Exploring Investment in US Stocks Through GIFT City: Indian Brokers’ Strategies for Simplifying the Process
India’s largest discount brokerages, including Groww, Zerodha, Angel One, Upstox, and Dhan, are preparing to offer overseas investing through GIFT City. This initiative aims to simplify access for Indian investors looking to purchase global stocks like Apple, Nvidia, Tesla, and SpaceX. While platforms such as Vested Finance, Borderless, and INDmoney already provide overseas investing options, the entry of major brokerages is expected to enhance access to international markets.
Why are brokerages registering in GIFT City
GIFT City serves as a key gateway for Indian investors to engage with overseas stocks. The growing interest in global investing has prompted leading brokerages to establish operations there. Some firms will offer services directly, while others will collaborate with Global Access Providers (GAP), which are registered entities in GIFT City that facilitate access to foreign markets.
When can investors start?
Brokerages are at various stages of launching their overseas investment services. Once available, investors will be able to open an overseas investment account through their broker’s app or website by completing the online KYC process. Funds can be transferred from an Indian bank account under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), which permits resident Indians to remit up to $250,000 per financial year for approved purposes, including overseas investments. Banks will charge foreign exchange conversion fees before investors can begin purchasing international stocks.
Who can invest and what is the minimum amount?
The overseas investment facility will be available to all Indian residents who meet KYC requirements, and NRIs can also invest through GIFT City. There is no high minimum investment requirement; fractional investing allows individuals to start with as little as $1, rather than needing to buy an entire share that may cost hundreds of dollars. However, the availability of fractional investing may vary across different platforms.
What are the charges?
Brokerages or Global Access Providers typically charge a brokerage fee of around 25 basis points, according to Yogesh Darji, Managing Director of HDFC Securities IFSC. Investors will also face foreign exchange conversion charges imposed by banks, usually ranging from 1% to 1.5% per transaction.
How is GIFT City different?
The primary distinction lies in regulation. Companies offering overseas investing through GIFT City are governed by its regulatory framework and must adhere to its rules. In contrast, some existing domestic platforms operate through entities regulated in foreign jurisdictions.
Do investors own the shares
Yes, investors are the beneficial owners of the shares they purchase and are entitled to dividends and other shareholder benefits. Typically, the shares are held in custody by the broker or investment platform on behalf of the investor.
How are overseas investments taxed?
The tax treatment for overseas investments varies depending on whether the investor is a resident Indian or an NRI. Investments made under the RBI’s Liberalised Remittance Scheme (LRS) are subject to a 20% Tax Collected at Source (TCS). However, trades executed on GIFT City exchanges do not incur Securities Transaction Tax (STT).
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