The National Stock Exchange's (NSE) International Financial Services Centre (IFSC) platform in Gujarat's GIFT City has started trading in eight US stocks from today, March 3, 2022. The trading will start in 8 stocks comprising Amazon, Apple, Alphabet (Google), Netflix, Tesla, Meta (Facebook), Walmart, and Microsoft, which will eventually be increased to 50 stocks. For availing the facility domestic investors need to open a demat account at the IFSC and the offering will be in the form of un-sponsored depository receipts.
You can also open a brokerage account abroad either through a domestic brokerage such as Vested Finance or Winvesta that offers this service or through a foreign brokerage. Many Indian brokers also enable foreign investing for their customers. Angel One Limited, 5paisa and Axis Direct, for instance, have partnered with Vested Finance to provide services to their clients.
How will trading be different on NSE IFSC platform?
“Overall NSE's offering is great for the ecosystem. Until two years ago we used to keep getting questions on whether this is even legal and now with India's leading exchanges offering an international investing solution, it adds some legitimacy to the space. NSE's offering is a bit different from the current Vested offering. We provide the opportunity to invest directly in US stocks while the NSE solution offers depository receipts that track the underlying stocks in the US. If all works well then it could become an alternate way to start investing internationally,” said Viram Shah, co-founder and CEO , Vested Finance.
Investing in the US stocks is different from the Indian markets. Here are 10 things you should know before investing in the US stocks:
1) Investments in US equities must be made in US dollars. Investments in the account are made by resident Indians using the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) where an individual can remit up to $250,000 per financial year.
2) You can buy fractional shares while buying international stocks. This means that you can get started by investing as little as $0.01 but every share will have its own limit.
3) Unlike the domestic market, where your money gets fully invested straightaway, various charges get deducted in case of international investing. The charges will be deducted under various heads such as broking, remittance and forex charges. These charges vary from broker to broker.
4) You are also charged at the time of withdrawing money from your account, which could be as high as $10-$20. Then there are also forex inward charges at the time of withdrawal.
5) Investing in listed Indian equity either through stocks or funds is taxed at 10 per cent of gains once one year has elapsed, else 15 per cent tax applies. However, international funds have debt taxation rates – two years is long term and long term capital gains is taxed at 20 per cent with indexation; short term capital gains is added to income.
6) For ETFs, the long-term threshold is 36 months. Accordingly the long term and short term tax is levied on the gains.
7) Dividends are taxed in the US at a flat rate of 25 per cent. The broker paying the dividend will subtract the 25 per cent taxes before giving the remaining amount to the investor. However, one can take credit for the dividend tax paid when filing taxes in India.
8) If individual is holding US shares directly in individual capacity, then after his/her death, there would be incidence of inheritance tax.
9) You can also invest in the US markets through international mutual funds that are available in India. Through these funds you can invest in rupees.
10) International stocks are suitable for investors who have goals in foreign currency such as overseas education expenses, as this investing acts as a hedge against sharp currency movements.
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