Investing in US stocks and mutual funds from India has become increasingly popular as investors seek diversification and exposure to global markets. The US market, being one of the largest and most dynamic, offers opportunities to invest in leading companies like Apple, Tesla, and Amazon. But how can an Indian investor access these opportunities? Let us have a look at the entire process of investing starting from scratch.
Ways to Invest in US Stocks and Mutual Funds from India
Direct Investment through Brokerage Platforms
Many Indian brokers have partnered with international platforms to facilitate investments in US stocks and ETFs. These platforms allow seamless access to US markets while adhering to local regulations.
Indian investors can directly open accounts with US-based brokerage firms, such as Interactive Brokers, that accept non-resident clients. These accounts provide access to a wide range of US equities and ETFs. However, they may require additional documentation and compliance with US tax laws.
Investing Through Indian Mutual Funds
Indian mutual fund houses offer funds that invest in global markets, including the US. These are often feeder funds that channel investments into US-focused funds. For instance, the Franklin India Feeder – Franklin U.S. Opportunities Fund focuses on US equities.
ETFs listed on Indian stock exchanges track international indices, providing exposure to US markets. For example, the Motilal Oswal NASDAQ 100 ETF tracks the NASDAQ 100 index, offering a cost-effective way to invest in US tech giants.
Trading via NSE IFSC in GIFT City
The NSE International Financial Service Centre (IFSC), located in Gujarat’s GIFT City, allows investors to trade in select US stocks. This platform offers a straightforward way to access US equities without the need for overseas accounts.
Regulatory Framework for Overseas Investments
Liberalized Remittance Scheme (LRS)
The Reserve Bank of India (RBI) allows resident individuals to remit up to USD 250,000 per financial year under the Liberalized Remittance Scheme (LRS). This limit applies to investments in foreign stocks, mutual funds, and other permissible asset classes.
Taxation
- Dividend Income: Dividends from US stocks are taxed at a flat rate of 25% in the US, as per tax treaties. Investors can claim this as a foreign tax credit in India.
- Capital Gains: Profits from selling US securities are taxed in India. Short-term gains (holding period of less than 24 months) are added to the investor’s income and taxed as per their income slab. Long-term gains (holding period of 24 months or more) are taxed at 20% with indexation benefits.
Steps to Start Investing in US Stocks
- Select a Platform: Choose a brokerage or investment platform that offers access to US markets.
- Open an Account: Complete the KYC and documentation process as required by the platform.
- Fund Your Account: Transfer funds under the LRS to your investment account.
- Choose Your Investments: Research and select the stocks, ETFs, or mutual funds that go well with your financial goals.
- Monitor and Manage: Regularly review your portfolio and adjust as necessary based on market conditions and personal objectives.
Investing in US stocks and mutual funds from India provides an excellent opportunity to diversify your portfolio and gain exposure to global market leaders. With multiple investment methods available—such as brokerage platforms, Indian mutual funds, and the NSE IFSC—accessing the US market has become simpler than ever.