Foreign stocks: how Indians can invest in US stocks
How much can Indian investors buy international or foreign stocks?
Indian brokers such as HDFC Securities, Motilal Oswal and Geojit, as well as fintech platforms such as Stockal, offer comprehensive US investment services. While you can invest a lot of money in US stocks, keep in mind that the Reserve Bank of India has set a limit of 250,000 & for Indian residents.
The Reserve Bank of India (RBI) allows an Indian citizen to send $ 250,000 each fiscal year to the United States. With the current exchange rate. This sum is in billions of rupees. If you have two family members, you can invest a total of 250,000 & (500,000).
Prepare to pay a lot of money: you will be dealing with foreign currencies if you want to invest in other countries. If you want to invest in the US stock market, now you have to pay the fees and brokerage in US dollars.
Direct investment in US equities
Process of investing in foreign stocks:
The first step is to create an account online once you have found the best brokerage account in India to buy US stocks. It is a quick and easy procedure.
Step 1: To invest in the international stock market, you must first open a trading account with a brokerage firm that offers overseas trading services. There are only a few well-known brokerage firms that offer foreign trade services.
Step 2: Submit a separate account opening form with all the required information, as well as your client’s papers (KYC).
Step 3: You need to transfer funds to the foreign partner of the local stock broker, through which the service is provided.
Step 4: Submit the LRS claim and declaration forms.
Step 5: Complete form A2 (which is available from your broker)
Step 6: Sign a Foreign Exchange Management Act (FEMA) reporting form.
Authorization form for the specified bank agency to act as an authorized reseller.
You can now use an internet marketplace to buy and sell international stocks.
Investing Through Mutual Funds
Investing in international funds (funds of funds) has a set of advantages. To get started, you don’t need a Demat account or a trading account. Second, investing is simple since the investor does not need to open an international account or worry about currency fluctuations. Third, you won’t have to worry about going over your investment limit, as there is an annual limit if you invest directly through the LRS.
This is the easiest way to invest in international stocks. The most important advantage of investing in mutual funds is that you don’t need to open an international account. Investing in mutual funds / ETFs is also less expensive than investing directly in foreign stock markets.
Investing via ETFs
A Demat and a trading account are required for ETFs. The simplest and most straightforward approach is to invest in companies based outside India through a feeder or fund of funds. In this way, they also offer index funds that invest in foreign indices such as S&P 500, NASDAQ, Russell, Dow Jones, etc. You can also invest in gold, commodities, technology, energy, and resource funds, all of which are differentiated by geography. Because many mutual funds already have different themes, an investor doesn’t need to worry. It’s as easy as investing in any national mutual fund.
Tax implications for these investments
This profit will be taxed in India. In the United States, no tax will be withheld. The amount of taxes you have to pay in India is determined by how long you keep the investment. The long-term capital gain threshold is 24 months, at a rate of 20% with an indexation advantage. Capital gains are deemed to be short-term if you sell a stock in less than 24 months and are taxed according to your tax bracket. Dividends, unlike investment profits, will be taxed at a fixed rate of 25% in the United States. Fortunately, the United States and India have a Double Tax Avoidance Agreement (DTAA) that allows taxpayers to deduct income tax paid in the United States. The 25% tax you have already paid in the United States is available as a foreign tax credit, which you can use to offset the income tax you owe in India.
There are online platforms that allow you to invest in foreign stocks directly, but keep in mind that this is not always straightforward due to various factors. For starters, all of these stocks are valued in US dollars. The dollar becomes excessively expensive when converted into Indian rupees.