Investing in US stocks from India has become increasingly accessible for new-age investors. The US stock market, being the world's largest, offers opportunities to invest in global giants and innovative companies, providing diversification benefits to an investment portfolio Invest in US Stocks. Here's a guide to help you navigate this process:

Ways to Invest in US Stocks from India:

There are primarily two routes for Indian investors to access the US stock market: direct and indirect investment.

1. Direct Investment:

• Opening an Overseas Trading Account: You can open a trading account with either a domestic broker that has partnerships with US brokerage firms or directly with an international broker that accepts Indian clients.
  • Domestic Brokers: Several Indian brokers have tie-ups with US brokers, acting as intermediaries for your trades. You'll need to open an international trading account with them and complete their KYC (Know Your Customer) procedures. Be aware of potential restrictions on investment choices or the number of trades. Examples include HDFC Securities and Motilal Oswal.
  • International Brokers: You can also directly open an account with foreign brokers that have a presence in India, such as Interactive Brokers, Charles Schwab, or TD Ameritrade. Ensure you understand their fees, charges, and terms before opening an account.
• NSE IFSC Platform: The NSE International Financial Service Centre (IFSC) in Gujarat's GIFT City allows Indian retail investors to trade in select US stocks. Currently, around eight US stocks, including Apple, Amazon, Alphabet (Google), Meta Platforms (Facebook), Microsoft, Netflix, Tesla, and Walmart, are available, with plans to expand this list to 50. You'll need to open a separate Demat and trading account with a broker registered with the IFSC to use this platform. Trading is in US dollars, so currency conversion is necessary.

2. Indirect Investment:

• Mutual Funds: Several Indian mutual funds offer schemes that invest in US equities. These "feeder funds" pool money from Indian investors and invest in offshore funds that hold US stocks. This offers a diversified approach without the need for a direct trading account in the US.
• Exchange-Traded Funds (ETFs): You can invest in US-focused ETFs, which track specific US market indices like the S&P 500 or the Nasdaq 100. These can be bought and sold on Indian stock exchanges through your existing Demat account or through international brokers.
• Investment Apps: Several new-age mobile applications have emerged that facilitate investment in US stocks for Indian investors. These platforms often offer features like fractional investing (allowing you to buy parts of expensive shares) and simplified account opening processes. Examples include INDmoney and Vested Finance (powered by HDFC Securities).

Key Considerations for New-Age Investors:

• Minimum Investment: Some platforms allow you to start investing with as low as $1, making it accessible for new investors with limited capital. Fractional investing further lowers the barrier to entry.
• KYC and Account Opening: The account opening process is usually digital, requiring you to submit identity and address proof (like PAN and Aadhaar) and complete the KYC verification.
• Funding Your Account: You'll need to transfer funds from your Indian bank account to your US trading account. This involves currency conversion from INR to USD, and banks typically charge a foreign exchange conversion fee and a transfer fee. Some platforms have integrations with Indian banks like HDFC and Axis Bank for simplified transfers.
• Brokerage and Other Charges: Be aware of the various fees involved, including brokerage fees (which can be a flat fee or a percentage of the trade value), currency conversion charges, wire transfer fees, and potentially account maintenance fees. Compare the fee structures of different brokers and platforms.
• Tax Implications: Investing in US stocks from India has tax implications in both countries.
  • Dividends: Dividends earned from US stocks are subject to a 25% withholding tax in the US. In India, this dividend income is also taxable according to your income tax slab. However, due to the Double Taxation Avoidance Agreement (DTAA) between India and the US, you can claim a foreign tax credit in India for the tax paid in the US by filing Form 67.
  • Capital Gains: The US does not levy capital gains tax on non-residents. In India, capital gains are taxed based on the holding period:
    • Short-Term Capital Gains (STCG): If you sell the stocks within 24 months of purchase, the gains are added to your taxable income and taxed according to your income tax slab.
    • Long-Term Capital Gains (LTCG): If you hold the stocks for more than 24 months, the gains are taxed at a flat rate of 20% (plus applicable surcharge and cess) without indexation benefits. Before Budget 2024, the LTCG tax rate was also 20% but with indexation.
  • Tax Collected at Source (TCS): Effective from October 1, 2023, a 20% TCS is applicable on remittances exceeding ₹7 lakh in a financial year under the RBI's Liberalised Remittance Scheme (LRS) for overseas investments. This TCS can be claimed as a credit when you file your income tax return.
  • Reporting Requirements: You must report your foreign investments and income in your Indian tax returns, even if there are no gains or losses, under Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) of your Income Tax Return (ITR). You might need to file ITR-2 or ITR-3 depending on your income sources.
• Liberalised Remittance Scheme (LRS): The Reserve Bank of India (RBI) allows Indian residents to remit up to $250,000 per financial year for various permissible purposes, including investing in foreign stocks. All investments in US stocks fall under this scheme.
• Currency Risk: Your returns on US stock investments will be affected by fluctuations in the INR/USD exchange rate. A depreciation of the INR against the USD can enhance your returns when you convert your investments back to INR, and vice versa. Strategies like dollar-cost averaging can help mitigate this risk.
• Research and Due Diligence: Before investing in any US stock, conduct thorough research on the company's fundamentals, financial health, growth prospects, and the overall market conditions. Diversifying your investments across different sectors can also help manage risk.
• Regulatory Compliance: Ensure that your investment methods comply with both Indian and US regulations.