BSE and NSE set up platforms to trade in international stocks from India
The India International Exchange (IFSC) Limited (India INX), Indiaâ€™s first international exchange based in the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City), has announced it will add international stocks to trading, including shares from major US-listed companies via its wholly owned subsidiary India INX Global Access IFSC Limited (Global Access). It proposes to offer stocks from the US, Canada, UK, Europe, Australia, and Japan, covering about 80 percent of the investing universe.
Also, NSE International Exchange, a subsidiary of the National Stock Exchange (NSE), plans to launch trading in US stocks at the Gift City.
Eventually, India INX will in the first phase provide access to over 130 exchanges across 31 countries worldwide covering global exchanges in America, Europe, Asia Pacific and Africa. Some of the exchanges to be offered are NYSE, Nasdaq, LSE, Canadian Securities Exchange, Toronto Stock Exchange, BATs Europe, Euronext France and Tokyo Stock Exchange.
Ashishkumar Chauhan, Chairman, India INX, said, â€œUnder the LRS route, resident individuals can use the India INX platform to transact and invest in global stocks in an easy and convenient manner. The addition of global stocks is a significant step that will bring further investment into the region from investors seeking contracts with a strong emphasis on liquidity and investability.â€
So, domestic retail investors will be able to transact on the platform under the liberalised remittance scheme (LRS) limits prescribed by the Reserve Bank of India (RBI), which allow a resident individual to remit up to $250,000 (Rs 1.86 crore) per financial year.
India INX will roll out the functional details in terms of specifications about the products and will also soon launch trading in international stocks.
Members of India INX can access this facility at no additional membership costs.
NSE has not yet disclosed the US stocks that will be available for trading. The stocks will be listed under an unsponsored depositary receipt (DR) programme. Under this, DR of an underlying security is issued without the involvement or consent of the foreign company.
Transacting in US stocks is popular among domestic investors. Currently, several domestic brokerages facilitate this through a tie up with their foreign counterparts.
NSE has said the proposed framework will make US stocks affordable to retail investors and provide an option to trade in fractional quantity or value. Investors may have to open a separate demat account at the Gift City to transact on the proposed platform.
The exchange said depositories, banks and brokers have already started work on the proposed platform. Initially, NSE International Exchange will offer 50 US stocks for trading.
â€œWith the guidance of IFSC authority and the support of all the key stakeholders involved, we hope to operationalise this product soon,â€ said Vikram Limaye, MD & CEO, NSE.
Compared to existing system of tying up with US brokers, the stocks will be held in your demat account in GIFT City.
How the process works
1. Open an account with a broker registered with NSE IFSC Gift City. Complete KYC.
2. Remit funds through LRS facility for future investments
3. The arrangement will allow fractional ownership, beginning with US stocks
4. The Gift City clearing corporation will settle trades and guarantee the same
You will be taxed in India for capital gain. You will not be taxed in the US. The amount of taxes you have to pay in India depends on how long you hold the investment. 24 months is the long-term capital gain threshold and the tax rate is 20% with indexation benefit.
Below 24 months is short-term capital gain and is taxed according to your income tax slab
Unlike investment gains, dividends will be taxed in the US at a flat rate of 25%. Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA), which allows taxpayers to offset income tax already paid in the US. The 25% tax you already paid in the US is made available as Foreign Tax Credit and can be used to offset your income tax payable in India.