Key Information before Overseas Investment

International investing may be a more effective means of achieving portfolio diversity for some investors.

When it comes to investing abroad, investors search for more than just native stocks. One of the easiest ways to achieve this is through mutual funds. Investments in foreign shares through mutual funds are now suspended due to the Sebi's $7 billion restriction, which is anticipated to be increased in the near future.

It is possible to invest in individual stocks or ETFs directly by an experienced investor. The direct stock choosing method and its contrast with the mutual fund method are discussed in this section.

Certain Indian brokers/platforms have partnered with overseas brokers to facilitate direct investing in foreign markets. Services such as Vested, Stockal, and Groww enable users to invest in overseas markets.

Another possibility for the investor is to create an account directly with a foreign broker operating in India. Users must, however, verify that the foreign broker is a member of the Securities Investor Protection Corporation (SIPC), which guarantees the user's account up to $500,000 in the case of the broker's bankruptcy.

Prior to initiating international trading, consumers should be aware that fees will apply to funds moved from their Indian bank account to their foreign bank account.

Additionally, the majority of Indian trading platforms enable users to engage in fractional investment, which allows them to purchase a fractional value of a stock regardless of its price.

Direct Investment in Foreign Equities:

The RBI's Liberalised Remittance Scheme regulations apply to direct investment through a broker. An Indian citizen can only invest up to $250,000 per year in this program.

Mutual funds are not included in the plan since they are considered domestic investments by an Indian investor. Furthermore, the cost of mutual fund investments is consolidated into a single ratio.

The bank charges for moving and remitting funds, as well as the brokerage fees associated with each transaction, apply to direct trading. Remittances above Rs 7 lakh in a financial year may be subject to 5% TDS.

Tax on Direct Investing in Foreign Equities:

When made directly, foreign equity investments in mutual funds are taxed as unlisted shares whereas they are treated as debt funds by mutual funds. ITRs for direct transactions must include the specifics of the financial assets bought.

If an Indian investor dies and his or her money is transferred back to India, inheritance tax will be applied to the money invested in foreign stocks. This is important to keep in mind if one were to do direct investing.