How can Indians invest in Japan, South Korea and Taiwan markets? Key risks and tax rules explained

Indian residents can legally invest in stocks listed in Japan, South Korea, and Taiwan. However, experts say that while investing overseas is permitted under the Liberalised Remittance Scheme (LRS), the practical challenges vary significantly across markets.

Let's find out what experts have to say on this.

Can Indians directly invest in stocks listed in Japan, South Korea and Taiwan?

According to Vijay Kuppa, CEO, InCred Money, direct investment is legally permitted. “Yes, it is possible for Indians to directly invest in all bonds, equities and funds from these countries through the Liberalised Remittance Scheme.”

Niteen Dongare, Director & CEO, Anand Rathi International Ventures IFSC, added that, “Indian residents under the LRS scheme of RBI can transfer up to $250000 every financial year for various purposes. One of these purposes is investment in global markets.”

Is direct investing equally easy across all three markets?

Not really. Gaurav Arora, Head of Research, Sahi, pointed out that each market presents distinct operational challenges.

Arora says, “Japan is practically accessible via global brokers like Interactive Brokers, but South Korea has operational catches- India-facing fintech tie-ups only support US markets and global platforms like Interactive Brokers restrict South Korean stock trading for accounts mapped under their Indian corporate entity.)

He adds, "Taiwan is the real outlier: the TWSE requires foreign investors to obtain local registration and a tax ID, and almost no retail-facing broker offers smooth access, so direct Taiwan investing is effectively impractical for most.”

Karan Aggarwal, Co-founder & CIO, Ametra PMS, also highlighted similar hurdles. “Japan is relatively straightforward, and an account can be opened directly. Korea was almost impossible till 2023. However, under a liberalised regime, the market can be directly accessed, but you need a custodian setup to back the account. Taiwan has a difficult and tedious process where registration on the exchange is needed.”

Kuppa adds that “it might be challenging to obtain stock-specific exposure in these economies since the broker might be registered with US exchanges and not exchanges of Japan, Taiwan and Korea.”

What investment routes are available to Indian investors?

Experts identify four broad routes.

1. International mutual funds and FoFs

Aggarwal says, “Easiest and simplest route is investing in ETFs, index funds and FoFs providing exposure to global markets.”

However, there is a limitation. “The funds are not issuing new units due to restrictions imposed by RBI on account of breaching the combined industry limit of $7 billion,” he explained.

Arora explained that the industry-wide overseas investment limit has constrained fresh inflows. “Several AMCs like Nippon, Axis and others have paused fresh subscriptions in international schemes, while a few like Invesco have reopened only to the limited headroom available.”

2. International ETFs

Kuppa says, “Investing via Exchange Traded Funds (ETFs) offers precise control over your entry and exit points.”

He highlighted US-listed country-specific ETFs such as iShares MSCI South Korea ETF, iShares MSCI Japan ETF and iShares MSCI Taiwan ETF.

3. International brokerage accounts

Aggarwal shares that, “Another easiest route is opening a trading account in the US and investing in different global markets through nearly 1500 equity ETFs, including 200 international ETFs.”

Dongare agrees that this may be the most practical route for many investors. “The preferable route could be a trading account with the global access provider, which is less costly as the cost of transaction is low. Trading account opening is digital, fund transfers through a partner bank are done at lower forex spreads, and placing trades is very easy.”

Kuppa highlighted that “investors can invest in American ETFs specifically for exposure to these markets, or they can invest in Japanese, Taiwanese or Korean companies which have ADRs listed on American exchanges.”

4. GIFT City-based investment platforms

Another emerging route is through the International Financial Services Centre (IFSC) in GIFT City.

Dongare said that, “GIFT City Global Access platform is an easy way to invest in US Stocks, US ETFs and global markets like China, Taiwan and South Korea. The majority of the platforms, as of now, are providing access to the US markets."

Arora also sees potential in this route. “The emerging GIFT City route, where platforms are beginning to offer global exposure within India's IFSC framework - worth watching as it matures.”

Which route is most practical for retail investors?

Jahol Prajapati, Equity Research Analyst, Samco Securities, says, “International mutual funds and ETFs remain the most practical and cost-effective route for most retail investors.”

Arora adds, “For investors who want specific stocks or uninterrupted access, a direct LRS-based international brokerage account is cleaner despite higher charges.”

Aggarwal believes investors interested specifically in Korea and Taiwan may find US-listed ETFs a better solution. He says, “Ideally, investors keen on Japan can go for a direct trading option. However, for Korea and Taiwan, they can take the US route and invest in respective country ETFs.”

What risks should investors consider?

Here are the key risks experts point out while investing in these markets.

Currency risk

Prajapati said, “Returns are influenced not only by stock performance but also by movements in the Japanese Yen, Korean Won and Taiwan Dollar against the Indian Rupee.”

Arora added, “Currency risk is double-layered - you carry both the rupee and the yen or Taiwan dollar.”

Market and cyclical risks

Many East Asian markets are heavily export-oriented and technology-driven. According to Arora, “these are tech-heavy, export-driven, cyclical markets, so they amplify global swings.”

Compliance and regulatory risks

Kuppa cautioned investors about compliance obligations. “Factors to keep in mind include stringent compliance, remittance limits and financial penalties imposed in case of lapses.”

He also reminded investors that the LRS limit includes foreign education and travel expenses, not just investments.

What are tax implications?

Experts say taxation is another important consideration. Arora shared that, “Foreign equities held for more than 24 months qualify for a flat 12.5% Long-Term Capital Gains (LTCG) tax, while gains on assets held for 24 months or less are taxed at your applicable income slab rate.”

Investors also need to be aware of reporting requirements. “One must also report all foreign assets in your return under Schedule FA,” says Arora.

In addition, Dongare highlighted other overseas tax considerations. “Investors should also be aware of the domestic taxation on global investments, US taxation like estate tax and inheritance tax, dividend taxation on US stocks and TCS (tax collected at source, applicable for LRS transfer more than ₹10 lakhs).”