For a very long time, it was very difficult to invest in US stocks from India; often expensive, and reserved for the uber-rich. But as more retail investors enter the fold, coupled with low commissions and easy account opening, hundreds of thousands of Indian investors have unprecedented access to US markets.
The trend of investing in US equities is gaining prominence globally and is not restricted to just India. In the last few years, millions of investors across the world have gained direct access to US stocks.
In this blog, we’ll answer three broad questions.
- Can I invest in US stocks?
- Should I invest in US stocks?
- How do I invest in US stocks from India?
Towards the end, we’ll explain which method is best for YOU, what you should look for in a platform, and how taxation works when investing abroad.
But let’s start with the first question.
Can I invest in US stocks?
Simply put, yes, you can invest in US stocks from India.
In fact, you can invest in a lot more than just US stocks – and you should definitely consider it.
Beyond stocks, you can invest in assets like ETFs, real estate, and even commodities. And people just like yourself do invest in these assets – in the year 2017, Indians were the 5th largest investor in US real estate.
So how does this happen?
Well, in the old days (circa 2004), you had to ask for the RBI‘s permission every time you needed to send or invest money abroad.
But today, it’s a much easier process with something called the LRS.
LRS stands for Liberalized Remittance Scheme and it allows Indian citizens to invest/send up to $250,000 in foreign markets, per person, per year.
Should you want to invest more than the cap, you can simply apply for an exception with the RBI.
Three important things to note about LRS:
- LRS can be exercised by investing in foreign stocks, paying for your child’s education, buying travel packages, transferring money, etc.
- Should you invest more than 7 lakh INR (~$10,000) in a financial year, you will be taxed 5%, collected at source.
- You can claim this 5% against tax payable while filing ITRs. So, if your Tax Collected at Source (TCS) is higher than your tax payable, you’ll get a refund.
Takeaway – LRS is not just for investing, but several use cases beyond that too. Finding a platform that enables you to utilize LRS to its fullest potential is key for your long-term financial planning.