How to Invest in US Stock Market from India?

Indian investors who wish to grow their wealth, often seek methods on how to invest in US stocks from India. Given the fact that it is home to two of the world’s biggest stock exchanges, their interest is justified.

The US stock market is one of the most liquid stock markets with a very high transaction volume. If you have even a basic idea of this market, you would know it is the market where stocks of companies like Apple, Tesla, Meta, Alphabet, etc. are traded.

Two of the main governing stock exchanges in US are the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ).

How To Buy US Stocks From India 

There are two primary methods to buy US stocks from India. i.e. direct and indirect methods. As the word suggests, the direct method means you can directly invest in the US stock market, and add those shares to your portfolio. The indirect method, on the other hand, means you can invest in the shares through different funds that invest in US stocks without having to add the shares to your portfolio directly. Let’s take a closer look at these two methods.

Direct method

This method can be further bifurcated into two options. The first option is to make US stock investments from India, by opening an overseas trading account with an Indian broker. Your other option is to open an overseas trading account with a foreign broker. Domestic brokers who offer this facility have tie-ups with US stockbrokers. Considering all the currency conversion charges and brokerage, this can be a more expensive option.

Indirect Method

Investing through funds like mutual funds and Exchange-traded funds allows you to invest in the US stock market from India without getting directly exposed to the volatility of the US market. You can invest directly in US funds through domestic or international brokers. If you want an alternative, then you can also choose domestic funds that invest in the US stock indices.

How To Invest in US Stock Market From India 

If you have been looking for platforms that allow you to invest in the US stock market from India, then Vested is here to meet your needs. We are an investment advisory platform that gives Indian investors a medium to invest in the US stock market with Zero commission. Here are the few simple steps you need to follow before getting started:

  1. Visit https://vestedfinance.com/in/.
  2. Click on the ‘Start Investing’ tab.
  3. On the next screen, click on ‘Sign up.’
  4. You will now get the option to sign up using your email, google account, Facebook, or Apple account.
  5. Choose an option at your convenience.
  6. Once you successfully register, you will be asked to complete your KYC process.
  7. Upload your ID proof, and address proof, and fill in other information as asked.
  8. If your documents are valid, you can get your approval in as little as 10 minutes.
  9. Your account is ready for you to start buying US stocks from India.

Benefits of Investing in US Stocks

Benefits of investing in US stocks range from diversification to better returns and a lot more. It is because of these benefits that inventors are inclined towards investing in the US stock market. Let’s take a closer look at some of them.

Diversify your portfolio

One of the most universal advice every investor tries to follow is the diversification of their portfolio. Hence when you invest in US stocks, you don’t get diversification just across different segments of the market, but across the different economies of the world. This is not limited to just US stocks but also stocks from across the world because the US stock market consists has companies from different countries listed on it.

Superior returns compared to India

If history is any proof, the US stock market has generated much superior returns than the Indian stock market. Even if you take the example of Covid-19, the US market bounced back much faster than the Indian stock market, which kept plummeting with every wave. Hence, if you are seeking higher returns, then the US stock market can be your doorway to it.

Exposure to other international stock markets

The US stock market is the only market that welcomes stocks from different countries on its stock exchanges. It has stock listed on it from countries across the world, including China, Japan, Germany, and many other countries. Thus, you get the benefits of the Global Market all in one place without having to invest in every country separately. Not just that, this diversification, also hedges your investment against different economies and mitigates your risk.

Can Invest in MNCs directly rather than the local Indian subsidiary

Many multinational companies that operate in India have their Indian subsidiaries registered in the country, while their headquarters are still situated in their home country. Irrespective of how those companies perform, they would never give you the returns that their holding company can. Additionally, these subsidiaries are often not even listed because of the shareholding pattern. Hence, another benefit of investing in US stocks is that it gives you direct access to the returns of the MNC, and you do not need to limit yourself to their Indian counterparts.

What documents are required for Investing in US Stocks from India? (documents required for US Investing)

There are no specific documents required for US investing except for opening your account. If you open an account with a global stockbroker or even Indian stock brokers that facilitate investing in US stocks from India, you would need some documents for KYC. Apart from KYC, there are no other documents required for US investing. You need a government ID to validate your ID and address proof. Hence when you open your account, you will have to submit your PAN card details and Aadhar card details to successfully open your account.

Once your KYC is approved, you can start investing in US stocks from India.

What are the charges and taxes involved in Investing in US Stocks? (Brokerage charges on US Investment, taxes on US Investing from India, Taxes on Dividends, Bank charges, FE Rates)

Before you decide to invest in US stocks, it is important for you to find out about all the charges associated with such investment. Incomplete or lack of knowledge of these charges can lead to negative returns despite your best investment strategies.

Brokerage Fee

Your brokerage fee is what your stockbroker charges when you buy or sell a share through their platform. Brokerage charges on US investments are decided by the stockbrokers themselves and can vary with every stockbroker. If you open an account with a domestic stockbroker with tie-ups to US brokers, they will levy high brokerage due to the number of intermediaries involved. Similarly, global investors might levy a lower fee, and depending on the platform, there might be no commission or brokerage fee at all.

Taxes on Investment Gains

Taxes on US investing from India are protected under the Double Tax Avoidance Agreement. Hence, if you pay any tax in the US, you won’t have to pay it in India again. For capital gains, there are no taxes levied in the US. However, in India, it is chargeable under tax as per the capital gains rule. A 20% income tax is charged if it is a long-term investment or otherwise as short-term gains based on your tax slab.

Taxation on Dividend

Tax on dividend income in the US is levied at 25% for Indian citizens. However, under the protection of DTAA, you won’t have to pay tax on your dividend income twice. Therefore, when you file your returns in India, you can claim a return for the tax paid in the US. You also don’t get any exemption of ₹1 lakh for foreign investments that you get while investing in Indian stocks. A TCS of 5% is also levied on the aggregate remittance on value exceeding ₹7 Lakhs.

Bank Charges

Your bank charges for investing in the US shall include foreign exchange conversion fees and transfer charges as well. Depending on your bank, you may also have to pay an account set-up charge.

Foreign exchange Rate

FE rates are the cost of converting Indian currency to USD. This charge plays a crucial role as the value of INR against USD determines the number of units that will be allotted to you when you buy your shares. The conversion rate also affects your profits.