Investing in US stocks from India is accessible by opening a direct international brokerage account, using Indian apps with international tie-ups, or buying US-focused mutual funds or ETFs. You can buy fractional shares with as little as $1, utilising RBI’s Liberalised Remittance Scheme (LRS) to transfer funds. Let's understand how to invest in US stocks, invest via Gift City, and more.

Key Highlights:

• TCS Threshold Hike: ₹7L to ₹10L, easing small investments (20% rate unchanged).
• LTCG Simplification: 12.5% flat on foreign assets, down from 20%, no indexation applicable.
• GIFT City Enhancements: UDRs expanded to 50+ stocks, zero TCS on education loans under LRS aids related remittances.

How to Invest in the US Stocks?

You can invest directly in the US stock market from India by opening an overseas brokerage account with an Indian broker that offers international investing, or with a US broker, leveraging the RBI's Liberalised Remittance Scheme (LRS) for up to $250,000 per financial year. And you can invest indirectly through Mutual Funds & ETFs.

Direct Investment Options

There are two options when it comes to direct investment methods:

Global Trading Account with a Domestic Agent:

Many domestic brokers collaborate with US stockbrokers as intermediaries for your trades. You can open an international trading account with any one of these brokers. Depending on the brokerage firm, you can be subject to restrictions on the kinds of investments you can utilise or the number of trades you can conduct.

Overseas Trading Account with a Foreign Broker:

Another option for setting up a trading account for international markets is to choose a broker with an international presence in India. Be aware of the costs and terms before opening the account. Therefore, research before selecting the best broker to purchase US stocks from India.

Direct investment costs may be high due to brokerage and exchange-rate charges. Therefore, ensure you are aware of all the expenses before opening an account.

Indirect Investment Options

Mutual Funds:

Through international mutual fund programmes, there are prospects for overseas investments. Some of these mutual funds track indices for various countries in Asia or South America; most track the US market.

Exchange-Traded Funds:

Unlike mutual funds, Exchange-Traded Fund (ETF) units are traded on the stock market throughout trading hours. You can buy and sell ETF units on the exchanges while they are open, just as you would buy and sell stocks.

You can trade ETFs with a demat account or any brokerage house. Many ETFs offer access to the NASDAQ and various other key international indices.

How can I buy US Stocks from NSE via Gift City?

There are three ways to buy US Stocks from India via Gift City.

• 1) Invest through international mutual funds that invest in stocks from other countries.
• 2) Investing directly through an U.S. registered stockbroker.
• 3) Investing through the NSE IFSC (International Financial Service Centre) Exchange. 

What is NSE IFSC and how to Invest?

The NSE IFSC (International Financial Service Centre) is a wholly-owned subsidiary of the National Stock Exchange (NSE). This NSE subsidiary operates an international stock exchange in GIFT City and Indian retail investors can trade US stocks there from March 3, 2022.

As of now only Eight US stocks are currently available for purchase on the NSE IFSC Exchange. They are Microsoft, Netflix, Apple, Amazon, Walmart, Alphabet (Google), Meta Platforms (formerly Facebook), and Tesla. 

The exchange's trading hours will be the same as those of the New York Stock Exchange (NYSE). Therefore, the NSE IFSC trading hours are from 2:30 p.m. to 8:00 p.m. IST.

Your domestic Demat account will not be able to trade these stocks. You will need to open another special Demat account.

Here's how:

• Open a trading and Demat account with a broker registered with the IFSC. 
• Get in touch with your existing broker affiliated with NSE IFSC to find out if there are any requirements you need to satisfy before you can begin trading US equities on the global exchange.
• Transfer funds from your Indian bank account to the broker's IFSC-registered account. 
• Currency conversion is required to invest in NSE IFSC US stocks because trades on the exchange are settled in dollars rather than Indian rupees.
• Once your money has been sent to the account of the IFSC-registered broker, you can begin trading in US stocks listed on the market.

Charges Involved in Investing in US Stocks from India

Tax Collected at Source (TCS):

Rate: 20% TCS applies on remittances exceeding Rs. 10 lakh under the RBI’s Liberalised Remittance Scheme (LRS) for US stock investments.

Refund: TCS can be claimed when filing your Income Tax Return (ITR) in India.

Capital Gains Tax:

Short-Term Capital Gains (STCG): Gains from stocks held for less than 24 months are taxed according to your income tax slab in India.

Long-Term Capital Gains (LTCG): Gains from stocks held for more than 24 months are taxed at 20% in India.

Dividend Tax:

US Tax: Dividends from US stocks are subject to a 25% withholding tax in the US.

DTAA Benefit: Under the India-US Double Taxation Avoidance Agreement (DTAA), you can claim the tax paid in the US as a foreign tax credit to offset your Indian income tax liability.

Bank Charges:

Foreign Exchange Conversion Fee: Up to 2% for converting INR to USD.

Transfer Fee: Charged for overseas fund transfers.

Account Setup Fee: Some banks may charge a one-time fee for setting up an account for international investments.

Brokerage Fees:

It varies by broker: it can be a flat fee per trade or a percentage of the traded value. Check your broker’s fee structure before opening the broking account.

Foreign Exchange Rate Impact:

Fluctuations in INR-USD exchange rates affect purchase costs, withdrawal amounts, and the number of shares/units allotted.

Additional Considerations

Reasons to Invest:

Diversification: Mitigates risks associated with Indian market volatility.

Historical Performance: The US markets have historically outperformed Indian markets, characterised by lower volatility.

Access to Global Leaders: Invest in companies like Amazon, Apple, Tesla, and innovative startups in AI, ML, etc.

Currency Gains: Potential for higher returns due to USD appreciation against INR.

Investment Approaches:

Direct Investments: Offer control but require market knowledge and regulatory compliance.

Mutual Funds/ETFs: Offers diversification and professional management, making them ideal for passive investors.

Key Reminders

Currency Exchange: Monitor forex rates and fees, as they impact returns.

Tax Compliance: Consult tax professionals to navigate DTAA and reporting requirements.

Regulatory Compliance: Ensure your investment method adheres to RBI and SEC regulations.

Risk and Goals: Align investments with your risk tolerance, market knowledge, and financial objectives.

Conclusion

Investing in US stocks from India offers diversification and growth potential, but it involves costs such as TCS, capital gains tax, dividend tax, bank charges, and brokerage fees. Select an investment approach tailored to your goals and expertise and consult with professionals to effectively manage your tax and legal obligations.