The US is one of the most attractive markets for investors globally. It houses a number of big and innovative companies that offer lucrative opportunities and diversification to investors. It is also where the well-known FAANG (Facebook, Apple, Amazon, Netflix, Google) sells its stocks and the place where the famous Wall Street is. Thus, many investors, including those from India, dream of investing in the US stock market.
There are many web platforms and apps today that help you invest in US stocks right from India, for example, the Appreciate US Stock Market App. If you are an Indian investor looking to diversify your portfolio by investing in the US markets, here are a few things that you should know before investing in US stocks from India.
1.The US Stock Market Regulatory Framework
The US stock market is known to be one of the oldest and most regulated stock markets in the world. It is regulated by the Securities and Exchange Commission or SEC, which is an agency established in 1934 that oversees the functionality of the US stock market. Investor protection and confidence are of utmost importance; thus, this agency makes sure you have the best experience when you buy US stocks by enforcing high standards of transparency and integrity.
2.Foreign Exchange & Risks Involved
One important thing to consider while investing in the US stock market or any other global market, for that matter, is currency fluctuations. The gains or losses for the Indian investor will depend on the currency conversion movement. The foreign exchange fluctuations are affected by various economic and political factors. In the past few years, the Indian Rupee has seen a steady decline against the US dollar.
3.Applicable Taxes & Other Charges
India and the US have a Double Tax Avoidance Agreement (DTAA) so that the same income is not taxed twice. Similar to India, the duration of holding the investment plays a significant role in the case of US stock investment, too. The return or profit from US stocks is divided into Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG).
LTCG taxation here will be applicable when the US stocks are retained for more than two years (24 months). The stocks, which are sold below the 24-month threshold, will fall under the STCG category and will be taxed based on the investor’s income tax bracket.
4.Fund Limit & RBI Regulations
When investing in US stocks to appreciate wealth from India, the maximum of $ 250000 per annum per investor is allowed under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). The limit covers any amount remitted abroad for education, travel, purchases or other foreign transactions for the year. Prior to investing in US stocks, the investor’s brokerage account should be funded. Investors are required to submit Form A–2, available with RBI authorised dealers. Any amount over and beyond the limit of $250000 would need RBI’s permission.
If you want to trade US stocks, knowing about the regulatory framework, foreign exchange fluctuations, taxes and charges, and finally, the fund limits and RBI’s regulation is very important.
Investing in US stocks has become more accessible for Indians. Today, you can even trade US stocks from a US stock market app like Appreciate. So, what are you waiting for? Widen your horizons and start investing globally today.