How to Invest in US Stocks from India

The US market offers a wide variety of investment opportunities in well-known firms and has produced double-digit returns yearly for a very long time. Additionally, over the last 100 years, the average yearly return for the S&P 500 is 10.62%. By doing investment in U.S. stocks from India you can easily diversify your portfolio and take advantage of growth opportunities in the U.S. market. With the help of this blog, understand how to invest in US stocks from India, what are the reasons to invest in the US stock market, and things to consider before investing. 

How to Invest in US Stock Market from India?

You can invest in US Stock Market with two different methods: Direct Investment and Indirect Investment:

Direct Investment

Direct investment can be done by two methods: 

  1. Opening a global trading account with a domestic broker: You can open a global trading account to trade internationally with the assistance of tie-ups between Indian and US brokerage houses. By opening this account, you can directly purchase and sell US stocks from India. However, you must submit thorough documentation, including copies of your identity, address, and other crucial documents.
  2. Opening a global trading account with a foreign broker: Additionally, you can open a trading account with an Indian-operated international brokerage. These brokers offer a wider range of services and options for investments. It's still important to be aware of the terms and conditions that apply to these brokerage firms. Brokerage costs and currency conversion costs can be significant for direct investments. 

Indirect Investments

Here are some options for indirect investments:

  1. Mutual funds: There are opportunities to invest abroad through international mutual fund schemes. Some mutual funds track different indices for various countries in Asia and South America; the majority of funds track the U.S. market. 
  2. ETFs or exchange-traded funds
    An exchange-traded fund (ETF) is a type of stock that is traded on a stock exchange. Like individual stocks, ETFs can also be used as an alternative to invest in US markets. The liquidity and flexibility offered by ETFs allow investors to purchase and sell them at any time of the day or night. An ETF is an excellent way to enter the US market, as some exchanges, such as the New York Stock Exchange (NASDAQ), are dedicated to tracking US indices.


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

The different charges involved while investing in US stocks are:

Tax Deducted at Source, or TDS

If your investment is more than 7,00,000 INR in US stocks, then a TDS of 5% will be applied. As part of the RBI's Liberalised Remittance Scheme, this provision is in place. While filling out your income tax return you can claim this TDS as a refund. 

Capital Gains

When purchasing US stocks, an Indian national is subject to a 25% dividend tax. According to the Double Tax Avoidance Agreement (DTAA) between the US and India, you can avoid paying taxes twice on your dividend income to claim credits for taxes paid in the USA. From US assets India taxes capital gains. 

Brokerage Charges

To simplify the purchase and sale of stocks, brokers charge brokerage fees. In addition to flat fees per trade, transaction fees can also be based on a percentage of the trade value.

Account Maintenance Fees

To maintain an investment account brokers charge an annual or monthly fee and this fee will cover all the administrative costs. 

Foreign Exchange Fees

If you are planning to invest in US stocks from another country while converting your local currency into US dollars you need to pay foreign exchange fees. 

Reasons to Invest in US Stocks from India

Here are the reasons to invest in us stocks from India:

  1. Diversification: With US stocks, Indian investors can diversify their portfolios beyond the domestic market, reducing risk by investing in various economies and sectors. With this diversification, you get access to international trends and industries that may not be available locally. 
  2. High returns possibility: Due to historically strong performance and the robust regulatory environment, which offer significant growth opportunities, investing in US stocks offers Indian investors the potential for high returns.
  3. Diversification of currency: By investing in US stocks, you can mitigate currency risk and prevent rupee devaluation, as dollar-denominated investments can compensate for rupee depreciation losses through diversification. Moreover, having assets denominated in a stronger currency like the US dollar can provide you with more protection from domestic economic shocks.
  4. Innovation and technology:  In terms of innovation, technology, healthcare, and biotechnology, the United States is a global leader. By investing in these industries you get substantial funding for research and development, which leads to constant advancements and high potential returns.
  5. Dividend income: A stable source of income and the ability to grow over time are provided by dividends paid by U.S. businesses. Reinvesting dividends can also significantly improve your investment portfolio's overall returns.

Things to Remember Before Investing in US Stocks from India

Here are the things to remember before investing in US stocks from India:

Know the Legal Requirements

The first thing you need to check is whether you are a beneficiary of the RBI’s liberalised remittance scheme. Under this scheme, Indian citizens can invest up to $250,000 annually abroad (including U.S. stocks).

Select the Appropriate Brokerage Account

Costs, usability, accessibility of the market, and customer service are some of the factors to keep in mind when choosing a foreign trading company.

Exchange Rates for Currencies

The exchange rate between the Indian rupee and the US dollar will have an impact on your income, so you need to be aware of the current exchange rates.

Know the Impact of Taxation

It is important to be aware of the tax impact when you are investing in the U.S. stock market, as you may be taxed on dividend income and capital gains in both the U.S. and India.

To sum up, investing in US stocks from India can be a great way to diversify your portfolio, achieve high returns, and access the global market. In this blog, for your better understanding, we have clearly outlined the methods of investment, associated charges, and the important factors so that you can make informed decisions to maximise your investment potential. You can use an online trading app or download the best app to invest in US stocks from India to stay informed about market trends and ensure a smooth investment experience.

FAQs for How to Invest in US Stocks from India

You can invest by opening a global trading account with a domestic or foreign broker operating in India.

The dividends from US stocks are subject to a flat tax rate of 25% for Indian investors; the corporations of America withhold the tax.

Expenses such as taxes on profits and dividends, account upkeep, brokerage charges, and foreign exchange.

The advantages of investing in US stocks are portfolio diversification, potential high returns, currency diversification, access to innovative and technological companies, liquidity, and dividend income.

You must ensure that RBI requirements are followed and declare your global investments on your income tax return.