Want to own FAANG stocks? Here’s how

Of late, Indian investors have shown strong intent to spread risk and expand the equity investment horizon to the US as they can now easily own shares of the best companies of the world — from Apple to Tesla. Here are the steps and procedures to put your money in companies that are global leaders in their respective business.HOW TO BUY GLOBAL STOCKS? Retail investors can open an account with brokerages offering a global investing platform or with certain fintech firms like Stockal, Vested Finance or Interactive Broking, among others. Once they open an account with a PAN card and address proof, they will have to transfer the money from their existing bank account to their foreign brokerage account, called remittances of funds. Once the foreign brokerage account is opened and funded, investors can buy global stocks, exchange-traded funds and listed fixed income securities. The settlement cycle for the US market is T+3.WHAT IS THE LIMIT TO INVEST IN FOREIGN STOCKS? Indians are allowed to remit up to a quarter of a million dollars to any country in a given financial year under the liberalised remittance scheme (LRS) which includes current account and capital account transactions. Current account transactions include education, employment, emigration, maintenance of close relatives, medical treatment etc while capital account transactions include gift, donation, investment in foreign securities, acquisition of property and so on. So there is an upper limit of $250,000 but no minimum ticket size to invest in foreign stocks. However, margin trading or leverage of any sort is not permissible. WHAT ARE THE TRANSACTION COSTS? Every brokerage firm has a different cost structure. Most of the domestic brokerages are now offering an annual subscription fee ranging from Rs 999 to Rs 9,999 plus fixed charges for every transaction ranging from $0.1-$3 per transaction or in a percentage form. CAN INVESTORS BUY FRACTIONAL SHARES? Yes, fractional shares allow investors to buy a dollar value of a stock irrespective of its price. This means investors can own a fraction of a share in a stock on the US markets which is not allowed in India. However, investors do not get voting rights on fractions of stocks. CAN INVESTORS TRADE IN FUTURES AND OPTIONS? Indian investors are currently not allowed to trade in future and options, and can’t short sell. However, the buy-sell day trade can be made but not the sell-buy. HOW ARE CAPITAL GAINS ON FOREIGN STOCKS TAXED? There is no income tax on capital gains in the US for foreigners. So investors will have to pay long-term or shortterm capital gain tax in India, depending on which category it falls. However, the US charges a flat 25% tax at source on dividends but investors can claim the benefit under the Double Taxation Avoidance Agreement.

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