Things To Keep In Mind When Investing In The US Stock Market
Well, you do indeed need to save money for the future. But merely saving money is not enough. You need to make your money grow. This will help you beat the impact of inflation and create a corpus for your future needs. There are many investment schemes present in the market. Though one of the most popular options is stock market investment. When you invest in the stock market, you buy equity shares of various enterprises. Investing in the stock market today is very easy. You can do so with the help of your Demat account on a computer or mobile app.
Thanks to the latest technology, investing in the US stock market is now viable. Yes, you can buy shares of companies listed on the US stock market. This option allows you to invest in some of the leading companies that you could not access otherwise. But is it easy to make a stock market investment in the US? What things should you keep in mind? Read on to learn more.
Fractional ownership of shares
In India, you can invest at least one share, i.e., no part-ownership. In the US market, the price of one share can go into the hundreds or even thousands of dollars. E.g., Berkshire Hathaway’s share is priced at around $460k, which means around INR 3.75 crores! As an investor from India, it can be hard for you to spare such a huge amount for only one share. Hence, the SEC in the US has made it easy for small investors to own a part of the companies listed on the US stock market. This is known as fractional ownership under stock market investment. Herein, you can own less than one share of a company, and other investors will own other parts of the shares. This way, you can own anywhere from 1% to 100% of a share in the US stock market.
Foreign Exchange
When you invest in the stock market today in India, you must invest in Indian Rupee. Likewise, you will have to use US dollars if you invest in the US stock market. But this means you first need to convert your money into US dollars. Only then will you be able to invest in the US stock market. However, this is where another issue arises.
The exchange rate between the US dollar and the Indian rupee changes every day. Hence, a stock that costs you $100 today might cost you $101 if you invest in it after a couple of days. So, you need to find out about the present exchange rate before you convert your Indian rupees into US dollars. You will also have to pay a markup based on the agent you choose in this process. This is a fee levied by the agent or the bank for currency conversion. This is one more cost that you need to factor in.
Tax Impact
Like the profits you make from the stock market in India, profits from US stock markets are also subject to the tax laws of India. So, to invest in the US stock market, you must be familiar with these laws. This will help you avoid any errors in the future. You can be subject to types of taxes in India regarding the US stock market investment, capital gain tax and tax on dividends.
A common issue that confuses most investors is that of double taxation. As an Indian, you must pay taxes in India. As an investor in the US, you must also pay taxes to the US government. So, will you have to pay the taxes twice? No, there is an agreement between the USA and India known as the DTAA. This treaty deals with the issue of double taxation and how to avoid it. Per the DTAA, Indian citizens who are making an income in the US do not need to pay taxes twice. This means you will only have to pay taxes on your profits in India.
Maximum Amount
Earlier, it was hard to make a stock market investment from India in the US. There were many rules that you had to follow. Recently, RBI has made it easy for Indians to invest up to a given amount outside India. This amount is given as per the rules of the Liberal Remittance Scheme, or LRS. Per the present rules, you can invest or send up to US$250,000 outside India without approval. After that, you will need to get approval from the government. This money can be used for US stock market investment. Hence, you need to make sure that the total amount of money you want to invest in the US is not more than $250k in one year. If you plan to invest more than this amount, you will have to get permission from India’s government.
If you want to invest in the US stock market today, all these points must be considered. This will help you make a wise stock market investment. Though you must learn more about this topic before making a decision. Visit Piramal Finance, which has many articles and blogs to help you learn more about the stock market. This will help you learn skills to make wise investment decisions for your future. Their experts always help you find the best financial products to meet your needs.