How to Invest in US Stocks from India: A Complete Guide

The US stock market is one of the most popular investment destinations in the world. This market is home to some of the biggest names including Apple, Google, Facebook, General Motors, amongst many other names. For Indian investors, investing money into these companies isn't just about chasing returns, but rather about diversifying beyond the Indian market and participating in global stock investments. If you've ever wondered how to invest in US stocks from India, then it has become more accessible today than ever before.

How to Invest in the US Stock Market from India?

There are broadly two ways to invest in the US stock market from India, including direct investment and indirect investment. Both have their own merits depending on one’s experience level, and investment size.

Direct Investment in US Stocks

Direct investing means the investor actually owns the shares. The two ways an investor can invest in the US stock market is through:

1. Through a Domestic Broker

Many Indian brokers have tie-ups with the US-based stockbrokers and act as intermediaries to execute their trades. To open an overseas trading account with a domestic broker, an investor needs to submit a few documents.

The factors an investor needs to remember are:

• Some brokers limit the number of trades as well as the type of investments to let an investor make
• They charge brokerage fees as well as conversion charges
• Always compare costs before choosing a platform

2. Through a Foreign Broker

An investor can also open an account directly through a foreign broker with their presence in India such as Charles Schwab, Interactive Brokers, or TD Ameritrade. This gives them more flexibility and often a broad range of investment choices.

Before signing up, an investor needs to make sure that they know their fee structure thoroughly. Knowing how to buy US stocks from India through the right broker can save the investor a huge amount in charges over time.

Indirect Investment in US Stocks

If an investor is not ready to dive into direct stock picking, then they can choose to go with the indirect investments which include:

1. Mutual Funds

Several Indian mutual funds invest in US stocks or US-based funds. This is good for beginners because:

• An investor doesn’t need to have an overseas trading account
• No requirements for minimum deposit in many situations
• The research and portfolio decisions are handled by the professional fund managers

2. Exchange-Traded Funds (ETFs)

Exchange-Traded Funds or ETFs provide exposure to a basket of US stocks without buying them individually. An investor can either:

• Buy US ETFs directly through a domestic or foreign broker
• Invest in Indian ETFs that track international indices

3. New-Age Investment Apps

Several fintech startups now provide platforms to help Indian investors access the US stock markets which are specifically designed for them. The apps are designed keeping in mind for the first-time investors with user-friendly features. However, it is important to know that some apps may not support intraday trading on US markets because of the regulatory restrictions.

Also Read: 5 Ways for Indians to Make Money in Us Markets

Table of Contents

1. How to Invest in the US Stock Market from India?
2. How Much Can I Invest in US Stocks from India?
3. What are the Different Charges Involved While Investing in US Stocks?
4. Reasons to Invest in US Stocks from India
5. Things to Remember Before Investing in US Stocks from India

How Much Can I Invest in US Stocks from India?

As per the Liberalized Remittance Scheme (LRS) by the Reserve Bank of India, Indian residents are allowed to invest up to USD 2,50,000, which is approximately ₹1.9 crore, per year without needing any special approvals. This limit is good for most retail investors, helping them build an exceptional international portfolio.

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

Understanding the charges involved while investing in US stocks is very important before beginning one’s journey in the US stocks market. The different charges include:

Tax Collected at Source (TCS)

Under the LRS, a TCS of 5% is applied to remittances more than ₹7 lakh, which can be claimed back when filed for Income Tax Return.

Capital Gains & Dividend Tax

The Indian investors are taxed at 25% for the dividends received from the US stocks. However, because of the Double Tax Avoidance Agreement (DTAA) between India and the US, the investors can claim credit for taxes that are already paid abroad.

Bank Charges

Several banks charge foreign exchange conversion fees, and wire-transfer fees.

Brokerage Fees

The brokers add their charges on every buy and sell transaction, which may differ across other platforms.

Foreign Exchange Rate Impact

The fluctuations in currencies during the time of investment can impact the actual returns and the number of units one receives.

Reasons to Invest in US Stocks from India

There are several good reasons to invest in US stocks from India:

• The US market is not as volatile as compared to the Indian indices.
• Multiple major and popular companies are listed in the US markets
• Over the last decade, US markets have outperformed Indian markets in dollar terms
• Investing in US stocks helps in diversifying one’s international portfolio, outside domestic investments
• The US is leading the global innovation and technology, which helps the investors to get an access to companies shaping the future

Also Read: How to Invest in US Stocks from India

Things to Remember Before Investing in US Stocks from India

It is important to know a few things before investing in US stocks from India such as:

Know your costs

As compared to domestic investing, international investing includes more charges in terms of TCS, brokerage fees, bank charges, and currency conversion before calculating the returns.

Invest, don't trade

Everyday trading becomes costlier when the charges are high, so in such cases, long-term investing is better for cross-border investments.

Impact of Taxation

While investing in US stocks, it is important to know the tax obligations of both India and US. While DTAA helps, one still needs to submit their foreign income correctly.

Start small

As a beginner investing in the US stock market, it is better to start with a small amount as a precautionary measure.

Do your research

Before entering into the US stock market, it is necessary for the investor to know and understand the market to make informed decisions.

Conclusion

Knowing and having an understanding as to how to invest in foreign stocks from India, it opens up several doors of opportunities for the investors. It entirely depends on the investors if they are comfortable with the direct route or choose to invest in the mutual funds and ETFs with proper knowledge and doing market research. Investing in US stocks can help one heavily diversify their portfolio while also understanding various factors including the charges, taxes, and currency conversion.