Investment in Indian shares through an SMSF: A step-by-step guide for Australian trustees

Introduction

In recent years, self-managed super funds (SMSFs) have become a preferred choice for Australians seeking greater control and flexibility in managing their retirement savings. With over 625,000 SMSFs registered by June 2024, the continued growth of this sector highlights a clear shift toward more personalised and hands-on investment strategies.

International markets are gaining increased attention as trustees explore ways to diversify their portfolios. Among these, India offers a wide range of listed companies across sectors such as finance, infrastructure, manufacturing, and consumer goods. For many trustees, it presents an appealing opportunity to expand beyond Australian equities.

However, accessing Indian equities through an SMSF requires more than market optimism. It involves clearly understanding how to structure the fund, meet compliance requirements, manage tax obligations across jurisdictions, and align investment decisions with long-term goals.

This guide provides a step-by-step overview for SMSF trustees interested in exploring Indian equities, offering the clarity needed to make informed and confident investment choices.

Why invest in Indian shares through your SMSF?

Here’s why investing in Indian shares through your SMSF is a smart, future-focused strategy in 2025 and beyond:

Strong economic growth:

India is poised to remain the world’s fastest-growing major economy in 2025–26 with a projected GDP growth of 6.5%, driven by strong domestic demand, infrastructure investment, manufacturing growth, and policy reforms that continue to boost economic resilience.

Diversification benefits:

Indian equities give SMSFs access to high-growth industries like technology, pharmaceuticals, and consumer products that are underrepresented in Australia. This type of diversification helps reduce risk, enhances global exposure, and makes your SMSF portfolio more resilient to market fluctuations.

Strong market performance:

Indian share markets have delivered strong historical returns, often outperforming developed and emerging economies. For SMSFs with long-term investment horizons, this performance aligns well with retirement goals and the need to grow wealth steadily and sustainably over time.

Economic resilience:

India has shown economic stability during global downturns, supported by strong domestic demand and responsible fiscal policies. This resilience positions India as a reliable market, offering SMSF investors both security and the potential for consistent long-term growth.

Digital innovation:

India is advancing rapidly in areas like digital payments, e-commerce, online banking, and fintech adoption. SMSFs can benefit by investing in companies leading this transformation, gaining exposure to real economic progress and emerging consumer trends.

Is it legal for SMSFs to invest in Indian shares?

Yes, SMSFs can invest in Indian shares, but only if specific legal and regulatory conditions are met in both Australia and India. Here’s what must be in place:

• The SMSF’s trust deed must allow international investments, and the investment strategy must clearly include Indian shares as an asset class.
• The fund must comply with the SIS Act, particularly the Sole Purpose Test and the Arm’s Length Rule, ensuring all investments are made for retirement benefits and at market value.
• Trustees must be recognised as Non-Resident Indians (NRIs) under Indian law to be eligible for investment in Indian assets.
• Each trustee must hold an Overseas Citizen of India (OCI) card, which allows investment access similar to that of Indian residents.
• Trustees are required to obtain a Permanent Account Number (PAN) from the Indian tax authorities for compliance and reporting purposes.
• An NRE (Non-Resident External) account must be opened to transfer funds from Australia to India under the SMSF’s structure.
• An NRO (Non-Resident Ordinary) account is also required to receive income from Indian investments such as dividends, rent, or capital gains.
• Trustees must apply for Portfolio Investment Scheme (PIS) approval through the Reserve Bank of India to legally invest in listed Indian equities.
• A PIS-linked Demat and trading account must be opened with a SEBI-registered broker. Standard Demat accounts are not allowed under this structure.
• All transactions must be supported by legal trust documents showing SMSF ownership and must be audit-ready for Australian compliance reporting.

SMSF investment options in Indian market

An SMSF can access a range of Indian investment options, provided all compliance requirements are met in both Australia and India.

• Indian listed shares can be purchased through the Portfolio Investment Scheme using a compliant Demat and trading account. These shares must be acquired through a SEBI-registered broker that supports NRI investors.
• Indian mutual funds regulated by SEBI are also accessible. These can be invested in through NRI-compliant platforms or directly via Indian banks that offer mutual fund services to non-resident investors.
• Exchange-traded funds provide exposure to Indian indices. Your SMSF can invest in ETFs listed on Indian exchanges or in global ETFs that track Indian equities.

Standard Demat accounts are not permitted for SMSF investments. To remain compliant, all transactions must be routed through approved PIS-linked accounts.

How do you invest in Indian shares through your SMSF?

Once your SMSF is legally structured and all compliance requirements are in place, the next phase is executing the actual investment. This involves working with the right financial institutions and following the required process to ensure every transaction complies with Indian and Australian laws.

Below are the key steps your SMSF must follow to begin investing in Indian shares effectively and correctly:

Step 1: Choose a SEBI-registered broker in India who offers services specifically for NRI investors under the Portfolio Investment Scheme (PIS).

Step 2: Link your PIS approval with your Indian trading and Demat accounts through the selected broker and your Indian bank to ensure all equity transactions are correctly routed and reported.

Step 3: Select suitable Indian shares listed on exchanges like the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE), or consider SEBI-regulated mutual funds that align with your SMSF’s investment strategy and risk profile.

Step 4: Place investment orders through your broker or via a supported NRI investment platform, ensuring every transaction flows through your PIS-linked bank and trading accounts for full regulatory compliance.

Step 5: Monitor your investments regularly and record all buy and sell transactions and income received from dividends and capital gains for SMSF reporting.

Step 6: Maintain detailed documentation, including trade confirmations, portfolio reports, and Indian bank account statements, to ensure your SMSF remains audit-ready and fully transparent during the Australian financial year-end reporting.

Tax implications for SMSFs investing in India

When your SMSF invests in Indian shares or mutual funds, it triggers tax obligations in both India and Australia. Understanding how these apply is essential for correct reporting and to avoid double taxation.

In India, capital gains and dividends earned from investments are taxed at source. The applicable tax rate depends on the asset type and the holding period. These taxes are usually withheld automatically by brokers or fund houses before income is paid to the SMSF.

In Australia, any foreign income your SMSF receives is taxed at the concessional superannuation rate of 15 percent, or zero if the fund is in the pension phase. Under the Double Taxation Avoidance Agreement between India and Australia, taxes paid in India may be claimed as foreign tax credits to reduce your SMSF’s Australian tax liability.

To benefit from tax credits and remain compliant with ATO rules, the income must be received and reported through the SMSF and not in the personal name of any trustee.

Common challenges to watch for

While investing in Indian shares through your SMSF can be rewarding, it does come with specific challenges that trustees must be prepared to manage.

Regulatory complexity:

Investing across two countries means navigating both Australian superannuation rules and Indian foreign investment laws. This includes managing tax obligations, approval requirements, and maintaining compliance with multiple government agencies.

Extensive documentation:

Setting up the necessary structure in India often involves detailed paperwork. Applying for PAN and OCI cards, opening NRE/NRO bank accounts, and securing PIS approval can be time-consuming and bureaucratic.

Currency volatility:

Fluctuations between the Indian Rupee (INR) and the Australian Dollar (AUD) can impact the overall return on investment. Exchange rate movement should be factored into risk assessments and performance expectations.

Audit and reporting requirements:

SMSF auditors in Australia require detailed records in English, including trade confirmations, account statements, and currency conversions. Incomplete or inconsistent documentation can delay annual compliance processes.

Investment limits under PIS:

The Reserve Bank of India sets limits on the amount Non-Resident Indians can invest in listed Indian equities. Exceeding these caps may result in regulatory issues or trading restrictions.

Why should you seek professional help?

Investing in Indian shares through an SMSF is not a typical DIY activity. It requires in-depth knowledge of both Australian superannuation rules and Indian investment regulations.

Working with an experienced SMSF accountant or administrator or like ZedPlus can offer valuable support, including:

• Ensuring your trust deed and investment strategy are compliant with overseas investment rules.
• Assisting with NRI status, OCI card, and PAN applications
• Coordinating the setup of NRE/NRO bank accounts and PIS-linked Demat accounts
• Managing cross-border tax obligations and maximising eligible foreign tax credits
• Providing ongoing compliance support to meet ATO and audit requirements
• Keeping your SMSF investments structured, transparent, and legally sound.

With ZedPlus by your side, you reduce risk, stay compliant, and gain peace of mind — so you can focus on growing your retirement wealth confidently.

Conclusion

India’s share market presents exciting opportunities for Australian SMSF investors. Success depends on strategic planning and full compliance with both Indian and Australian regulations. From high-growth sectors to global diversification, the potential is significant.

To make the most of these opportunities, your SMSF must be structured correctly, tax-efficient, and compliant with cross-border legal requirements. That is where professional guidance becomes essential.

ZedPlus specialises in helping trustees navigate the complexities of international SMSF investments with clarity and care. We ensure your fund is compliant, well-documented, and positioned for long-term success. Contact ZedPlus today to get expert support and invest with confidence.

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Before making any investment decisions, including investing in Indian shares through your SMSF, we strongly recommend that you obtain independent financial and legal advice tailored to your specific circumstances. At ZedPlus, we can assist with SMSF setup, tax compliance, ongoing SMSF accounting support, and applying for loans to purchase investment properties through your SMSF.