In today’s interconnected world, investing in global markets has become more accessible, and the US stock market, home to tech giants like Facebook, Google, and Apple, offers an attractive opportunity for Indian investors. This guide breaks down the two primary ways to invest in the US stock market from India: direct investment and indirect investment through mutual funds or ETFs.
Direct Investments
Opening an Overseas Trading Account with a Domestic Broker
- Several domestic brokers facilitate US stock market investments, acting as intermediaries for Indian investors.
- Understand potential restrictions and costs associated with certain investment vehicles or trade limits.
- Be aware of brokerage and currency conversion charges before opening an account.
Opening an Overseas Trading Account with a Foreign Broker
- Explore options with foreign brokers like Charles Schwab, Ameritrade, or Interactive Brokers.
- Conduct thorough research on fees and charges before committing to an account.
Indirect Investments
1. Mutual Funds
Avoid the need for an overseas trading account or maintaining a minimum deposit.
Various mutual funds offer exposure to US stocks without the complexity of direct investment.
2. Exchange-Traded Funds (ETFs)
Consider direct or indirect routes to invest in US stocks through ETFs.
Choose between purchasing US ETFs directly or opting for Indian ETFs that track international indices.
3. Investing via New-Age Apps
Stay updated on mobile apps designed to facilitate Indian investors in the US stock market.
Note potential restrictions on intraday trading due to regulatory requirements.
4. Investment Limits and Regulations
The RBI’s Liberalized Remittance Scheme allows Indian residents to invest up to $250,000 annually without special permissions.
Charges Involved
1. Tax Collected at Source
- A 5% TCS is levied on remittances above Rs 7 lakh under the LRS.
- TCS can be claimed as a refund when filing Income Tax Returns.
2. Capital Gains & Dividend Tax
- Understand the tax implications on dividends (25%) and how DTAA benefits apply.
- No capital gains tax in the US, but Indian taxes may apply.
3. Bank Charges, Brokerage Fees, and Foreign Exchange Rate
- Be mindful of foreign exchange conversion fees, transfer fees, account setup charges, and brokerage fees.
- Track the foreign exchange rate at the time of purchase for cost considerations.
Reasons to Invest in US Stocks from India
- Historically, US stock markets are less volatile than Indian markets.
- Diversify investments with exposure to mega global corporations headquartered in the US.
- US markets have outperformed Indian markets in dollar terms over the last decade.
- Tap into global innovation by investing in promising companies during their initial stages.
Things to Remember
- Open an overseas trading account if you have the time and expertise for informed decision-making.
- Be aware of all charges associated with international investing.
- Long-term investing is more cost-efficient than frequent trading.
- Consider applicable taxes as per US and Indian laws.
- Start with a small investment and gradually increase based on market understanding.
In Summary
Diversifying your portfolio by investing in the US stock market from India can offer unique opportunities. However, it’s crucial to weigh the pros and cons, considering charges, taxes, and your financial goals. With the right information and careful planning, you can embark on a successful journey into the world of US stock market investments from the comfort of India.
Also Read: Top 10 Stock Exchanges In The World
