Even before Donald Trump staked claim to a second stint in the Oval Office, Elon Musk's Tesla Inc. shares jumped as much as 13% in aftermarket trade on Tuesday.
Musk has been a strong supporter of Trump and part of the inner circle of the Republican candidate's electoral campaign. Then former has even offered the Tesla CEO a position in his cabinet, should he come back to power.
The Tesla stock has run up 36% in the last six months. The counter zoomed late last month to their biggest gain in a decade after four quarter of disappointing earnings and sluggish demand, extending lead his lead at the top of Bloomberg Billionaires Index.
With focus back on the EV maker, here how Indian investors can buy Tesla shares:
Direct Investment
Direct investment in US stocks refers to purchasing stocks listed on the US stock exchange. There are two ways for an Indian investors to directly invest in US stocks like Tesla.
The first option is to open an overseas trading account with a domestic broker that offers access to international stock markets. Brokers like HDFC Securities, ICICI Securities and Kotak Securities are domestic brokers that offer such services.
In order to open an overseas trading account one has to go through a KYC verification and also incur currency conversion fees as funds deposited in the account have to be US dollar dominated.
The second option via the direct investment route is to directly open an account with a foreign broker that has a presence in India like Charles Schwab, Interactive Brokers, Ameritrade, among others.
Indirect Investment
Indian residents that are not keen on investing directly in the U.S. stock market can have indirect exposure by investing in mutual fund schemes that have exposure to international markets and will invest in foreign stocks.
Another way is to invest in exchange-traded funds. An investor can either invest in U.S. ETFs via a domestic or international broker or purchase an Indian ETF of international indices.
How Much Can You Invest?
Under the Liberalised Remittance Scheme, the Reserve Bank of India permits an Indian resident to invest up to $2,50,000, which is around Rs 2.07 crore per year, without any special permissions.
Additional Charges
Tax Collected at Source (TCS): The RBI's Liberalised Remittance Scheme imposes a 5% TCS on remittances exceeding Rs 7 lakh. This tax is applicable only to the portion exceeding Rs 7 lakh, and not the entire sum. Taxpayers can reclaim the TCS by filing an Income Tax Return.
Capital Gains and Dividend Tax: The U.S. taxes dividends at a rate of 25% for Indian citizens. Owing to the Double Tax Avoidance Agreement, an investor can claim credit for taxes paid abroad, so that one does not have to pay tax on the same income twice. While there is no capital gains tax on investments in the U.S., an Indian resident is liable to pay tax on the capital gains in India.
Bank Charges: Many banks impose a fee for foreign exchange conversion and transfers, often including one-time account set-up charges.
Brokerage Fees: Brokerages charge a fee on the buy-and-sell transactions made by investors.
Foreign Exchange Rate: Investing in U.S. stocks from India involves international transactions, so the foreign exchange rate at the time of purchase or withdrawal can affect costs and the number of units allocated.
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