Learn to Trade Archives

You can invest in foreign stocks from India in several ways. Indian retail investors can easily buy shares of companies like Apple, Microsoft, or Tesla directly from India. However, many are still unsure how to invest in foreign stocks from India, what rules apply, and which platforms make it possible. In this article, you will learn why you should invest in foreign stocks from India, a step-by-step guide on how to do so, and an outline of the required documentation, taxation details, and associated risks. Why Should You Invest in Foreign Stocks from India? Investing in foreign stocks is beneficial, so it is a good idea to consider this type of investment in your investment portfolio. Diversify your investment portfolio beyond the indian market. Gain exposure to top-performing global companies and industries. Hedge against domestic market and currency risks. Take advantage of global growth opportunities. How to Invest in Foreign Stocks from India (Step-by-Step) Indians have multiple options for investing in foreign stocks, each offering varying levels of accessibility, cost, and convenience. You can invest through indian mutual funds and ETFs, international brokerage platforms, or trading directly via the NSE IFSC exchange in GIFT City. 1-Invest Through Mutual Funds or ETFs: Most of India's asset management companies offer Fund of Funds (FoFs) that invest in a single foreign fund, called a master fund, which holds global securities. This way enables you to invest more easily, as the AMC manages all foreign transactions and compliance. 2- Use Indian Brokers with Global Partnerships: International markets are accessible from India through indian brokers, which have a partnership with foreign brokers. There are different platforms, such as ICICI Direct, HDFC Securities. These platforms allow you to trade global equities. 3-Use International Brokerage Platforms Just opening a trading account directly with international brokers can easily give you access to the global markets. 4-Use RBI’s Liberalised Remittance Scheme (LRS) The Republic Bank of India allows indian residents to invest up to USD 250,000 abroad per year per person, including stocks, ETFs, or bonds. Now that you learn different methods to invest in foreign stocks from India, let’s know more about the documentation required to be eligible for such investments. Documents Required to Invest in Foreign Stocks from India It's a must complete basic KYC and regulatory requirements before investing in foreign stocks from India. The required documents may vary depending on whether you use an Indian mutual fund, an international broker, or the NSE IFSC platform. PAN card and a valid ID proof. Bank account enabled for international remittance. KYC verification with your broker or platform. Declaration under LRS if sending funds abroad. Now that you understand the documentation required to start investing in foreign stocks from India, let’s shift our focus to the taxation that may apply. How Are Foreign Stock Investments Taxed in India? The holding period of the capital gains is the crucial factor for the taxation fee: Gains from shares held less than 24 months are treated as short-term and taxed according to your income slab. Gains from shares held more than 24 months are long-term and taxed at 20% with indexation. Dividends received from foreign stocks are also taxable according to your income slab. You may be eligible to claim tax credits under the Double Taxation Avoidance Agreement (DTAA) to avoid paying taxes twice on the same income. Let's explore the risks associated with this type of investment and understand what to watch out for. Risks to Know Before Investing: These risks mentioned below are important to be aware of before starting to invest in foreign stocks from India: Currency fluctuations between INR and USD can impact returns, as gains may be eroded if the rupee strengthens. Higher transaction and remittance fees may reduce overall profitability compared to domestic investments. Investor protection may be limited, and settlement times for trades can be slower. Different regulatory frameworks across countries can affect trading rules, reporting requirements, and taxation, so understanding the regulations of the target market is crucial. Investing in foreign stocks allows you to diversify and participate in global growth.With a proper understanding of how to invest in foreign stocks from India, you can expand your portfolio internationally while managing risks effectively.