How to Invest in US Stocks from India (2024)

Direct Investments

How to directly how to invest in foreign stocks from India? You can invest in the US stock market directly by opening an overseas trading account with a domestic or foreign broker. Be mindful of the charges before you pick the best app to invest in US stocks.

1. Opening an Overseas Trading Account with a Domestic Broker

Many domestic brokers have tie-ups with stockbrokers in the US. They act as intermediaries and execute your trades. You can open an overseas trading account with any such broker. You might have to submit a set of documents to open this account.

However, it is important to remember that this facility has some restrictions. Based on the brokerage firm, you might have some restrictions on certain investment vehicles or the number of trades that you can make, etc.

The cost of investing can be high, considering brokerage and currency conversion charges. Hence, ensure that you know all the costs before opening an account.

2. Opening an Overseas Trading Account with a Foreign Broker

You can also open an overseas trading account directly with a foreign broker with a presence in India. Some such brokerages are Charles Schwab, Ameritrade, Interactive Brokers, etc. Ensure that you understand the fees and charges before opening the account.

So, conduct your research properly before you pick the best broker to invest in US stocks.

Indirect Investments

Like domestic investments, you can take an indirect position in US stocks without investing in them directly. Here are two options to consider:

1. Mutual Funds

You don’t need to open an overseas trading account or maintain a minimum deposit which can be the case with some stockbrokers offering direct international investments.

There are many Mutual Funds that invest in US Stocks and/or Mutual Funds.

2. Exchange-Traded Funds (ETFs)

You can also gain exposure to US stocks by investing in ETFs. There are direct and indirect routes available for ETFs. You can purchase US ETFs directly via a domestic or international broker or purchase an Indian ETF of international indices.

3. Investing via New-Age Apps

Since the evolution of mobile apps for different types of services, there have been several apps launched by start-ups to help Indian investors invest in the US stock market.

Intraday trading in the US market from India may not be allowed in some of these apps due to regulatory requirements.

How Much Can I Invest in US Stocks?

The Reserve Bank of India (RBI) released guidelines under the Liberalized Revenue Scheme (LRS) that permitted an Indian Resident to invest up to 250000 dollars (around 1.9 crore rupees) per year without any special permissions.

Now that we know how to invest in the US market from India, let’s look at some reasons why you should consider investing in stocks in the US and the charges involved.

What are the Different Charges Involved While Investing in US Stocks?

Here are the different charges involved you should know while searching for how to buy US stocks from India-

• Tax Collected at Source

A 5% TCS (Tax Collected at Source) is levied on all remittances above Rs 7 lakh under the RBI’s Liberalized Remittance Scheme (LRS). This is applicable to the amount above Rs 7 lakh and not the total amount.

The TCS can be claimed as a refund when the taxpayer files an Income Tax Return.

• Capital Gains & Dividend Tax

In the US, dividends are taxed at a rate of 25% for Indian citizens. Owing to the Double Tax Avoidance Agreement (DTAA), the investor can claim credit for taxes paid abroad so that he/she doesn’t have to pay tax on the same income twice.

There is no capital gains tax on your investments in the US. But you are liable to pay tax on the capital gains in India.

To know more about how capital gains are taxed in India, click here: Capital Gains Tax

• Bank Charges

Most banks charge foreign exchange conversion fees and transfer fees. There may also be a one-time account setup charge.

• Brokerage Fees

Brokerages charge a fee on the buying and selling of shares.

• Foreign Exchange Rate

The foreign exchange rate at the time of purchase or withdrawal can impact the costs and the number of units allotted.

Reasons to Invest in US Stocks from India

Since we have already answered how to invest in US stock market from India, here are some reasons you should consider US Investment in India:

• Historically, the US Stock Market indices have been less volatile than the Indian stock market indices.
• Most mega global corporations are headquartered in the US, which offers you a more diversified investment avenue.
• The US Stock Market has outperformed the Indian Stock Market over the last decade in pure dollar terms.
• With the US being at the centre of global innovation, you can invest in a promising company during its initial stages.

Things to Remember Before Investing in US Stocks from India

• Open an overseas trading account if you have the time and expertise to analyze the US market and economy and make informed decisions.
• International investing attracts more charges as compared to domestic investments. Look for the account charges, brokerage, currency conversion charges, etc. Hence, ensure that you understand all charges well.
• Investing is more cost-efficient than trading in the US market. This is because high charges can eat away at the marginal profits that traders usually make. Long-term investing allows you to earn reasonable returns post-charges, too.
• Consider applicable taxes as per the US and Indian taxation laws.
• Start small and increase your investment as you gain an understanding of the US markets.

Summing Up

By allowing yourself to consider starting US stock trading from India and investing in foreign markets, you can introduce an additional element of diversification to your portfolio. With information at our fingertips, researching and analyzing stocks is simpler than before.

However, it is important to remember that international stock investing has certain pros and cons. Hence, ensure that you consider all aspects and invest according to your financial goals and risk tolerance.

Happy Investing!