Investing in US stocks from India has become increasingly popular in recent times. Today, many Indian investors are putting their money into global companies like Apple, Tesla, Amazon, and Nvidia. Digital investment platforms and the RBI’s simplified remittance policies have made this process easier. In this blog, you’ll learn how to invest in the US stock market from India safely and intelligently.
Can Indians Legally Invest in US Stocks?
Yes it is perfectly legal for Indian residents to invest in the US stock market when done according to the rules. The most important rule is the RBI’s Liberalized Remittance Scheme (LRS), which allows an Indian resident to invest or send up to USD 250,000 abroad per financial year, including direct investments in US stocks, ETFs, and other foreign investments.
RBI and FEMA Regulations
- Legal Framework : The Foreign Exchange Management Act (FEMA) governs this and regulates all foreign investments.
- LRS Limit : Each individual is allowed to remit up to ₹2.25 crore (approximately USD 250,000) abroad, which can be used for investing in US stocks.
Ways to invest in US stocks
There are several easy and reliable options available today for investing in the US stock market from India. You can choose from the methods below based on your needs and risk profile.
- Investing Directly in US Stocks : In this method, you directly buy shares of American companies such as Apple, Google, Tesla, or Amazon. To do this, you need to open an account on an international investment platform. Platforms like INDmoney, Vested, and Groww offer this facility in India. Here, you can also buy fractional shares, meaning that even if a share price is high, you can still buy a small portion of it. This option is quite useful for new investors.
- Investing Through Mutual Funds : If you are not comfortable choosing individual stocks, international mutual funds can be a better option for you. These funds invest in American companies or indices. In this case, your money is managed by a professional fund manager, which reduces the stress of research. However, you don’t have the freedom to choose individual stocks.
- Investing Through ETFs : ETFs are suitable for investors who want to invest in multiple companies simultaneously. These funds typically track indices like the S&P 500 or Nasdaq 100. The advantage is that you get good diversification at a low cost, and the risk is also reduced.
How to Buy US Stocks from India
1. Choose a Platform
Select a reliable app that offers access to US stocks, clearly displays its fees, and is easy to use.
2. Complete KYC
KYC (Know Your Customer) verification is required to open an account. This involves uploading necessary documents to verify your identity and address.
The good news is that this entire process is usually done online and doesn’t take much time.
3. Transfer Funds
Transfer funds from your bank account. The money will be converted to US dollars and credited to your account.
4. Buy Shares
Search for the company, enter the amount you want to invest, and buy the shares. You can even buy fractional shares.
5. Monitor Your Portfolio
Regularly check how your investments are performing.
How to Invest in Nasdaq from India
What is Nasdaq?
Nasdaq is a popular stock exchange in the United States, where most technology and innovation-focused companies are listed. This is where shares of major companies like Apple, Microsoft, Google, Amazon, Meta, and Nvidia are traded. For this reason, it’s often referred to as a hub for tech companies. If you have confidence in the technology sector, Nasdaq could be a good option for you.
Ways to Invest
- Buying Shares Directly : You can buy shares of these companies directly. This requires an international trading platform.
- Investing in Nasdaq ETFs : If you want to cover the entire sector instead of choosing individual companies, the Nasdaq 100 ETF is a better option. It allows you to invest in several large tech companies simultaneously.
- Through Indian Mutual Funds : There are also some mutual funds in India that invest in companies listed on Nasdaq. These are suitable for those who don’t want to select individual stocks themselves.
Mutual Funds that invest in US stocks from India
| S.No | Fund Name | AUM (Rs Cr) | 3 Years Return (%) | 5 Years Return (%) | Current NAV |
|---|---|---|---|---|---|
| 1 | Motilal Oswal NASDAQ 100 FOF Fund Direct | 6,159.15 | 36.15% | 19.21% | 47.8342 |
| 2 | Franklin U.S. Opportunities Equity Active FoF Fund | 4,465.25 | 24.66% | 10.67% | 90.8343 |
| 3 | Kotak US Specific Equity Passive FoF Fund | 3,769.89 | 35.78% | – | 23.3484 |
| 4 | Edelweiss US Technology Equity FoF Fund | 3,640.42 | 37.48% | 13.19% | 34.3526 |
| 5 | DSP US Specific Equity Omni FoF Fund | 1,068.04 | 25.47% | 18.73% | 86.4890 |
| 6 | Invesco India – Invesco EQQQ NASDAQ-100 ETF | 406.92 | 34.86% | – | 21.6847 |
| 7 | Bandhan US specific Equity Active FoF | 357.00 | – | – | 18.8810 |
| 8 | Edelweiss US Value Equity Offshore Fund | 192.07 | 15.33% | 15.04% | 41.7112 |
| 9 | Bandhan US Treasury Bond 0-1 year Specific | 136.03 | – | – | 12.5394 |
| 10 | Mirae Asset Global Electric & Autonomous Vehicles Equity | 58.77 | – | – | 15.0410 |
Charges & Hidden Costs You Must Know
- Brokerage Fees : Every platform charges a small fee for buying and selling shares. Some have a fixed charge, while others use a percentage-based fee.
- Currency Conversion Charges : When converting rupees to dollars, the bank or app applies a forex markup. This is often the biggest hidden cost.
- Bank Remittance Fees : Banks may charge a transfer fee when sending money abroad.
- Platform Charges : Some apps also charge account maintenance or withdrawal fees.
- Tax Deductions : Taxes are deducted in the US on dividends, which can later be adjusted in your income tax return (ITR).
- Important Lesson : New investors often overlook these costs and later get upset when they see lower returns. Therefore, it’s crucial to understand the fees before investing.
Taxation: Taxes on US stocks for Indian investors
1. Capital Gains Tax applied
When you earn a profit by selling US shares, the tax is payable in India.
The US generally does not levy capital gains tax on non-residents.
Tax is applied in two ways :
- Short-Term Gains : If you sell shares within a short period, the profit is added to your income and taxed according to your tax bracket.
- Long-Term Gains : Holding shares for a longer period results in a lower tax rate. Currently, it is considered to be around 12.5% + cess (subject to change as per regulations).
2. Dividend Tax
When a US company pays you dividends, the US already deducts approximately 25% tax. This is called Withholding Tax.
- This deduction is made under the India-US DTAA (Double Taxation Avoidance Agreement).
- You also have to declare the same dividend income in your ITR (Income Tax Return) in India.
- However, you can claim a Foreign Tax Credit to avoid paying tax twice.
3. Reporting in ITR (Income Tax Return)
If you have invested in US stocks, you must declare this information in your ITR.
- Details of foreign investments must be filled in Schedule FA.
- Both dividends and profits must be shown as income.
- Filing the correct documents is essential to claim the tax credit.
4. Double Taxation Avoidance Agreement (DTAA)
There is a Double Taxation Avoidance Agreement (DTAA) between India and the US.
The benefits are :
- You don’t have to pay tax twice on the same income.
- The tax deducted in the US can be adjusted against your tax liability in India.
Important risks to understand before investing US stocks
- Currency Risk : You invest in rupees, but the returns are in dollars. If the dollar weakens, your returns could be affected.
- US Market Volatility : The US market, especially tech stocks, experiences rapid fluctuations. Therefore, short-term losses are possible.
- Global and Geopolitical Events : Factors such as wars, elections, or changes in interest rates can immediately impact the US market.
- The Mistake of Over-Diversification : Holding too many stocks can dilute returns. Focusing on quality stocks is a better approach.
- Emotional Trading : Buying or selling based on fear or greed is the biggest mistake.
- Long-Term Perspective is Essential : The real benefits of investing in US stocks are realized over the long term; patience is crucial.
Conclusion
Investing in US stocks has become a smart move for Indian investors today. If you choose the right platform, understand the costs and taxes beforehand, and make decisions without rushing, it can be very beneficial. The real advantage comes when you invest with a long-term perspective.
Frequently Asked Questions (FAQs)
How to invest in US stocks from India?
Open an account on a reliable app, complete KYC, transfer money, and buy shares.
Is it legal to invest in the US stock market from India?
Yes, it is completely legal under the RBI’s LRS scheme.
How much money can I invest in US stocks?
You can invest up to USD 250,000 per year.
Do I need a US bank account?
No, you can invest using your Indian bank account.
Can I buy US stocks with a small amount?
Yes, you can buy even with a small amount using fractional shares.
Is tax applicable on US stock profits?
Yes, you have to pay tax on the profits in India.
