Want to Invest in US Markets from India? Here’s How.
How to Invest in US Markets from India
A Complete Guide to International Diversification for Indian Residents
As an Indian investor, diversifying your portfolio with international exposure has never been more important. With the US housing approximately 55% of the world’s stock market capitalization, investing in US markets offers access to global giants like Apple, Microsoft, Amazon, and Alphabet (Google), along with innovative sectors like AI, cloud computing, and biotechnology that are underrepresented in Indian markets.
This guide will walk you through the best methods available today, their pros and cons, and everything you need to know to start your US investment journey.
Why Consider Investing in US Markets?
- Diversification: Reduces concentration risk by adding geography and currency diversification
- Access to Global Champions: Invest in world-leading companies across technology, healthcare, and consumer sectors
- Currency Benefits: Potential for INR depreciation to boost returns when converted back
- Innovation Exposure: Access to cutting-edge sectors like AI, space tech, and genomics
- Market Stability: Historically more stable with stronger regulatory frameworks
📝 Important Tax Note
All investments in US markets are subject to Indian taxation. Long-term capital gains (held >24 months for equity) are taxed at 10% above ₹1 lakh exemption. Short-term gains are taxed at 15%. Additionally, US deducts 25% dividend withholding tax, which can be reduced to 15% by submitting Form W-8BEN through your broker. You can claim foreign tax credit in India for taxes paid in the US.
Top 5 Methods to Invest in US Markets
1. International Trading Platforms (Direct Investing)
Open an account with SEBI-registered brokers that offer direct access to US exchanges like NASDAQ and NYSE.
How It Works
Platforms like Vested, INDmoney, Winvesta, and Stockal allow you to open an account, complete KYC, transfer funds via LRS (Liberalized Remittance Scheme), and start trading US stocks and ETFs.
Advantages
- Direct ownership of US stocks and ETFs
- Fractional investing available (buy parts of expensive stocks)
- User-friendly mobile apps and platforms
- Research tools and educational resources
- Typically lower minimum investment requirements
Disadvantages
- Forex conversion charges apply (0.5-1%)
- Platform fees (varies by broker)
- LRS limit of $250,000 per financial year
- Dividend withholding tax of 15-25%
- Trading in US timezone can be inconvenient
Best For: Investors who want direct control, fractional shares, and access to specific US companies.
2. Indian Mutual Funds with US Exposure
Invest in Indian mutual funds that allocate a portion of their portfolio to US stocks or track US indices.
How It Works
Funds like Motilal Oswal S&P 500 Index Fund, ICICI Prudential US Bluechip Equity Fund, and Franklin US Opportunities Fund invest primarily in US markets. You invest in INR and the fund handles forex conversions.
Advantages
- No LRS limit concerns
- Familiar mutual fund structure
- Professional management
- No direct tax filing for US dividends
- Easy SIP facility available
Disadvantages
- Limited fund choices compared to direct investing
- Higher expense ratios (1-2%)
- No direct stock picking
- Tracking error in index funds
- Exit loads may apply
Best For: Investors who prefer the mutual fund route, want SIP options, and don’t want to deal with LRS or foreign account management.
3. International Brokerage Accounts
Open an account directly with international brokers like Interactive Brokers, Charles Schwab, or TD Ameritrade.
How It Works
These global brokers accept Indian clients and offer direct access to US markets with advanced trading tools, though account opening can be more complex and may require higher minimum deposits.
Advantages
- Access to advanced trading platforms
- Lower trading commissions (some offer zero commission)
- Wider range of investment products
- Professional-grade research and tools
- Global account access if you relocate
Disadvantages
- Complex account opening process
- Higher minimum balance requirements
- Less handholding for Indian investors
- Tax reporting complexity
- Customer service timezone differences
Best For: Serious investors, traders, and HNIs who want professional tools and don’t mind complexity.
4. Fund of Funds (FoFs) Investing in US ETFs
Indian FoFs that invest in US-listed ETFs like those tracking S&P 500, NASDAQ-100, or specific sectors.
How It Works
These are Indian mutual funds that invest in US ETFs rather than individual stocks. Examples include Axis S&P 500 Index Fund of Fund and Mirae Asset NYSE FANG+ ETF FoF.
Advantages
- Simplest method for beginners
- Diversification through ETFs
- No LRS paperwork
- SIP facility available
- Lower minimum investment
Disadvantages
- Double layer of fees (ETF expense ratio + FoF expense ratio)
- Limited choice of underlying ETFs
- Tracking error potential
- Less control over specific investments
- May not be tax-efficient
Best For: First-time international investors who want simple, hassle-free exposure to US markets.
5. Global Equity Funds
Indian mutual funds that invest globally, including but not limited to the US markets.
How It Works
Funds like DSP World Mining Fund, PGIM India Global Equity Opportunities Fund, and Edelweiss Greater China Equity Off-shore Fund invest across multiple countries, typically with significant US exposure.
Advantages
- Broader global diversification
- Professional geographic allocation
- No LRS limit concerns
- Expert management of currency risks
- SIP available
Disadvantages
- US exposure may be limited or diluted
- Higher expense ratios
- Less focused on pure US growth
- Fund manager’s geographical bets may not align with your views
- Performance depends on multiple market factors
Best For: Investors seeking global diversification beyond just the US, managed by professionals.
Method Comparison at a Glance
| Method | Minimum Investment | LRS Required | SIP Available | Tax Complexity | Best Suited For |
|---|---|---|---|---|---|
| Direct Trading Platforms | As low as $1 | Yes | Yes (auto-invest) | Medium | Hands-on investors |
| Indian US-focused MFs | ₹500-1000 | No | Yes | Low | MF investors wanting US exposure |
| International Brokers | $500-$2000 | Yes | No | High | Serious traders/HNIs |
| FoFs in US ETFs | ₹500-1000 | No | Yes | Low | Beginners, passive investors |
| Global Equity Funds | ₹1000-5000 | No | Yes | Low | Global diversification seekers |
💰 LRS (Liberalized Remittance Scheme) Limits
Under RBI’s LRS, Indian residents can remit up to $250,000 per financial year for overseas investments. This includes all foreign transactions – travel, education, gifts, and investments combined. If you’re investing with direct methods (not through Indian mutual funds), you’ll need to use this limit. Keep meticulous records as all LRS transactions are reportable to the RBI.
Getting Started: Step-by-Step Process
Step 1: Define Your Goals
Determine why you want US exposure: diversification, specific company access, currency hedging, or sector exposure. This will guide your method selection.
Step 2: Choose Your Method
Based on your goals, risk tolerance, investment amount, and comfort with complexity, select from the methods above.
Step 3: Complete KYC & Account Opening
For direct methods, you’ll need PAN, Aadhaar, bank details, and possibly income proof. For mutual funds, standard mutual fund KYC suffices.
Step 4: Fund Your Account
Transfer funds via bank transfer. For LRS routes, your bank will ask for purpose code “S0004 – Investment in equity/debt.”
Step 5: Submit Form W-8BEN
For direct US investments, submit this form to your broker to reduce dividend withholding tax from 25% to 15% under the US-India tax treaty.
Step 6: Start Investing
Begin with a diversified approach. Consider starting with broad market ETFs like SPY (S&P 500) or QQQ (NASDAQ-100) before picking individual stocks.
Frequently Asked Questions (FAQ)
Yes, it’s completely legal. The Reserve Bank of India (RBI) allows Indian residents to invest up to $250,000 per financial year under the Liberalized Remittance Scheme (LRS). You must use authorized channels and report transactions as required.
In the US: Dividends are subject to 15% withholding tax (with W-8BEN form) or 25% (without). Capital gains are not taxed in the US for non-residents.
In India: You must report worldwide income. Long-term capital gains (holding >24 months for equity) are taxed at 10% above ₹1 lakh exemption. Short-term gains at 15%. You can claim foreign tax credit for US taxes paid.
Direct stocks offer more control, lower fees (no expense ratio), and ability to pick specific companies. US-focused mutual funds offer professional management, diversification, no LRS hassles, and SIP facility. Beginners may prefer mutual funds, while experienced investors might choose direct investing.
You can repatriate funds through your broker’s withdrawal process. The money will be converted to INR at prevailing exchange rates and deposited to your linked Indian bank account. There are no restrictions on bringing back original investment plus gains, though large amounts may require additional bank documentation.
If you become an NRI, your existing investments can typically remain as is. However, you may need to update your residency status with your broker. Some platforms may restrict further investments from NRIs, so check their policies. You might consider transferring assets to an international brokerage that serves your new country.
Watch for: 1) Forex markups (0.5-1% above interbank rate), 2) Platform/annual maintenance fees, 3) Inactivity fees on some international brokers, 4) Wire transfer charges for funding/withdrawal, 5) Higher expense ratios for FoFs (double layering), and 6) ADR fees for some foreign stocks listed in US markets.
Some Indian brokers like ICICI Direct, HDFC Securities, and Kotak Securities offer US investing through their platforms, linked to your existing demat. However, these often have higher fees compared to specialized platforms like Vested or INDmoney. Your US holdings will be in a separate demat account (not your Indian one) as they’re held with a US custodian.
For beginners, consider: 1) Broad market ETFs like SPY (S&P 500) or VTI (Total US Market), 2) Indian mutual funds with US exposure (easiest start), 3) Fractional shares of large-cap companies like Apple, Microsoft, Amazon, 4) Sector ETFs like QQQ (NASDAQ-100 tech focus) or VGT (Technology sector). Start with small amounts to learn the process.
Final Thoughts
Investing in US markets from India has become increasingly accessible over the past few years. While direct platforms offer the most control, Indian mutual funds with US exposure provide the simplest entry point for most investors.
Recommended approach: Start with a small allocation (5-15% of your equity portfolio) using the method that matches your comfort level. As you gain experience, you can increase exposure and possibly use multiple methods for different goals.
Remember that currency movements can significantly impact returns. A weakening rupee boosts your dollar returns when converted back, while a strengthening rupee reduces them. Consider US investments as a long-term diversification strategy rather than a short-term bet.
Whichever method you choose, ensure you understand the tax implications, maintain proper records, and stay within LRS limits. Happy investing!
