If you want to invest in stocks like Apple, Google, or Tesla but are worried about the legality of investing in US stocks from India, then the answer is – Yes you can invest in US stocks from India under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI).
Under the LRS, you can remit up to USD 250,000 (more than 2 crores) per financial year.
How to Trade in US Stock Market from India
You can’t do intraday trading in US stock market from India due to regulatory requirements. However, you can invest in US stock market from India in five ways.
5 Ways to Invest in US Stocks from India
There are various options available for investing in US stocks from India. Let’s explore these options in more detail:
#1. Investment in Entities Located in IFSC (SEZ)
You can start investing in US stocks from India through companies located in International Financial Services Centres (IFSC). NSE IFSC is a special economic zone that is designed to attract financial institutions and corporations from around the world.
These entities allow investors to invest in US stocks and other international assets through Indian financial institutions.
Currently, there are two IFSC SEZs located in Gujarat and Maharashtra.
To buy US stocks listed on the NSE IFSC Exchange, you will need to open a new demat account with an IFSC-registered broker. Your existing demat account with regular brokers won’t be sufficient.
For example, if you have a demat account in Groww, you can’t use that for IFSC investments, you have to open an account with Groww (IFSC) separately.
The exchange currently allows the trading of 8 US stocks as of now. These US stocks are –
- Meta (earlier Facebook)
NSE IFSC has trading hours aligned with NYSE (NewYork Stock Exchange) which are 8 pm to 2:30 pm IST.
You’ll need to transfer funds from your Indian bank account to the account of the IFSC-registered broker since trades are conducted in US dollars.
Once your funds have been transferred, you can start trading in US stocks. You can also learn how to read the Japanese candlestick charts for trading in US stocks.
Some of the NSE IFSC registered brokers are –
Edelweiss (IFSC), Groww (IFSC), Geojit (IFSC) and Motilal Oswal (IFSC).
Some banks are also registered with IFSC which are SBI, HDFC, ICICI, and Axis.
#2. Direct Investment in US Stocks
Another option is to invest directly in US stocks. You need a US trading account with an Indian bank or broker that offers this service. You can check out our research report on top 20 stock brokers in India 2023.
You must complete your KYC using your PAN card, and Aadhar card to open the account. Once your account is opened, you have to transfer funds to a US trading account and then you can start trading in US stocks.
Brokers such as 5paisa, Groww, and Angel Broking have collaborated with US brokers such as Drivewealth to allow you to invest directly in US stocks.
Investment platforms like INDmoney or Vested also offer US stock investment. You can also check the detailed review of INDmoney app.
#3. Investment in US Stocks with Mutual Funds
Many Indian mutual fund companies offer funds that invest in the US stock market. You can easily invest in US stocks without having to manage your investments actively.
For example, ICICI Prudential US Bluechip Equity Fund allows you to invest in the United States’ top tech, telecom, health, and many similar high-growth companies.
Another plus point is you don’t have to open a US trading account to invest in these funds. You can invest using any demat account because you are investing in Indian mutual funds that further invest in US stocks or ETFs.
#4. Investing in US Stocks through ETFs
You can invest in US-based ETFs that invest in US stocks. These ETFs are passive investment instruments that track the performance of US-based companies listed on popular stock exchanges like NASDAQ and NYSE.
For example, the SPDR NYSE Technology ETF tracks United States’ technology sector and has given around 42% CAGR in the last 3 years.
You get exposure to the US equity markets without the complexities of direct investments.
Investing in ETFs has 3 major benefits –
- Firstly, you can US equity markets without the complexities of direct investments.
- Secondly, Investing in US stocks is cost-effective with lower expense ratios compared to mutual funds.
- Lastly, you can diversify your investment portfolio and reduce your overall investment risk. You may like to read how you diversify your 15 lakhs investment portfolio to earn monthly income return with medium risk reward ratio.
#5. Investing in US Indices
Another option for investing in US stocks from India is investing in a US index like the Nasdaq.
The Nasdaq is an index that includes some of the world’s largest and most successful technology companies, such as Apple, Google, Facebook, and Amazon.
Investing in the Nasdaq provides investors with exposure to the US market and the opportunity to invest in some of the world’s most valuable and innovative companies.
You can invest in Nasdaq or any other US index in two ways –
- Through US trading account – Investment platforms like Groww, INDmoney, Vested, and some brokers like Groww, allow you to directly in the Nasdaq index through a US trading account.
- Through domestic demat account – Your regular demat account allows you to invest in the fund of funds that further invest in US indices such as Nasdaq, Vanguard, and NYSE.
How to Invest in US Stocks from India (Direct Investment)
Investing in direct US stocks is a new trend that has been very popular for the last 2 years. Brokers and investment platforms allow you to open a US trading account to invest in US stocks. Let’s discuss the step-by-step process.
Step 1 – Choose an Investment Platform
Open a trading account with a broker that offers international investing services such as Groww, 5paisa, and INDMoney.
Most of these investment platforms or brokers allow free account opening and zero AMC.
Step 2 – Open an account for US stock investment
Once you have your account opened, you have to open a US stock trading account by clicking on “US stocks account” in your profile tab.
Step 3 – Transfer funds to your US broker’s bank account
You can transfer funds to your US account by adding it as the beneficiary in your bank account’s fund transfer section. For example, if you have an HDFC bank account you can follow the process below.
- Log in to your HDFC bank’s net banking portal
- Go to the Funds Transfer section
- Click on ‘Remit Now’ and then click on “Add as Beneficiary”
- Fill in US bank account details provided by your broker for US stock investment
- Once the US bank is added as a beneficiary, now transfer the required funds to that Beneficiary under the “Remit Now” option.
Step 4 – Select the stock you want to buy.
Once the funds are transferred, you can open your broker’s app and choose the US stocks that you want to invest in. For example, I have selected Tesla stock for investment. You can go through a dedicated article on How to invest in Tesla from India for a better understanding.
Step 5 – Place the order
Enter the amount you want to invest or the number of shares you want to buy. You can also buy shares in fractions such as you can buy 0.50% of Tesla shares or 0.25% of any stock.
Click on “Place Buy Order” and your order will be executed immediately.
You may like to read – report on upcoming IPOs 2023-2024
Charges Associated with Investing in US Stocks
Sure, here’s the table showing different charges associated with US Stock Investment:
|Account opening charges||Indmoney and Groww charge Zero account opening fee|
Vested charges Rs 450 as an account opening fee.
|Annual charges||Start from Zero to Rs 10,000 varies from broker to brokerIndmoney, Vested, and Groww charge Zero AMC fees|
ICICI Direct charges from Rs 0 to 9999 per year as subscription charges
|Fund deposit charges||Zero|
|Fund deposit and withdrawal charges||$5 to $10 per withdrawal|
|Currency conversion charges||As per the rates fixed by banks|
Benefits and Risks of Investing in US Stocks
#1. Benefits of Investing in US and International Stocks from India
- Diversification: Investing in US and international stocks can help you diversify your investment portfolio and reduce your overall risk. By investing in stocks from different countries and industries, you can spread your risk and potentially earn higher returns.
- Exposure to global markets: Investing in US and international stocks gives you exposure to global markets and allows you to participate in the growth of global companies.
- Potential for higher returns: US and international stocks have the potential to offer higher returns than Indian stocks. By investing in companies with strong fundamentals and growth prospects, you can potentially earn higher returns over the long term.
- Hedge against inflation: Investing in US and international stocks can also serve as a hedge against inflation. As the value of the rupee decreases, the value of your international investments may increase, providing a hedge against inflation.
You may like to read how to invest 1 crore for regular monthly income in India.
#2. Risks Associated with Investing in Global Stocks from India
Investing in US and international stocks can be risky, just like any other investment. Here are some of the risks associated with investing in US and international stocks from India:
- Currency risk: When you invest in international stocks, you are exposed to currency risk. Fluctuations in exchange rates can affect the value of your investment. If the currency of the country where you are investing depreciates against the Indian rupee, the value of your investment will decrease.
- Political risk: Investing in international stocks also exposes you to political risk. Political instability, changes in government policies, and geopolitical tensions can affect the performance of your investment.
- Market risk: Stock markets are inherently volatile and unpredictable. The value of your investment can fluctuate based on market conditions, economic indicators, and company-specific factors.
- Regulatory risk: Investing in international stocks also exposes you to regulatory risk. Changes in foreign regulations, tax laws, and trade policies can affect the performance of your investment.
You can check out our latest article how to invest 50 lakhs for monthly income with low, medium, and high risk investment plans.
Tax Implications of Investing in US Stocks from India
#1. Capital Gains on US Stock Investment
When it comes to US stocks, Indian investors need to pay a tax on the capital gains earned from the investment.
|Capital Gain Type||Holding Period||Tax Percentage|
|Long-term capital gains (LTCG)||More than 24 months||20% with indexation benefit|
|Short-term capital gains (STCG)||Less than 24 months||As per income tax slab rates|
It is important to note that you can claim a tax credit for the taxes paid in foreign countries on your foreign income. This helps in avoiding double taxation of the same income.
#2. Tax Collected at Source (TCS) under LRS
Recently, the Indian government introduced a new tax on remittances made under the Liberalised Remittance Scheme (LRS).
Under this new tax, called the Tax Collected at Source (TCS), investors will need to pay a 5% tax on any remittance made above INR 7 lakh in a financial year.
This means that investors who want to invest more than INR 7 lakh in US stocks through the LRS will need to pay an additional tax.
How to Invest in US Stocks From India Zerodha
Zerodha doesn’t provide an international stock investment facility. You can go for Groww, INDMoney, 5paisa, or Vested for US stock investment. You can also check the detailed comparison between 5paisa vs Upstox for Us stocks investments.
Investing in US stocks from India offers several benefits, including diversification of investment portfolio, exposure to global markets, and potential for higher returns.
However, you should do proper research, seek professional advice, and choose the right investment options and brokerage firms to invest in US stocks from India.
The amount of money you need to invest in US stocks from India depends on the brokerage firm and the minimum investment requirement.
Yes, you need a PAN card for KYC verification while opening trading account to invest in US stocks from India.
Yes. NRIs can also invest in US stocks from India.
Yes, it is safe to invest in US stocks from India, but investors should understand the risks associated with investing in the stock market.
The amount of money required to invest in US stocks from India depends on the investment option chosen by the investor. Direct investments in US stocks require a larger amount of capital, whereas investing in US mutual funds or index funds can be done with smaller amounts. Some brokerage firms also have minimum investment requirements.
When choosing a brokerage firm for investing in US stocks from India, you should consider factors such as brokerage fees, minimum investment requirements, customer service, and trading platforms.
Additionally, you should research the regulatory compliance and reputation of the brokerage firm.
Yes, investors can invest in international stocks from India using the same options available for investing in US stocks.
Some popular options for investing in international stocks include investing in mutual funds or index funds that track international markets or investing directly in foreign companies.
Diversifying your investment portfolio with international stocks involves investing in stocks from different countries and regions.
You can achieve this by investing in mutual funds or index funds that track international markets, investing directly in foreign companies, or investing in exchange-traded funds (ETFs) that provide exposure to international markets.