How to Invest in US Stocks From India

How to Invest in US Stocks From India

There are two different ways to invest in US stocks from India. The first one is the direct route – buying shares from US stocks exchange like NASDAQ. This method is similar to buying shares from NSE or BSE.

Second is the indirect method that involves investing in US stocks through mutual funds.

Let me explain, you can see from the table below that NIFTY 50 generated around 100% returns in the last 5-year period. 

Nifty Historical Returns

Whereas during the same time, NASDAQ’s 5-year returns of 196% (shown below) are almost double than the returns generated by Nifty 50. 

Nasdaq historical Returns

If you compare the 10-year returns from the US stock, you will find it to be more than double the returns given by NASDAQ.

Other benefits of investing in US stocks are

  • Investing in fractional shares (I will explain this in detail)
  • You get dividends even on fractional shares
  • Trading time starts at 7 pm IST (after you reach home from office)
  • Exciting tech and finance companies to invest
  • Help bring USD back to India

You can legally buy stocks of US companies like Amazon (AMZN), Facebook/Meta (FB), Google (GOOGL), Tesla (TSLA), Apple (AAPL) and Netflix (NFLX) from India. 

In this article, I have taken questions like – “How to invest in foreign stocks from India” and “How to invest in international stock markets from India” to mean and include investing in US stock markets. 

Because presently the returns given from the US stock market are the most profitable. 

Another reason is that – people hardly look forward to investing in Tokyo, Singapore, London, Germany or Bahrain stock markets due to the non-availability of stock investment services by any reputed broking house.  

Is Investment in US Stocks From India Legal

Yes, RBI allows it under the LRS scheme.

The RBI Liberalised Remittance Scheme (LRS) allows all resident individuals from India to freely remit an amount up to $250,000 per financial year (April to March) out of India. 

You are free to use the money for various permissible transactions listed under FEMA. Investment in US stocks (foreign securities) is one of the permissible transactions.

Note – But you can’t do leverage trades involving margins, like – intraday trading, derivatives trading and F&O trading with the money remitted abroad under LRS. 

RBI LRS Scheme details

At the current exchange rate of Rs. 82.27 per USD, you can invest around Rs. 2.05 Crore in the US stocks under the RBI LRS scheme. 

LRS categorizes investment in US stocks as a capital account transaction under the scheme.  

How to Invest in Foreign Stocks From India

Two methods to invest in foreign stocks are

  • directly through an investment broker (stockbroker) or 
  • indirectly through mutual funds that invest in international stocks

Investing through a broker allows you to directly buy and sell stocks on international exchanges like NASDAQ. 

Brokers Offering US Stock investing services in India are  

  • 5Paisa
  • ICICI Direct
  • HDFC Securities
  • IND Money

Drawbacks – The currency exchange rate movement and charges will eat a portion of your profits when investing directly in foreign stocks.

Investing in mutual funds that invest in international stocks can be a more affordable and convenient option for Indian investors. 

Many mutual funds in India offer access to international stocks. A few of them are  

  1. Franklin India – Franklin US Opportunities Fund
  2. ICICI Prudential US Bluechip Equity Fund
  3. Motilal Oswal NASDAQ 100 ETF
  4. SBI Magnum Global Fund

Mutual funds handle all the currency-related processes like transfer, Fx conversion and remittance. They eliminate the need for you to worry about fluctuations in exchange rates. 

Drawback – You also don’t have the option of selecting stocks as you wish. Additionally, mutual funds charge expense and management fees, which will lower your returns.

Opening a US Stock Investment Account 

List of tie-up brokerage companies that allows US stocks investment

  • 5Paisa & Vested Finance
  • Angel Broking & Vested Finance
  • Geojit Securities & Stockal Inc
  • HDFC Securities & Stockal 
  • Kotak Securities & Interactive Brokers LLC
  • ICICI Direct & Interactive Brokers LLC

There are few standalone brokerages (including fintech platforms and apps) that allow investment in US stocks from India like

  • Stockal Inc
  • Groww
  • Vested Finance
  • Winvesta
  • INDmoney

Note – You can save account opening time if you already have a demat & trading account with any one of the Indian stockbrokers. 

I already have an existing demat & trading account with 5Paisa. 5Paisa took 1 day to open a US investment account.

The US-based brokerage firm relies on the KYC done by your local broker which reduces account opening time. That is the only benefit I can see when you open a US investment account with tie-up brokers.

 But then also you need to upload your KYC documents while account opening. The US investment account opening is simple and the process is similar to opening a demat & trading account in India. 

The US account opening process will be more or less the same even if you choose to open a brokerage account with standalone brokers like Groww. But it may take an additional day or two for KYC completion.

You need to 

#1. Use your existing 5Paisa ID & password to login into the 5Paisa-Vested Finance platform

#2. Provide basic details – like your mobile number. The rest of the details like name, email ID and DOB (date of birth) will be pulled from the database of your existing broker. 

#3. Create risk profile – by selecting risk tolerance, investing experience, net worth and primary source of your income. You will also need to provide marital status and the country where you file tax returns.

#4. Upload KYC documents – Aadhar and PAN card.

#5. Choosing an investment plan – In the beginning, you can pick the basic plan. Later with experience, you can pick a higher plan.

Here you also need to pay the account opening fees at this point. 5paisa-Vested charged Rs. 399 for US stock account opening. But in general, the fees will vary from Rs. 0 to a few hundred rupees depending on your broker. 

The account opening charges payment options are  

  • UPI like Google Pay, Phone Pe and Paytm, 
  • Cards – credit and debit cards of private and PSU banks
  • Netbanking and Wallets 

5Paisa-Vested took 1 day to create my US investment account.  

The US investment account opening process may take 1-3 days of time at the broker’s end. The broker may even contact you over the phone or email if any additional information or documents are needed. 

In my experience, the US-based broker relies on your local stockbroker and you may receive a call to cross-check your identity.

Understanding Broker Relationships

#1. In case you are opening an investment account with a US-based broker who has a tie-up with a local stockbroker.

For example, 5Paisa & Vested Finance. 

Your existing broker (in this case 5Paisa) is limited to – facilitating the opening of a US investment account. 

You will also find that there is one more broker involved in the whole process, who is also known as a partner broker. DriveWealth LLC is the partner broker to Vested Finance in the above example.  

Note – The partner broker will be the custodian of the money that you deposited and the stocks that you purchased.  

In the US there are dedicated custodians who will electronically hold securities safe with them on your behalf. 

US – Market Timings & Settlement 

The US stock market timings are

  • 7:00 PM to 1:30 AM Indian Standard Time (March to September)
  • 8:00 PM to 2:30 AM Indian Standard Time (November to February)

You can easily utilize time in the evening after coming from the office to invest in US stocks.

Depending on your brokerage firm, your US brokerage account will allow buying and selling on

  • NYSE (The New York Stock Exchange) 
  • NASDAQ (National Association of Securities Dealers Automated Quotations) or
  • Both NYSE and NASDAQ

Charges for Investing in US Stocks 

Particulars Charges
Account Opening Rs. 0 to Rs. 1000 depending on your broker.

Presently 5Paisa & Vested Finance is offering Rs. zero account opening.

Their regular global account opening charge is Rs. 399.

AMC fees Rs. 0
Commission (i.e Brokerage) Rs. 0 to a fixed percentage of trade depending on your broker.

5Paisa-Vested Finance charges zero commission

Other charges that you need to pay

Particulars Charges
USD-INR exchange rate As applicable by your bank. Presently, costing in the range of Rs. 80.34 to 83.96 per USD.
Bank service charges on adding dollars As applicable by your bank. 
Can range from Rs. 0 to Rs. 1000.
Withdrawal charges Depend on your broker
5Paisa charges $0 for the first withdrawal
After that up to $11 per withdrawal 

Fund Your US Investment Account

Your bank will help you to fund your investment account (remit money outside India) under the LRS scheme. 

SWIFT outward remittance channel offered by banks is the most convenient way to fund US investment account from India. 

SWIFT is software used by banks for worldwide financial payments.

You will need a SWIFT payment receipt copy as proof of remittance under the LRS scheme for investment.

Note – your US broker will not accept money from any other source, except for bank payments made through SWIFT.

The funding process involves two things  

#1. Buying dollars using INR funds in your account. The USD-INR exchange rate will impact your overall returns.

Keeping everything the same, if you bought 100 USD at Rs. 82 per dollar to invest in US stocks. You need to pay Rs. 8200 to get 100 dollars.

After an year, suppose you got only $100, that you want to remit back to your bank in India and the USD-INR rate has moved to Rs. 86. In that case you will get Rs. 8600 in exchange for 100 dollars. 

The money you receive back will be 4 per dollar more because of the exchange rate movement. 

But if the USD-INR exchange rate moves to Rs. 79. Your returns will be lower by Rs. 3 per dollar. 

The above profit/loss to your overall return from investment is irrespective of the gains or losses from US stock investment. 

#2. Wire transfer fees and withdrawal charges

Your bank will charge service fees for remitting dollars to your US account. The charge will range from Rs. 0 to Rs. 2000 every time you send dollars.

Wire transfer fees vary from bank to bank. 

In addition to that, your US brokerage firm will charge a fixed amount of withdrawal fees when you move your money back to India. The fees can go up to $11 per withdrawal request depending on your broker. 

Both the charges will eat up some amount of your returns from investment in US stocks.

Below are the steps to do a fund transfer.

Step 1 – Click on Fund Your Account

Click on “View bank process” after login to your account.

Steps to open 5Paisa-Vested account

You will get a page that shows $0 as a cash balance.

Steps to Fund your account

Step 2 – Fill the Amount in Dollars and Select Bank

Vested Finance lists 11 banks in India through which you can remit dollars into your US investment account. 

Steps to Fund your account - select bank

The banks in the list are 

  • Axis Bank
  • HDFC Bank
  • IDFC First Bank
  • ICICI Bank
  • Kotak Mahindra Bank
  • IndusInd Bank
  • Bank of Baroda
  • HSBC
  • Punjab National Bank
  • Yes Bank
  • State Bank of India

Fill in the amount and select one of the banks (with whom you have a banking relationship) to remit money online.

Amount of Fund Deposit

Step 3 – Register Your US Broker/ Partner Broker as Beneficiary 

You need to add a beneficiary for “Foreign Outward Remittance” in order to deposit dollars. This is similar to registering a beneficiary for making an online money transfer. 

The beneficiary will be the broker who is going to keep custody of your money and stocks. In United States, this can be your US broker or the partner broker. Your local Indian broker will let you know who is the beneficiary.

US stock investment - Add beneficiary

You will require beneficiary details like – 

  • Beneficiary Broker name
  • Beneficiary address
  • Currency – choose USD
  • Beneficiary contact number
  • Beneficiary’s Bank name
  • Beneficiary Bank address
  • Beneficiary account number
  • SWIFT code
  • ABA or routing number

Your US broker or your bank will give you all the details to get the registration done. 

Registering a beneficiary may take a few hours to a day depending on your bank.  

Step 4 – Remit Dollars to Your Investment Account

Log in to your net banking and open the fund transfer page. Select the beneficiary and fill in the dollar amount that you want to transfer. 

The mode of remittance will be SWIFT-wire transfer and the purpose of remittance will be – “Indian Portfolio Investment Abroad – in Equity Shares”.

Check the tab for LRS self-declaration and provide your email ID and account number. 

Check the box, at the end, to confirm that you are an Indian Individual Resident for tax purposes. 

You can watch the below video for fund remittance.

The fund remittance may take a few hours and your bank will send you the SWIFT receipt on the email provided. You need to upload the SWIFT receipt on the funds page or email it to your US broker to confirm payment. 

Check Fund deposit once all the process is over. 

Check US Fund Deposit

The time taken for fund deposit can vary from a few hours to a day depending on your bank. 

How to Invest in Pfizer Stock (Full Shares)

Step 1 – Search for the Stock 

Use the stock search tab (on the top) to get the share that you want to invest.

If you type Pfizer Inc in the search tab and click the symbol you will get the following details.

Investing in Pfizer shares

Step 2 – Fill the Buy Order Form  

When you click on the buy button a buy order form will pop up. 

Investing in Pfizer shares

You have the option to select Market/ Limit or Stop Loss order from the drop-down. Fill in the number of shares that you want to purchase.

For investing in full shares you need to select in round numbers in multiples of 1.

Step 3 – Place Buy Order

You will get a final buy order option on the next screen. You will also see relevant information like market order type, the number of shares and the total amount required. 

Investing in Pfizer shares

Click the “Place Buy Order” tab to buy a full share.

How to Invest in Amazon (Fractional Shares)

In US you are allowed to buy/sell partial shares (known as fractional shares). Fractional shares of only a few companies may be available with your broker. 

For example, you can buy 1 share of Amazon for $3568. 

Fractional shares allow you to buy 0.01 Amazon shares by paying 3568 x 0.01 = $35.68.    

Step 1 –  Select Share for Fractional Buying

The example shows Amazon’s shares priced at $3568.  

Buy Amazon Fractional Shares

Click on the “Buy” tab on the right side bottom.

Step 2 – Complete the Order Form and Buy Fractional Shares

Select the order type and fill in the number of shares in fractions (0.005 here in the example). You will see the estimated cost of the fractional shares.

Buy Amazon Fractional Shares

Confirm the buy order as shown below. 

How to Buy Amazon Fractional Shares

You can view all your shares in the portfolio section of the dashboard. 

Portfolio of US stocks

Selling US Stocks and Money Withdrawal Process

Steps to Sell US-Stocks 

Select the stock that you want to sell from your portfolio.  Let’s say, you want to sell Pfizer stock. 

Sell US stock

Click on the sell tab. 

A sell order form as shown below will pop up

Sell US stock - sell order form

Select the order type from the drop-down and fill in the number of shares that you want to sell.   

Sell US stock

Click the “Place sell order” tab.

Follow the same steps as above if you want to sell Amazon fractional shares.

You can check the order execution status in the transactions section. 

Sell US stock - check sell transaction

Money Withdrawal

The process involves selling USD lying in your investment account and getting the rupee amount back in your bank account in India. 

A favorable USD-INR exchange rate at the time of withdrawal as compared to the rate at the time of the investment will return you more rupee per amount of dollar invested. 

For example, keeping everything the same, if the USD-INR exchange rate is Rs. 85 per dollar now as compared to Rs. 82 per dollar when you invested in US stocks. 

Then you stand to benefit Rs. 3 per dollar because of favorable exchange rate movement.  

How to Invest in NASDAQ From India

NASDAQ is a name of a US stock exchange located at 4 Times Square, in New York City. Similar to BSE located in Mumbai, India. 

NASDAQ 100 index is a compilation of 100 large non-financial US-based organizations.

Investing in NASDAQ is similar to investing in stocks listed on NASDAQ. Which is equivalent to investing in 30 shares of Sensex. 

2 Simple methods of investing in NASDAQ are

#1. Through ETFs Offered By Indian Mutual Fund Companies 

Examples of ETFs allowing to invest in NASDAQ from India are

  • Motilal Oswal NASDAQ ETF
  • Invesco EQQQ NASDAQ ETF
  • Axis NASDAQ Funds of Fund
  • ICICI Prudential NASDAQ Index Fund
Invest in Nasdaq 100

#2. Through Foreign ETFs Offered by Domestic Brokers

IND Money app provides this facility. You need to select any foreign ETFs that benchmark NASDAQ for investment. 

Invest in Nasdaq ETF

INDmoney is a Finance App from Finzoom Investment Advisors Private Limited. Finzoom is registered stockbroker with SEBI.

Taxation on Returns From US-Stock Investment 

The returns you will get from investing in US stocks are in the form of

  • Dividends 
  • Capital gains/ loss

Taxation in Case of Dividend Income

Dividends in the US are taxed at a flat rate of 25%. 

You will get 75% of the dividend amount after 25% being withheld as a tax by the US authorities. 

In India, the dividends received (100%) by you will be charged at the normal slab rates as per the IT Act. But due to the Double Tax Avoidance Agreement (DTAA), the 25% tax withheld in the US can be set off against your tax liability.

For example, if you receive $100 in dividends from investment in US stocks. The company withholds $25 as tax and pays you the balance of $75 as dividends. 

You need to declare $100 as dividend income in your IT return in India and your tax liability will be calculated as per the slab rate. 

From the total tax payable amount you can claim a deduction of $25 under DTAA. 

Taxation in Case of Capital Gains

There is no taxation in the US for capital gains means you wouldn’t need to pay any tax on capital gains to the US government.

But you will be liable to pay taxes on capital gain solely to the Indian government. The capital gain rate will depend on your stock holding period. 

You will be subjected to

  • LTCG, if the stock is held for more than 24 months 
  • STCG if the holding period is less than 24 months

Long Term Capital Gain (LTCG) is taxed at 20%. Whereas in the case of the Short Term Capital Gain (STCG) the gains are taken as a part of the current year’s income and taxed as per the slab rate. 

FAQs

What is the best way to invest in US stocks from India?

The best way to invest in US stocks from India is through a brokerage account that offers access to US stock exchanges.

The US brokerage account is offered by Indian stockbrokers like – 5Paisa, Angel One, HDFC Securities and ICICI Direct.

How much money do I need to invest in US stocks?

The amount of money needed to invest in US stocks can vary depending on the brokerage and investment strategy.

You also have the option to invest in fractional shares.

Investing via fractional shares is more affordable option for investors.

What are the risks associated with investing in foreign stocks?

The risks associated with investing in foreign stocks include

  • Exchange rate fluctuations
  • Political instability
  • Economic downturns
  • Policy changes
How can I manage currency exchange rates when investing in foreign stocks?

You can manage currency exchange rates by using a currency hedging strategy.

This involves buying Currency F&O that allows you to sell USD in future date at a pre-determined exchange rate.

Are there any restrictions on investing in US stocks from India?

Indian residents are allowed to invest up to $250,000 per year in foreign stocks, including US stocks.

Apart from that – there are also restrictions on US companies that you can invest in, such as companies involved in defense or nuclear energy.

Can I invest in US Stocks from Zerodha?

No, at present Zerodha does not offer US stock investment.

You can use 5Paisa, Angle One or HDFC Securities for investing in US Stocks.

Can I buy US Stocks from NSE?

Only 8 US Stocks are actively traded on NSE IFSC Exchange platform. They are –

  • Google (Alphabet)
  • Tesla
  • Walmart
  • Microsoft
  • Facebook
  • Apple
  • Amazon
  • Netflix

NSE is looking to add more number of US shares in coming future.

What is the minimum investment amount?

Using fractional investment, at minimum you can buy $0.01 (82 paisa in rupee terms) worth of Apple, Tesla or any shares.

What are charges for trading in US stocks?

Intraday trading is not allowed on US Stocks for Indian citizens.

For investment purpose – brokers provide commission free (ZERO charges) account for investing in US Stocks.

What are the charges for withdrawing funds from US Stock account?

US broker may charge upto $11 when you withdraw funds back to your Indian savings bank account.

Your bank may collect Fx conversion and service charges additionally.