US Stock investment allows the Indian investor to diversify his portfolio and benefit from major global companies like Apple, Google, or Amazon. With the help of this ever-improving technology, Indian citizens can now easily invest abroad.
In this article, we will talk about various methods by which one can invest in US stocks, what are the legalities involved, taxation rules, and essential tips for beginners.
Why Investing In US Stocks Is Beneficial?
There are a few compelling reasons why the Indian investor should step out of the comfort zone of Indian markets and invest in the US stock market:
International Exposure: Investing in global companies offers access to other markets with greater growth potential.
Risk Diversification: Increasing their portfolio of US stocks can eliminate some of the risks typically associated with single-market investments, namely Indian markets.
Investment in Leading Brands: The US is home to most of the world’s largest companies, such as Microsoft and Tesla, which gives a great return on investment.
How To Invest In US Stock Market From India?
1. Direct Investments with Indian Brokers
There are a few Indian brokerage websites that can invest directly into US stocks. A couple of them join hands with international websites or permit direct access to the US stock exchanges. It is pretty simple:
Investment through US-based brokerage Firms
Submit personal documents for KYC verification
Open an account with the broker
Some very popular websites offer the same including Groww, Zerodha, and ICICI Direct.
2. Investment through US-based brokerage Firms
Indian investors can also open accounts with US-based brokers. However, this will require more documents and compliance with various other international regulations. Some US-based brokers may offer more services or charge fewer fees than Indian brokers.
3. Mutual Funds and Exchange-Traded Funds (ETFs)
Alternatively, if you do not have a desire to invest directly in individual US stocks, you can consider mutual funds or ETFs. Most of the Indian mutual fund houses offer US-focused funds giving exposure to various US companies. There are also several ETFs available on Indian exchanges that track US indices like the S&P 500 or NASDAQ.
4. Investment through New-Age Fintech Platforms
The fintech platforms like INDmoney and Vested have simplified international investing for the wallet. In this, savings are accrued through fractional share investing, which is cheaper for a new client than buying shares whole.
5. Investment via Fractional Shares
These are a good starting point for small-time investors who want to invest in costlier stocks. Now, one need not buy the entire share of companies like Google or Amazon; they can simply buy a fraction of the stock, making the investment a lot more accessible.
Suggested Read: Best Stock Market Software
Things To Remember Before Investing In US Stocks From India
Exchange Rate Fluctuation: An Indian investor, investing in US stocks has to bear the consequences of exchange rates. Since your investments are in USD, changes in INR-USD will impact returns. Thus, for instance, a weak rupee might pump up your returns whereas a strong rupee may deflate them.
Remittance Limits under LRS: Indian residents can remit up to $250,000 during the fiscal year for investment and any other purpose. So, while investing in US stocks, investors have to check if they are buying under LRS limits or not.
Taxation: The other element is the tax. When you plan to invest in US stocks as an Indian, then both Indian and US tax rules apply.
Tax on Dividends: Income derived from dividends from US companies attracts a 25% tax by the US Government. You can still claim double tax relief if you declare in your Indian return under DTAA.
Capital Gains Tax:
Short-term Capital Gain: Any US stock sold within three years results in the profit earned being considered STCG and would be taxed according to your applicable income tax slab.
Long-term Capital Gains (LTCG): If any investment is held for more than three years, then that results in a 20% tax rate with the indexation advantage.
Remember that before investing abroad you must seek the services of a tax consultant to ensure all your investments comply with Indian Tax Laws
Steps To Invest In US Stocks Directly From India
Choose a Platform: Choose a reputable Indian or US-based broker. Ensure the platform is user-friendly, charges minimal fees, and has excellent support mechanisms.
KYC along with Opening of Account: Complete your KYC documents and upload whatever is required as proof for verification.
Fund Account: Transfer your funds through proper banking channels and exchange INR to USD.
Research Stocks: Watch out for US companies’ performance and decide whether to invest in individual stocks or ETFs. Get the company fundamentals, market trends, and news.
Make an Order: An order should be placed on the trading brokerage platform. This could be either a market order, which means one buys or sells at whatever price is charged at a given time, or a limit order, which is buying or selling of the commodity at a set price.
Track and Evaluate: Monitor your investments at every given interval. Monitor the market news and follow the updates about the companies to determine when to buy more, hold, or sell.
Tips for Indian Investors
Go Small: It would be quite advisable to start small, this means, begin with a small investment and gradually increase your exposure to US markets as you gain experience.
Be Informed: Global markets are influenced by both political and economic events. So, keep an eye on news regarding US policies, market trends, and company performance.
Diversify: Do not keep all eggs in one basket. Invest in various kinds of companies and industries to spread out the risk associated with investments.
Aware Yourself of Tax Laws: Learn about tax rules and regulations of India and the US to not be surprised by unknown tax liabilities.
Conclusion
In the US, making a stock investment has been one good opportunity that makes Indian portfolios diversified and exposed to some of the world’s largest companies.
Many trading platforms and investment options have made it the easiest time ever to get started, but again, one should not ignore the aspects of exchange rates, tax, and market trends as these play major roles. Apart from that, with proper steps and research, Indian investors can benefit from global investment while managing risk.
Published On: October 9, 2024
Namrata Samal
Namrata is a skilled content writer with an expertise in writing marketing, tech, business-related topics, and more. She has been writing since 2021 and has written several write-ups. With her journey with Techjockey, she has worked on different genres of content like product descriptions, tech articles, alternate pages, news, buyers’ guide, expert reviews, and more.
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