BAJAJ BROKING
March 24, 2025
10 mins read
Investing in US stocks from India provides an opportunity for portfolio diversification and exposure to some of the world’s most influential companies, including Apple, Google, Facebook, and General Motors. Buying shares in such global giants allows investors to participate in their growth while expanding beyond the Indian stock market. With advancements in digital brokerage platforms, investing in US equities has become more accessible than ever. However, factors such as regulatory compliance, taxation policies, and currency exchange rates must be considered before making investment decisions. Understanding the associated costs, risks, and long-term financial implications can help investors make informed choices while navigating the US stock market.
Here’s a list of reasons why you should invest in US stocks:
Historically, US stock market indices have been less volatile than Indian indices, making them a relatively stable investment option. Investing in US stocks can help balance risk in a portfolio by reducing exposure to market fluctuations.
Many of the world’s largest and most influential companies are headquartered in the US, giving investors the opportunity to invest in well-established global brands across diverse industries, including technology, healthcare, and consumer goods.
Over the past decade, the US stock market has outperformed the Indian stock market in dollar terms. This offers Indian investors the potential for higher returns by diversifying their portfolios internationally.
The US is a global hub for technological and business innovation. Investing in US stocks allows individuals to participate in the early growth of promising companies in sectors like artificial intelligence, biotechnology, and clean energy.
Since investments in US stocks are made in US dollars, Indian investors can potentially benefit from the appreciation of the US dollar against the Indian Rupee, enhancing long-term investment returns.
Investing in US stocks from India is now easier than ever, thanks to multiple investment options available to Indian investors. Whether through direct investment or indirect means, individuals can gain exposure to the US stock market while complying with Indian regulations.
1. Direct investment
Many Indian brokers have tie-ups with US-based stockbrokers, allowing investors to trade in US stocks through their platforms. These brokers act as intermediaries, executing trades on behalf of Indian investors. To start investing, individuals need to open a demat account and provide necessary KYC documents. However, certain restrictions may apply, such as limits on investment types or trading frequency, depending on the brokerage firm. Additionally, investors should factor in brokerage fees, currency conversion charges, and taxation before proceeding.
Investors can also open an overseas trading account online directly with US-based brokers that have a presence in India. Brokerage firms such as Charles Schwab, Ameritrade, and Interactive Brokers allow Indian investors to access US stock markets without intermediaries. These accounts provide direct market access, but investors must ensure compliance with Indian foreign investment regulations. It is important to review the platform’s charges, including withdrawal fees, currency exchange rates, and minimum balance requirements before selecting a broker.
2. Indirect investment
Investors can gain exposure to the US stock market by choosing Indian mutual funds that invest in US equities. These funds are managed by professional fund managers who allocate capital to major US companies.
Investors can also invest in US stocks through ETFs, which track US indices like the S&P 500 or Nasdaq. These funds offer a cost-effective way to diversify investments without directly purchasing US stocks.
With the rise of digital platforms, several mobile apps have been developed to facilitate US stock investments for Indian investors. These apps simplify the investment process by offering seamless account setup, compliance assistance, and real-time market access. However, due to regulatory restrictions, some platforms may not permit intraday trading in the US markets from India. Investors should carefully review app features, fees, and regulatory limitations before choosing a platform for international investments.
Investing in US stocks from India is permissible under the Reserve Bank of India's (RBI) Liberalised Remittance Scheme or LRS. This provision allows resident individuals (including minors) to remit a maximum of $250,000 each financial year (April–March) for various purposes, including overseas investments.
Key Regulations:
It's essential for investors to stay updated on current regulations and consult with financial advisors or tax professionals to ensure compliance with all legal requirements when investing in US stocks from India.
Investing in US stocks from India involves several charges that investors should be aware of before making international transactions. Below are the key costs associated with buying and holding US stocks:
A 20% TCS is levied on remittances exceeding ₹7 Lakhs under the RBI’s Liberalized Remittance Scheme (LRS). This tax applies only to the amount above ₹7 Lakhs and can be claimed as a refund while filing income tax returns.
Indian investors are subject to a 25% withholding tax on dividends earned from US stocks. However, under the Double Tax Avoidance Agreement (DTAA), investors can claim tax credits to avoid double taxation. Capital gains on US stocks are not taxed in the US but are taxable in India as per the applicable income tax slab.
Banks charge foreign exchange conversion fees and transfer fees when remitting money to invest in US stocks. Some banks may also impose a one-time account setup fee for international transactions.
Brokerage firms charge fees for buying and selling US stocks. These fees may vary depending on whether the brokerage is a domestic firm with international services or a foreign broker offering direct access to US exchanges.
Investing in US stocks provides Indian investors with access to a broader range of opportunities. However, it also comes with certain challenges. The table below highlights the pros and cons of investing in US stocks:
Pros | Cons |
Global Diversification – Investing in US stocks allows Indian investors to diversify their portfolios beyond domestic markets, reducing risk and exposure to a single economy. | Currency Risk – Since investments are made in US dollars, fluctuations in the exchange rate can impact overall returns when converting back to rupees. |
Access to Global Companies – The US market hosts some of the world’s largest companies across various industries, offering exposure to industry leaders. | Higher Transaction Costs – Investors incur brokerage fees, bank charges, and foreign exchange conversion costs, making investing in US stocks more expensive than domestic investments. |
Stable and Mature Market – US stock exchanges are highly regulated, providing transparency and security to investors. | Tax Implications – Dividends earned are subject to a 25% tax in the US, and capital gains are taxable in India. |
Investment in ETFs and Mutual Funds – Indian investors can access global ETFs and invest in mutual funds that track US indices, enabling diversified exposure. | Regulatory Restrictions – Investments must comply with RBI’s Liberalized Remittance Scheme (LRS), which limits remittances to $250,000 per year. |
Potential for Higher Returns – Historically, US stock markets have outperformed Indian markets in pure dollar terms, offering the possibility of strong returns. | Time Zone Differences – The US market operates at a different time from Indian markets, which can make active trading and real-time decision-making more challenging. |
Investing in US stocks provides diversification and access to global markets, but it also comes with specific challenges. Before making an investment, Indian investors should consider the following factors:
Investing in US stocks from India provides an excellent opportunity to diversify a portfolio beyond domestic markets, allowing exposure to global industries and leading companies. With the availability of digital platforms and real-time information, researching and analyzing US stocks has become more accessible for Indian investors. By considering regulatory requirements, investment costs, currency risks, and taxation, individuals can make informed investment decisions that align with their financial objectives.
However, international investing comes with its own set of challenges, including higher transaction costs, time zone differences, and varying tax structures. It is essential to assess one’s risk appetite, investment strategy, and long-term goals before venturing into US stock markets. Investors should carefully evaluate different investment methods, whether direct stock purchases, ETFs, or mutual funds, and choose the approach that suits their financial needs. A well-planned investment strategy can help maximize the benefits of global market exposure while mitigating risks effectively.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only.
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Yes, Indian investors can invest in US stocks through international brokerage firms, domestic brokers with global tie-ups, or mutual funds and ETFs with US market exposure. Investments must comply with RBI’s Liberalized Remittance Scheme (LRS), which allows remittances up to $250,000 per financial year for foreign investments.
Yes, Indian investors can buy US stocks directly by opening an account with a foreign broker that operates in India or a domestic brokerage offering international investment services. This requires a trading account and remittance of funds under the LRS. Brokerage fees, currency conversion costs, and regulatory compliance must be considered.
To trade in the US stock market, investors must open an international trading account with a broker, transfer funds in USD, and execute trades through online platforms. Some brokers offer fractional shares, allowing investment in high-value stocks with smaller capital. Time zone differences should be considered for active trading.
Dividends earned from US stocks are taxed at 25% in the US but can be claimed as a tax credit in India under the Double Tax Avoidance Agreement (DTAA). Capital gains are not taxed in the US but are subject to Indian tax laws based on the holding period and income tax slab.
Yes, Indian investors are required to pay taxes on capital gains from US stocks. If the stocks are held for more than 24 months, they are classified as Long-Term Capital Gains (LTCG) and taxed at 20% plus surcharge and cess. If sold within 24 months, they are classified as Short-Term Capital Gains (STCG) and taxed as per the investor’s income tax slab. Additionally, dividends from US stocks are taxed at 25% in the US, which can be claimed as a tax credit in India under the Double Tax Avoidance Agreement (DTAA).
Both US and Indian stocks offer unique opportunities. US stocks provide global diversification, access to established companies, and potential dollar appreciation. Indian stocks offer high-growth potential in an emerging economy. The choice depends on investment goals, risk tolerance, and portfolio diversification strategy.
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