This article will help you understand the nitty gritty of investing in the US stock market from India
Answering the Why First?
India has its own stock market and the world is singing songs of investing in emerging economies like India, China, UAE etc. then why to invest in US Stocks?
Taking the help of Data, in last 10 years Indian index Sensex’s value tripled giving a return of ~222% as of March 2, 2022. But, the dollar got appreciated against rupees by ~50.4%
Whereas US index S&P 500 also gave a return of ~232% in USD terms, in RS equivalent it gave a return of ~400%
Hence, it makes a lot of sense to invest in a country where currency appreciates with the economy which leads to double benefit on the returns. Also comparing some of the leaders in industry stocks, investing in US gives an opportunity to invest in global leaders like Google, Tesla, Apple, Microsoft etc.
Google is one of the tech giant in US and has given a return of 11.9X where as TCS which is a tech giant of India has given a return of 5.51X. Tesla an innovative automobile company of US gave a return of 255X compared to 7X of Maruti Suzuki which is an automobile leader of India.
Also, if you are thinking that buying a stock worth 2 Lakhs is a big investment amount, hold on to the question we have a solution.
How to Invest?
So , as why part has been answered, coming to how to invest in US stocks. It is as easy as ordering anything from Amazon. There are 3 popular apps in India through which you can buy US stocks:
The solution of not having large capital to buy a full share — These platforms allows you to purchase fractional stocks and that is the beauty of investing through these apps. I wouldn’t have imagined owning a Berkshire Hathaway Stock which is currently at nearly 500,000 dollars (4 crore Rupees) but now I can invest as less as 1 dollar in this stock.
Under LRS (Liberalised Remittance Scheme) an individual can invest upto 250,000$ a year in US market from India. Some of the questions and documents that user needs to provide is:
Risk Profile Questions: Something like Income, years of experience in investing etc.
Bank Account Verification from where funds will be deposited
Proof of Address and Proof of Identity (Aadhar Card)
IT return of one of past 2 years or Last year Bank account statement
As soon as all docs are provided it takes 1–2 business days to open an account.
Very similar to how we invest in India and the infrastructure remains same i.e. User should have a bank which is connected to a stock broker who purchases or sells stocks on orders from the user. Here, the bank designated is State Bank of Mauritius which opens an account for you in 3 minutes and there is 0 fixed fees on transfer of funds.
The good news is NO. There is only a single tax regime which is divided as STCT (Short term capital tax) and LTCT (Long term capital tax). If you sell the assets under 24 months it will fall under short term and tax payable is based on tax slab where as if you hold more than 24 months, tax payable under long term is flat 20% on gains.
So what are you waiting for?
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