the fund house’s website using a US credit card.
ETFs listed in the US are the most convenient option. You can buy them on your existing US brokerage account-Fidelity, Charles Schwab, or Robinhood. The most popular one is the India ETF (INDA) from iShares, which tracks the Nifty 50 index. It holds shares in top Indian companies like Reliance, HDFC Bank, and Infosys. Another option is the AXS India ETF (INDY), which has a heavier focus on tech and consumer growth stocks.
Invest in Indian Startups Directly
If you want to back early-stage companies, you’re not locked out. India’s startup scene has over 100,000 registered startups, and nearly 1,200 received funding in 2024. The government allows foreign investors to put money into startups under the Automatic Route, meaning no prior approval is needed for most sectors.You can invest through:
- Angel networks like Indian Angel Network or Mumbai Angels-these let you join syndicates and invest as little as $5,000 in early-stage startups.
- Crowdfunding platforms like LetsVenture or SeedIn, where you can review startup pitch decks, financials, and team backgrounds before investing.
- VC funds with US ties like Sequoia Capital India, Accel, or Lightspeed Venture Partners. Many of these funds accept investments from US-based accredited investors through feeder funds.
Just remember: early-stage investing is risky. About 70% of Indian startups fail within five years. Only invest money you can afford to lose. Look for startups with proven revenue, a clear path to profitability, and a founding team that’s worked together before.
Know the Tax Rules
This is where most US investors get surprised. India and the US have a Double Taxation Avoidance Agreement (DTAA), so you won’t pay full taxes twice. But you still owe taxes in both countries.In India, capital gains from stocks or startups are taxed based on how long you held them:
- Short-term gains (held less than 12 months): 15% tax on equity investments.
- Long-term gains (held more than 12 months): 10% tax on gains over ₹1 lakh ($1,200) per year.
- Startups: If you invest in a qualified startup (recognized by DPIIT), you may get a 100% tax exemption on gains if held for 3+ years.
In the US, you must report all foreign investment income on your IRS Form 1040. You’ll pay capital gains tax based on your US income bracket (0%, 15%, or 20%). You can claim a foreign tax credit on Form 1116 to avoid double taxation. For example, if you paid $1,000 in Indian capital gains tax, you can reduce your US tax bill by the same amount.
Also, if you hold more than $50,000 in foreign financial assets at year-end, you must file Form 8938 with your tax return. If you have a foreign brokerage account with over $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). Missing these can mean fines up to $10,000 per form.
Choose the Right Investment Vehicle
Here’s how the options stack up in 2025:| Option | Minimum Investment | Access | Control | Risk | Tax Complexity |
|---|---|---|---|---|---|
| US-listed India ETFs (e.g., INDA) | $50 | Easy (US brokerage) | Low | Low-Medium | Low |
| Indian Mutual Funds | $100 | Medium (global platforms) | Medium | Medium | Medium |
| Direct Stock Market (via PIS) | $500 | Hard (Indian bank + broker) | High | Medium-High | High |
| Indian Startups (Angel/VC) | $5,000+ | Very Hard (networking required) | Very High | Very High | Very High |
If you’re just testing the waters, start with an ETF. If you want exposure to India’s growth without managing accounts, go with mutual funds. If you’re serious about beating the market and have time to research, direct investing or startup funding might be worth the effort.
Common Mistakes to Avoid
Most US investors make the same three mistakes:- Ignoring tax reporting-Many assume they don’t need to report foreign gains because they’re not in the US. That’s false. The IRS knows. They get data from banks and brokers worldwide.
- Using unregulated platforms-Some websites promise “easy India investing” with no paperwork. These are often scams. Only use RBI-approved brokers or SEC-registered mutual funds.
- Investing without due diligence-Just because a startup looks cool doesn’t mean it’s viable. Check if they’re registered with DPIIT, have audited financials, and a clear exit strategy.
Also, don’t try to invest through a friend’s Indian account. That’s illegal under Indian law and could get your money frozen-or worse, your visa flagged if you ever travel there.
Where to Start in 2025
Here’s a simple action plan:- Open a US brokerage account (if you don’t have one). Fidelity and Schwab support international investing.
- Buy an India ETF like INDA or INDY. This gives you instant exposure to 50+ top Indian companies.
- Set up a Google Alert for "Indian startup funding" to spot new opportunities.
- Join an angel network like Indian Angel Network-they host virtual pitch nights open to global investors.
- Consult a cross-border tax advisor who understands both US and Indian rules. Don’t rely on your regular CPA.
India’s economy is projected to hit $7 trillion by 2030. The middle class will grow by 300 million people. Startups are building solutions for that market-health apps, affordable fintech, electric vehicles, and AI tools for small businesses. If you’re looking for growth, India is one of the few places where the upside still outweighs the risk.
Can a US citizen buy shares in Indian startups?
Yes, but only through approved channels like registered angel networks (e.g., Indian Angel Network) or venture capital funds that accept foreign investors. Direct investment in private startups requires compliance with India’s Foreign Direct Investment (FDI) policy. You must use a PIS account and report the transaction to the RBI. Never invest through informal channels or unregistered platforms.
Do I need an Indian bank account to invest in India?
You only need one if you’re buying individual stocks or investing directly in private companies. For US-listed India ETFs or Indian mutual funds bought through global platforms, you can invest from your US bank account. If you do open an Indian account, you’ll need an NRE or NRO account-both require proof of US residency and a PAN card (which you can apply for online as a foreigner).
What’s the best way to invest $10,000 in India?
Split it: put $7,000 into an India ETF like INDA for stability and diversification. Use the remaining $3,000 to invest in one or two early-stage startups via LetsVenture or Indian Angel Network. This balances safety with high-growth potential. Avoid putting all your money into one startup or one stock.
Are Indian mutual funds safe for Americans?
Yes, if you buy through regulated platforms like Motilal Oswal, Franklin Templeton, or ICICI Prudential. These funds are registered with SEBI (India’s market regulator) and report to global investors. Avoid small, unknown fund houses with no track record. Always check if the fund is available on Fundsupermart or similar global platforms.
How long does it take to set up an Indian investment account?
If you’re using a US-listed ETF, it takes minutes. For direct investment, it takes 2-6 weeks. You’ll need to open an NRE/NRO account (3-5 days), get a PAN card (7-10 days), and link it to a broker (another 5-7 days). Start early if you’re planning to invest in an IPO or startup funding round.
Can I withdraw my money anytime?
With ETFs and mutual funds, yes-you can sell and transfer funds back to the US anytime. With direct stocks, you can sell anytime, but transferring money out of India takes 3-7 business days and requires RBI compliance paperwork. Startup investments are illiquid-you may need to wait 5-7 years for an exit via acquisition or IPO.
Next Steps
If you’re serious about investing in India, start with the ETF. It’s low-friction, transparent, and gives you exposure to the country’s biggest companies. Once you’re comfortable, explore mutual funds. Only after you’ve studied the market and understood the tax implications should you consider direct startup investing.India isn’t a gamble-it’s a long-term bet on a rising economy. The key is to move slowly, stay compliant, and never chase hype. The best investors don’t try to time the market. They time their entry into the right ecosystem-and India’s is one of the most powerful today.
