How Can You Invest in US Stocks From India?
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There are many reasons why investing in US stocks is preferred. Most of the leading global companies are listed on the US stock market and it has over 6,000 companies listed. It is one of the strongest capital markets with a market capitalisation above $40 trillion.
The US stock market is more mature and on a currency-adjusted basis, investors get higher returns. Investors can easily invest in the US stock market using an online share trading app.
Investing in US stocks
The RBI’s Liberalised Remittance Scheme allows investment by Indian residents in the US stock market to $250,000 per financial year. This includes remittance abroad for various purposes like education, travel, business and more.
Indians can invest in US stocks as follows:
To invest directly, investors can open an overseas trading account with a domestic/foreign broker.
Investors can invest indirectly through mutual funds and exchange-traded funds that are listed on the US stock exchange.
Investors can buy US stocks through the International Financial Services Centre (IFSC) via the NSE International Exchange (NSE IFSC). US stocks can be purchased through the India International Exchange Limited and the international arm of BSE from the India INX Global Access IFSC Limited.
What do investors need to do to invest in US stocks?
Investors should possess important documents like proof of address, proof of identification, PAN card and also profile information like net worth, income and risk tolerance.
The investors can send the money to a regulated broker in the US through an RBI-regulated bank. When you open an account in the RBI-regulated bank it will conduct an online KYC and check the documents like bank statements and ITR. Form A2 which is the LRS declaration also has to be submitted. Anti-money laundering checks are done by the bank before approving the remittance.
When you open an account the US broker will also conduct KYC, risk assessment and background checks. For non-resident aliens (NRA) taxpayers a W-8BEN declaration is also required
Taxes to pay
Tax Collected on Source (TCS) of 5% is levied above the mark of Rs. 700,000. Though TCS can be claimed when filing the ITR - Form 26 AS as a refund. Profits on investment are taxed based on the duration the funds were held.
Dividends earned on US stocks by investors are taxed at 25%. India and the US have a Double Taxation Avoidance Agreement (DTAA) which allows investors to pay this tax only once.