HomeFINANCEInvesting in US Stocks from India? 6 Things you Never knew About

Investing in US Stocks from India? 6 Things you Never knew About

It has always been the first rule of investing money.

“Invest mainly in things you use daily”. So you look around yourself to find that investing in US stocks is actually great.

You find Apple’s iPhones and Macbooks. You find Intel’s processors and nVIDIA’s graphic cards and all sort of electronics.

Then you turn your eyes to Amazon, from which you mostly have tons of packages incoming (Right?).

So you hear influencers talking about massive returns investing in US stocks and you want to go on their path.

Thinking of cashing in on US stock gains from India? Let’s get started.

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Key Benefits of Investing In US Stocks from India: Why do it?

From portfolio diversification to fractional ownership thus investing in US stocks gives you several advantages. Check a few of them below.

  1. Eggs in multiple baskets : By investing in US stocks, Indian investors can diversify their portfolios by going international, reducing risks associated with a single market.
  2. Access to Leading Companies : The US market includes some of the world’s largest and most innovative companies like Apple, Amazon, and Google, providing opportunities to invest in global leaders.
  3. Fractional Ownership : You can own a fraction of a share listed on the US stock markets whereas in India where you have to buy at least 1 share of any company.
  4. Innovative Instruments : The US markets offer plenty of unique investment options like Inverse Index ETFs, Water ETFs, and a diverse range of funds. These opportunities arise from the relatively relaxed regulatory environment, allowing investors to explore specialised sectors and strategies that might not be available in other markets. 
  5. High Returns Potential : Historically, US stocks have offered substantial returns driven by a robust economy and corporate performance.
  6. Currency Advantage : If the rupee depreciates against the dollar which is happening from the last two decades, the value of US investments increases. Thereby, offering an additional return boost for Indian investors. 

What are some challenges in Investing in US Stocks from India?

Time to say thanks to our beautiful taxation system. You are supposed to file a different ITR form i.e. ITR Form 2.

Many such implications are brought in when you deal with US Stocks. Some of them are listed below:

  1. Currency Risk: Exchange rate fluctuations can negatively impact returns if the rupee appreciates against the dollar, reducing the value of US investments. You are invested in the Forex market alongside US stocks.
  2. Tax Implications: Investing in US stocks involves navigating complex tax regulations, including double taxation and differing capital gains taxes. Even if your salary income is less than 50 Lakhs still you cannot file the ITR-1 (Sahaj) if you hold US Stocks. You will be required to file ITR 2.
  3. Market Volatility: US markets can be highly volatile, and global events can lead to significant fluctuations. All the major companies suffer direct consequences.
  4. Higher Transaction Costs: Investing internationally often comes with higher transaction fees, including brokerage charges and currency conversion fees. This adds upto a burden.

Investing in US Stocks from India: Tax Implications You Need to Know

When investing in US stocks from India understanding the tax implications is crucial to maximise your returns and stay informed about the regulations and penalties.

Here are the key tax considerations :

  1. Double Taxation Avoidance Agreement (DTAA) : India has a DTAA with the US, which helps in avoiding double taxation on the same income. However, investors need to file the appropriate forms to claim benefits under the DTAA. 
  2. Withholding Tax on Dividends : Dividends received from US companies are subject to a 25% withholding tax in the US. Indian investors can claim credit for this tax paid while filing their returns in India.
  3. Capital Gains Tax : Long-term capital gains (holding period more than 24 months) from US stocks are taxed at 20% with indexation benefits in India. Short-term capital gains are taxed as per the individual’s income tax slab.
  4. Reporting Requirements : Investments in US stocks need to be reported under the Foreign Assets Schedule in the Indian income tax return. Non-compliance can lead to penalties.
  5. Investment Limit : There’s a $250,000 investment limit per year, beyond which an Indian citizen won’t be permitted to invest in any form like equities, educational expenses, etc. without the express approval of the authority. 

Can I Invest in US Stocks from India?

Yes, Indian residents can invest in US stocks through several ways.

Here are the top 3 main methods used by majority of Indians:

  1. Direct Investment Through Brokerage Accounts: You can open an account with an Indian brokerage that offers international trading or with a US-based brokerage. Some popular platforms include Interactive Brokers, Vested, and INDmoney.
  2. Mutual Funds and ETFs: Several Indian mutual funds and ETFs invest in US stocks, providing an indirect way to gain exposure to the US market.
  3. International Investment Platforms: Platforms like Stockal and Globalise facilitate investments in US stocks for Indian investors.

How to Do Intraday Trading in US Stocks from India?

Trading is always the most interesting part. Agree?

Intraday trading in US stocks from India requires a good understanding of the market and the right tools.

Remember, knowledge and experience are your two main friends when trading in stock markets.

Here’s a step-by-step guide:

  1. Choose a Reliable Broker : Select a broker that offers real-time trading in US stocks. Ensure they provide necessary tools like charts, news feeds, and technical analysis features.
  2. Understand Market Hours : US markets operate from 9:30 AM to 4:00 PM EST. Indian traders need to adjust their trading hours accordingly, usually late evening to night.
  3. Stay Informed : Keep up with US market news, earnings reports, and economic indicators. Tools like Bloomberg, Reuters, and Yahoo Finance can be valuable.
  4. Use Stop-Loss Orders : Protect your investments by using stop-loss orders to minimise potential losses in a volatile market.
  5. Practice with Paper Trading : Many platforms offer paper trading accounts where you can practise intraday trading without risking real money.

Best App to Invest in US Stocks from India: Which one to choose?

There are many apps that are designed to make investing in US Stocks more convenient from India.

Learn about AI in Investment advisory and how it will change investing in future.

Here are some of the best options:

  1. Vested : Vested offers a seamless experience with fractional investing, no account opening fees, and educational resources.
  2. INDmoney : This app provides a complete financial planning solution including direct investment in US stocks with zero commissions.
  3. Stockal : Stockal enables Indian investors to invest in US stocks and offers curated investment portfolios based on risk profiles.
  4. Interactive Brokers : Known for its comprehensive trading tools and low fees, Interactive Brokers is suitable for more experienced investors.
  5. Globalise : This platform focuses on ease of use thus, providing a straightforward way to invest in US stocks with a minimum investment amount.

Conclusion

Investing in US stocks from India can be a smart move to diversify your portfolio and tap into the growth of global market leaders. While there are great upsides, it’s essential to understand the risks, tax implications, and the best tools available to maximise your investment returns.

By staying well informed, Indian investors can effectively navigate the complexities of investing in US stocks.

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Is it OK to invest in US stocks from India?

Yes, it is legal for Indian residents to invest in US stocks. Under RBI’s Liberalized Remittance Scheme (LRS), individuals can invest up to $250,000 per financial year, including foreign stocks.

Which is the best platform to invest in US stocks from India?

Vested, INDmoney, Stockal, Interactive Brokers, and Globalise are some of the best platforms for investing in US stocks from India. These platforms offer features like fractional ownership, low fees, and comprehensive financial planning tools.

Do I have to pay tax on US stocks in India?

Yes, you must pay taxes on US stock income in India. The US charges a 25% withholding tax on dividends, which can be claimed as a credit in India. Investors must pay a 20% tax with indexation benefits on long-term capital gains, while short-term gains are taxed based on your income slab.

Is it good for Indians to invest in US stocks?

Investing in US stocks is great for Indians as it offers portfolio diversification, access to global companies, high returns potential, and currency advantage due to the rupee’s depreciation against the dollar.

What are the benefits of investing in US stocks?

Investing in US stocks enables portfolio diversification, access to leading global companies, fractional ownership, and innovative investment options. It also offers high return potential and a currency advantage if the rupee depreciates against the dollar.

What are the disadvantages of investing in US stocks from India?

The disadvantages include currency risk due to exchange rate fluctuations, complex tax implications requiring filing ITR-2, market volatility from global events, and higher transaction costs, including brokerage fees and currency conversion charges.

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