Investing in US stocks is now possible through GIFT City, which is regulated by the International Financial Services Centres Authority (IFSCA). According to reports from Personal Finance News, several stock investment platforms in GIFT City have enabled investors to undertake fractional investing in US stocks with as little as $1. This development provides Indian investors with direct access to international markets while maintaining regulatory oversight through the IFSCA framework. The NSE IFSC (International Financial Services Centre), a fully owned subsidiary of the National Stock Exchange, operates an international stock exchange in GIFT City where Indian retail investors have been able to trade US stocks since March 3, 2022. Trading hours align with the New York Stock Exchange, operating from 2:30 p.m. to 8:00 p.m. IST.
For Indian tax residents, capital gains arising from investments in US-listed stocks are taxable in India, as reported by Personal Finance News. Direct investments in US equities are treated as investments in unlisted foreign securities for Indian tax purposes, with a holding period of 24 months applying to determine the nature of capital gains. Gains from shares held for more than 24 months are classified as long-term capital gains (LTCG) and taxed at 12.5%, while gains from shares held for 24 months or less are treated as short-term capital gains (STCG) and taxed at the investor's applicable income tax slab rates. Under the India-US Double Taxation Agreement (DTAA), investors can claim credit for taxes paid in the US, helping to avoid double taxation on dividend income. However, as per Mint, Section 47(viiab) provides an exception when US stocks listed on IFSC exchange are sold by non-residents through GIFT City in foreign currency, where the transaction is not treated as a transfer and no capital gains tax liability arises.
Dividends received from US stocks are generally subject to a withholding tax in the United States, but Indian investors can claim a Foreign Tax Credit (FTC) in India for the tax withheld, as reported by Personal Finance News. The gross dividend amount must be reported as income and is taxable at the investor's applicable slab rate. The FTC is usually claimed by filing Form 67 along with the income tax return, with details of foreign taxes paid and credit claimed disclosed in Schedule TR. For non-residents, dividends from foreign companies typically have no Indian tax incidence and no tax is deducted at source in India, though if taxable due to business nexus, a 20% withholding tax applies. For resident investors, a 10% tax deduction at source (TDS) applies on dividends exceeding ₹10,000 in a financial year, as reported by Mint.
Under the Liberalised Remittance Scheme (LRS) regulations, TCS is not triggered by the value of a specific trade but by the aggregate amount of foreign currency remittances within a single financial year, according to Personal Finance News. For investments made through international platforms, including GIFT City-listed brokerages, a statutory threshold of ₹10 lakh applies per financial year. Remittances up to an aggregate of ₹10 lakh incur a nil TCS rate, while once the total accumulated remittances exceed this limit, a 20% TCS rate is applicable. Fractional investments in overseas securities through GIFT City are generally subject to the RBI's Liberalised Remittance Scheme limit of USD 250,000 per financial year for resident individuals. Common costs involved include forex markup of 0.5-2% on INR or USD, brokerage fees of 0-0.25% per trade, and currency conversion spread of 0.2-2%. As per Mint, the TCS threshold is calculated on aggregate remittances made during the financial year across all channels, not just a particular investment transaction.
