How to Invest in US Stocks from India: A Detailed Guide

There are a number of Indian investors that would like to purchase US stocks. Diversifying their portfolio is their goal. In order to get a taste of the global market, they are actively searching for foreign capital. Some of the most sought-after corporations, including Apple, Google, Facebook, and others, have equities on the US stock exchange. You profit from these companies' strengths when you invest in these international stocks. When the business takes its next growth moves, you can also get a high return on your investments. There are various avenues for Indians to invest in US stocks. Learn how to invest in US stocks from India by reading on.

---

Table of Contents

Direct Investment

Indirect Investment

Taxes and Charges on Investment in US Stocks from India

Buying US Stocks in NSE India

Reasons to Invest in US Stocks

Conclusion

Most Asked Questions

---

Direct Investment

Investing directly in any US stock is a very simple process. It can be done in two main methods. You can contact an Indian broker and ask them to help you open an account for trading abroad, or you can contact a foreign broker and ask them to help you open an account for trading abroad.

• International trading account with a local agent: Many domestic brokers collaborate with US stockbrokers to function as middlemen for your trades. Any of these brokers will allow you to open an international trading account. To open this account, you may need to several papers. There may be limitations on the kind of assets you can use or the quantity of trades you can make, depending on the broking firm.

  
  

• Overseas trading with a foreign broker: An international broker with a presence in India is an additional option for opening a trading account for foreign markets. Before opening the account, familiarise yourself with the terms and expenses. Thus, before choosing the best broker you can rely on to buy US equities from India, do your homework. Exchange rates and broking fees might make direct investments expensive. Therefore, before opening an account, make sure you are aware of all the costs.

Indirect Investment

With this approach, you can purchase US stocks without using a broker. There are a few indirect ways to invest in US stocks. Without making a direct investment, you can have exposure to the US stock market and the US stock of your choosing. The following are a few of the most popular indirect stock investment strategies in the US:

• Mutual funds: There are opportunities to invest abroad through international mutual fund programs. While the majority of these mutual funds follow the US market, some follow distinct indices for certain South American or Asian nations. 

  
  

• Exchange-traded funds: Exchange-Traded Fund (ETF) units are traded on the stock market during trading hours, in contrast to mutual funds. As a result, you can purchase and sell ETF units on exchanges during business hours, just like you would with stocks. If you have a Demat account with any broking house, you can trade ETFs. Access to the NASDAQ and other significant foreign indices is offered by numerous ETFs. To buy US ETFs, you can utilise an Indian ETF of a global index along with a domestic or foreign broker.

  
  

• Investment apps: To help Indian investors make investments in the US stock markets, a number of start-ups have created smartphone applications. Some apps may not provide intraday trading in the US market outside of India due to regulatory constraints. Discover the top applications for investing in US equities from India, then decide whether to move forward with the investment. 

Taxes and Charges on Investment in US Stocks from India

Your investments in US stocks are subject to various taxes and fees. In order to adhere to the nation's investing regulations, you must pay these taxes. Among these taxes are: 

• TDS: A 5% TDS would be applied if you invest more than INR 7,00,000 in US stocks. This clause is a component of the RBI's Liberalised Remittance Scheme. When you file your income tax returns, you can, nevertheless, claim the TDS as a refund.

• Capital Gains and Dividend Tax: All dividends received by an Indian citizen who invests in the US stock market are subject to a 25% dividend tax. Nonetheless, the United States and India have a Double Tax Avoidance Agreement. Therefore, in order to prevent double taxation on your dividend income, you might seek a credit for these taxes. In India, you will also be required to pay capital gains tax on your US investments. In India, your income slab determines the capital gains tax rate.

• Bank Charges: Investing in US stocks requires transferring funds to another nation. As a result, your bank might impose fees for both money transfers and currency conversion.

  
  

• Brokerage: You will have to pay brokerage to the brokers who assist you in investing in US equities, just like you would with any other stock market investment. These fees vary from business to business.

  
  

• Foreign Exchange Charges: An Indian investor who purchases US stocks must deal with the effects of the foreign exchange rate both at the time of investment and when taking their money and profits out.

Buying US Stocks in NSE India

Previously, purchasing US equities could only be done through a US-registered broker or through foreign mutual funds that purchase stocks from other nations. Your third option at the moment is to invest in leading US stocks on the NSE IFSC (International Financial Service Centre) Exchange. Beginning on March 3, 2022, Indian retail investors will be able to trade US stocks on the NSE IFSC market, which is situated in Gujarat's GIFT City (Gujarat International Finance Tech City). The NSE IFSC Exchange now offers eight US equities for sale. These include Alphabet (Google), Microsoft, Netflix, Apple, Amazon, Walmart, Meta Platforms (Facebook), and Tesla. This figure will increase to 50 US stocks as they are progressively introduced into the market. The NYSE (New York Stock Exchange) and the exchange will have the same trading hours. As a result, 2:30 pm to 8 pm IST is the trading time for NSE IFSC.

Trading these equities will not be possible with your domestic Demat account. Another specific Demat account will need to be opened for you. Here's how: 

Step 1: Register for a trading and Demat account with an IFSC-registered broker. To learn if there are any prerequisites you must meet before you may start trading US stocks on the international market, get in contact with your current broker who is affiliated with the NSE IFSC.

Step 2: You should move money to the broker's IFSC-registered account from your Indian bank account. Since transactions on the exchange are conducted in dollars rather than Indian rupees, currency conversion is necessary in order to trade in NSE IFSC US stocks. You can start trading US equities listed on the market as soon as your funds have been sent to the broker's account, which is registered with the IFSC.

Reasons to Invest in US Stocks

• Indian stock market indexes have historically been more volatile than US stock market indices. 

• The US is home to the majority of large multinational firms, giving you access to a wider range of investment options. 

• In terms of pure dollars, the US stock market has performed better than the Indian stock market throughout the past ten years. 

• Because the US is at the forefront of global innovation, you can invest in a potential business when it's just getting started.

Conclusion

Stock trading in US stocks from India and making investments in foreign markets is an ideal way to diversify your investment portfolio. Researching and evaluating stocks is easier now that we have access to information. But it's crucial to keep in mind that there are benefits and drawbacks to investing in foreign stocks. Therefore, be sure to take everything into account and make investments based on your risk tolerance and financial objectives. Compared to trading in the US market, investing is more economical. This is due to the fact that excessive fees have the potential to reduce traders' typically marginal returns. You can also earn respectable profits after costs if you invest for the long term. Take into account any applicable taxes under Indian and US tax legislation. Begin with a little investment and raise it as you learn more about the US market.

FAQ

Q1. How to invest in Dow Jones from India?

By opening an overseas trading account with a domestic broker or an overseas trading account with a foreign broker, you can purchase US stocks directly from India. You can invest indirectly in the US market by using mutual funds, exchange-traded funds (ETFs), and a few internet investment apps.

Q2. Is it risky to invest in US stocks from India?

US stocks have intriguing advantages for Indian investors. First, they offer a chance to diversify globally, distributing risk over a different market, especially a strong one like the US.

Q3. Is it legal for Indians to invest in US stocks?

Yes, investing in the US stock market is entirely permissible for Indian citizens. It's becoming common for Indians to diversify their portfolios by investing in US stocks.

Q4. How to file ITR for US stocks?

There are certain rules to follow in India regarding the disclosure of foreign stocks and investments for tax purposes. The values of these assets should be declared in Indian rupees after being converted from foreign currencies, and these investments should be listed in Table A3 under schedule FA in your ITR.

Q5. How much income tax on US stocks in India?

Dividends from US stocks must also be considered when determining the tax on US stocks in India. This sum is subject to a flat 25% tax rate. Therefore, you will receive $75 if the corporation announces a $100 dividend.

Q6. Is it wise to invest in US stocks from India?

The US economy has grown rapidly, especially in the technology sector. Indian investors have benefited from that momentum thanks to the robust returns from US-focused ETFs this year. Exposure to top US corporations may offer durability and growth for investors seeking to balance their portfolios.

Q7. How much can I invest in US Stocks?

Under the Liberalised Revenue Scheme (LRS), the Reserve Bank of India (RBI) published guidelines allowing Indian residents to invest up to $250,000 (about 1.9 crore rupees) annually without requiring special approval.

Q8. Can Indians legally invest in US stocks?

Yes, under the Liberalized Remittance Scheme (LRS), Indian residents can invest in US stocks legally.

Q9. Which platforms allow Indians to buy US stocks?

Several online platforms like Vested, INDmoney, and Groww facilitate investment in US stocks from India.

Q10. Is there a minimum investment amount for US stocks?

No, many platforms allow fractional investing, enabling you to start with as little as a few dollars.

Q11. Do I need a US bank account to invest in US stocks?

No, most platforms handle the currency conversion and transfer directly from your Indian bank account.

Q12. Are there tax implications for US stock investments?

Yes, dividends are taxed at 25% in the US, and capital gains are taxed in India under local laws.

Q13. Can I invest in ETFs and mutual funds in the US?

Yes, Indian investors can also invest in Exchange-Traded Funds (ETFs) and mutual funds listed in the US.

Q14. What is the currency risk in investing in US stocks?

Fluctuations in the USD-INR exchange rate can impact the overall returns on your investments.

Q15. Can I hold US stocks in my Indian demat account?

No, US stocks are held in a foreign demat account that is managed by the platform you choose for investing, not your Indian demat account.

Q16. What documents are required to invest in US stocks?

You typically need a valid PAN card, bank details, a proof of identity, and a proof of address. Some platforms may also require you to complete a W-8BEN form for tax purposes.

Q17. Do I need to pay taxes in both India and the US on US stock investments?

Yes, you are subject to US withholding tax on dividends (usually 25%) and capital gains taxes in India. However, tax treaties may allow you to offset some of the US taxes paid.

Q18. Are US stocks a good investment for Indian investors?

Yes, US stocks offer diversification opportunities and exposure to some of the world’s largest companies, but it’s essential to consider currency risk and market fluctuations.

Q19. What is the minimum time required for investing in US stocks from India?

The process to start investing is quick and can take as little as 2-3 days if your KYC and account setup are completed properly on the platform.

Q20. Is it safe to invest in US stocks from India?

Investing in US stocks is generally safe if done through a regulated platform that follows proper guidelines and offers secure transactions.

Q21. Can I transfer US stocks to a different platform or brokerage account?

Some platforms allow the transfer of US stocks to other brokerages or platforms. However, the process may incur charges and vary depending on the platform's policies.

Q22. What is the best strategy for investing in US stocks from India?

It’s advised to diversify across different sectors and use dollar-cost averaging to mitigate risks associated with currency fluctuations and market volatility.