Investing in US Stocks: A Step-by-Step Guide for Indian Residents

1) Why invest in US stocks?

• Invest in top global companies like Apple, Microsoft, and Amazon, while also exploring sectors less common in India, such as AI and biotech.
• Hedge India-specific risks with USD exposure.
• Dollar assets can balance a rupee-only portfolio.

2) The three routes to invest

A) Direct overseas brokerage (most control)

Open an account with a global broker that accepts Indian residents or through an Indian broker partnered with a U.S. firm. You fund via LRS from your Indian bank account in USD and buy US shares/ETFs directly.

B) NSE IFSC Receipts (GIFT City)

Trade US stock receipts (unsponsored depository receipts) on NSE’s international exchange at GIFT City; they represent fractions of US shares and can be bought through IFSC-registered Indian brokers. This route simplifies access and allows fractional exposure. External resources: NSE India, Zerodha

C) Indirect funds

Invest in Indian mutual funds/ETFs that hold international securities. Easy setup, but you don’t choose individual US stocks.

3) Step-by-step: Open, fund, and buy (Direct route under LRS)

Step 1: Pick your route and broker

Choose Direct (US broker/Indian tie-up) or IFSC Receipts. Check product access, fees, platform, and support.

Step 2: Complete KYC and tax forms

Submit PAN, passport/address proof as required by the broker.

Submit Form W-8BEN to your broker (you’ll be prompted within your account). This certifies you as a non-US person so the broker withholds US taxes at the correct treaty/statutory rate on dividends. IRS

Step 3: Set up funding via LRS

Add your broker’s beneficiary details. Your bank will process the outward remittance under LRS.

You’ll select a purpose code; for portfolio investment in equity shares abroad, banks use S0001. (Banks display the code list during remittance.) ICICI Bank

Step 4: Understand TCS before you remit

Starting April 1, 2025, TCS on LRS remittances applies for amounts exceeding ₹10 lakh per financial year (PAN-wise, across all authorized dealer banks). Rates vary by purpose; for investments, banks typically collect 20% TCS on the amount above the threshold and credit it to your Form 26AS—you can claim it while filing ITR. Review your bank’s guidelines and CBDT updates before making transfers.

Step 5: Send funds (INR→USD)

Your bank may collect Form A2 and 15CA/CB depending on amount and purpose; many investment remittances don’t need 15CB, but the bank’s checklist prevails.

Step 6: Place your first trade

Search the ticker (e.g., AAPL), choose market or limit order, review fees, and confirm. For IFSC Receipts, you’ll trade the “receipts” that represent part of a US share. NSE India

Step 7: Track, rebalance, and document

Download monthly statements and the year-end tax pack from your broker (or IFSC broker). Retain records for Indian tax filing and foreign tax credit claims.

4) Fees and costs to expect

• Bank charges & FX spread: INR→USD conversion + outward remittance fee.
• Brokerage & platform fees: Per-trade or %-based; IFSC receipt brokers may have their own schedule.
• Exchange/clearing fees: Embedded in fills or disclosed separately.
• TCS (if applicable): Collected by your bank on qualifying LRS amounts (credit available at tax filing).

5) Taxes: dividends, capital gains, and compliance (simple overview)

In the US

Dividends: For non-US investors, default withholding is 30%, but the India–US tax treaty generally sets 25% for individuals (15% applies only to certain corporate shareholders with ≥10% voting rights). Your W-8BEN ensures the correct rate is applied. IRS

Capital gains on US stocks: Generally not taxed in the US for non-resident individuals (unless specific US presence tests are met). Investopedia

In India

Dividends from US stocks: Fully taxable at your slab rate; you can claim foreign tax credit (FTC) for US withholding by filing Form 67 before your ITR due date. Investopedia

Capital gains on foreign shares: Treated like unlisted shares in India—long-term if held >24 months, taxed at 20% with indexation; short-term taxed at your slab.

Disclosure requirement: If you hold foreign investments, include them in Schedule FA of your ITR—commonly filed in ITR-2 or ITR-3. Winvesta

Tip: Keep broker statements and the annual 1042-S (if provided) for dividend tax withheld in the US; they support your FTC claim in India. Schwab Brokerage

6) Smart tips to avoid common mistakes

• Start small and diversify: Use ETFs or a basket of 10–15 names to avoid single-stock risk.
• Monitor the LRS limit: USD 250,000 per individual per financial year (April–March), tracking remittances across all banks.
• Price in total cost: Include FX spread, bank fees, brokerage, and TCS cash-flow impact.
• Use limit orders for volatile stocks: Control your fill price, especially around US market open.
• Rebalance annually: Lock gains, harvest losses where appropriate, and realign to your risk level.
• Keep documents tidy: W-8BEN (valid for three years unless your status changes), bank remittance records (use purpose code S0001), and tax-related forms for compliance. ICICI Bank

7) FAQs

Q1) What is the maximum I can invest abroad each year?
Up to USD 250,000 per financial year under LRS, subject to permitted purposes. Reserve Bank of India

Q2) Do I need a US bank account?
No. You remit from your Indian bank under LRS to fund your brokerage. Many platforms support direct inward credit. (Process details vary by broker.)

Q3) How is dividend income from US stocks taxed?
The US withholds tax (generally 25% under the India–US treaty for individuals), and in India you pay tax at your slab, claiming FTC for US tax already withheld. IRS

Q4) Do I pay US capital gains tax?
Typically no for non-resident individuals investing in US stocks (special residency rules can apply). Investopedia

Q5) What about capital gains tax in India on US shares?
If held >24 months: 20% with indexation. If ≤24 months: taxed at your slab.

Q6) Is TCS an extra tax?
It’s a tax collected at source on LRS remittances above ₹10 lakh (from Apr 1, 2025). It’s adjustable against your final tax when filing ITR (appears in Form 26AS).

8) Disclaimer

This article is intended solely for informational purposes and does not constitute financial, tax, or investment advice. Rules regarding LRS, TCS, taxation of foreign income, and investment limits are subject to change by the RBI, CBDT, and Government of India.

Before making any investment decisions, please:

• Consult a SEBI-registered investment advisor for portfolio advice.
• Verify the latest RBI circulars, CBDT notifications, and broker policies.
• Seek guidance from a qualified tax professional for filing returns, claiming foreign tax credit (FTC), and compliance with Indian tax law.