The world is an oyster when it comes to investing, thanks to technology. Now you can invest in most global indices while sitting in India—from New York Stock Exchange (NYSE), Frankfurt Stock Exchange (FSE), and London Stock Exchange (LSE) to Tokyo Stock Exchange (TSE). Global investing has many advantages, and the biggest one is portfolio diversification. Investing in foreign stocks, exchange-traded funds, and index funds can help you participate in innovations across the world. Here’s how you can invest in global stocks.
Step 1
To invest in global stocks, you need to create an international trading account with stock exchange platforms such as the National Stock Exchange (NSE), International Financial Services Center (IFSC) or Bombay Stock Exchange (BSE).
Step 2
To complete the account opening process, you will need to undergo the know your customer (KYC) process. For this, you would need to submit basic documents such as proof of identity and address. These may include your Permanent Account Number (PAN) card, Aadhaar card or Passport. You would also need to furnish your savings bank account details.
Step 3
Once the platform, where you are opening the account, verifies the KYC information through email and phone, your account will get activated.
Step 4
Before you start trading, you will need to transfer funds from your bank account to your international trading account. However, the process is not the same as transferring funds to a demat account. You will need to submit the request in a prescribed form at your bank branch.
Step 5
Funds transferred to an international trading account should be in the country’s specific currency, such as the US dollar. Forex and remittance charges will also apply.
Step 6
Once funds are available in your international trading account, you can start investing in global stocks. The brokerage charges differ from platform to platform.
Step 7
The Foreign Exchange Management Amendment (FEMA) rules stipulate that the money earned through stock sale should be transferred to your Indian bank account within 90 days.
Things To Know
- Foreign stocks are stored in the overseas trading partner’s account. They reflect as depository receipts (DRs) in your Indian demat account.
- If the partner broker, for example in the US, goes bankrupt, $500,000 worth of shares are protected under the Securities Investor Protection Act. The limit and facility might vary depending on the country.
- The Reserve Bank of India’s Liberalised Remittance Scheme (LRS) allows Indians to invest up to $2,50,000 (about Rs 2 crore) in foreign stocks in a financial year. This limit applies to all international expenses.
- On BSE, you must buy at least one share of the company. Other platforms allow fractional buying.
- All foreign remittances above Rs 7 lakh in a fiscal year are subject to 5 per cent tax credited at source (TCS). You can claim this amount during the annual tax-filing process.
- As per the Double Tax Avoidance Agreement (DTAA) with the US, investors can show the US tax receipt to avoid paying tax twice.
- If the stocks are sold after 24 months, profit will be considered long-term capital gain that attracts 20 per cent tax plus cess, along with indexation benefit.
- Profit from assets held for less than 24 months (short-term capital gains) are taxed at normal slab rates.
