Frequently Asked Questions
How can I start investing in US markets?
Create an account on Geojit.com, powered by Stockal. Your brokerage account will be created with DriveWealth - our US partner for clearing services. It will take 2 business days for your account to get approved if all your information is correct. Once approved, you will have to fund the account by transferring money into the brokerage account from your domestic bank account. Once the funds become available in your brokerage account, you will be able to start investments. Feel free to use the extensive research and support available on the platform. If you wish to sell any of your investments, just click on ‘Withdraw’ any time and all your available cash will be sent over to your domestic bank account.
How much can I invest as an Indian resident?
Currently, you can invest up to USD 250,000 every year in foreign stocks from India. This amount can change, subject to RBI guidelines. So, for now, your investments in US securities are also governed by the same limit.
What are the documents required to transfer Money to invest in US Markets?
The following documents are needed:
- Form A2 along with a declaration form: As per FEMA, Form A2 is required every time the money is sent abroad to declare the amount that is to be transferred. Your bank will file this for you within the LRS filings. Stockal automatically fills this for you - all you need to do is, make sure that the information is correct, then download the filled-in form, sign and upload it back for your bank to file.
- Bank KYC documents: PAN card and your address proof.
What are the tax deductions on my profit or withdrawals?
There is no TDS (Tax Deduction at Source) for your stock market gains in the US. So, when you send money back to your Indian bank account, the broker in the US does not deduct any tax on it. You will have to pay Short-term Capital Gains Tax OR Long-term Capital Gains Tax in India, whichever is applicable. Short-term Capital Gains apply if a security is held for less than 12 months.
A 25% TDS applies only on your dividend earnings. This is when stocks in your portfolio give out dividends to their investors. US and India have a Double Taxation Avoidance Agreement (DTAA). This means that you pay tax only once. For the TDS done on your dividend earnings, you will get W-8BEN from DriveWealth. You can use it while filing your taxes in India to show that you have already paid taxes on this income. W-8BEN is issued on request. You will be able to offset the tax withheld in the US and adjust it with the tax liability in India
Resident & Ordinarily Resident (ROR): For RORs, global income is taxed in India. Thus, you have to pay taxes on all of your earnings from US stock holdings in India.
Resident but Not Ordinarily Resident (RNOR) & Non-Resident (NRI): For RNORs & NRIs, foreign income is taxable only ifit is received in India, or is accrued in India from a business controlled in or a profession set-up in India Thus, if you are an RNOR or an NRI, you have to pay taxes on only those earnings from US stocks which is received in India or which is from a business controlled in or set-up in India like Infosys, Tata Motors etc.
What is Tax Collection at Source (TCS) on Foreign Investments?
As per the Union Budget 2020, under LRS, a 5 percent Tax Collection at Source (TCS) was to be applicable on remittances aggregating to Rs 7 lakh or more in a financial year.
- TCS to apply from 1st October 2020 on foreign remittances
- TCS shall be applicable on amount in excess of Rs 7 lakhs in a financial year and not on the total amount. For example, if the total foreign exchange facility availed under LRS in a financial year is Rs 10 lakh, i.e. you want to remit the amount abroad, a TCS at 5 per cent will be applicable on Rs 3 lakh. (Rs 10 lakh minus Rs 7 lakh) and tax collected will be Rs 15,000
Where is my Overseas Investing account held?
The platform to invest in international securities is provided to you in partnership with Stockal platform. Your investing (brokerage) account inthe US is opened at US brokerage and clearing services firm DriveWealth - a FINRA and SEC regulated brokerage firm. It is a licensed carrying and self-clearing broker offering brokerage services to global investors. DriveWealth is backed by Softbank Group and other leading venture capital firms in the financial services ecosystem.
The custody of your brokerage account, in turn, would be held by one of their custodian partners.
Who is Custodian of my Securities Account?
The securities will be delivered and held by the Custodian account in the broker's name with ledger entry to the Investor in their books and records. In our current arrangement for US securities, Our custodian is Axos Clearing and Citigroup
What is the protection for my A/c?
US brokerage ecosystem recommends that every investor account should have insurance. DriveWealth, is a member of the Securities Investor Protection Corporation (“SIPC”) which currently protects the securities and cash in your Account up to USD500,000 of which USD250,000 may be in cash.Please note that this USD500,000 is not applicable for general losses in the stock market. SIPC says the following: SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a brokerage firm that is a member of SIPC.
Who will be responsible to ensure compliance as per RBI LRS scheme, FEMA Rules, FATCA?
RBI and FEMA compliance is managed directly by the investor's Indian bank as the money is being remitted directly from bank account to US brokerage account. FATCA compliance, as applicable, is managed by Stockal's US brokerage partner. Geojit is not required to manage these as it is just referring the customer.
What are the regulatory reporting requirements and who will be responsible for it?
Regulatory reporting requirements are at the foreign regulator (SEC and FINRA) and at the Indian bank. These are managed by the US brokerage, the respective Indian banks, and Stockal facilitates as and when needed.
What is the digitized user journey/functionality for sending money from customers’ bank account to overseas brokerage account for the purpose of investing, offline logistics for overseas fund remittance and online/on-call tracking of said remittance?
- Customer initiates remittance on Stockal.
- Selects his bank from the list available. Enters account number, customer id. Rest of the info is pre-filled and uneditable.
- Stockal auto-generates bank-specific LRS documentation. This is automatically filled with user details
- User schedules a document pick-up
- Stockal support will call and confirm the pick-up. Executive will pick-up the LRS document as per schedule, making sure it's signed in the right places.
- Document will get delivered to the appropriate (customer') bank and the centralized location wherever Stockal has made the arrangements.
- Stockal will generate LRS ID for user to call and check with Stockal in case of any delays. Stockal internally uses this to manage each LRS remittance with each bank.
Is Geojit responsible for customer KYC, AML or PML filing and handling?
For US brokerage accounts, the referrer (Geojit) does not have the responsibility of doing KYC or following AML/PML filings since the investor's brokerage account is opened directly in the US. All this is handled by the US broker.
Please explain in detail the complete process - the pay-in and pay-out of funds - How will it happen and in which currency?
Sending money: Investor will remit money from his Indian (local) bank account. The LRS debit instruction will be given in USD. Bank will convert INR to USD and remit the funds to the brokerage account in the US.
Receiving money: Investor will give a withdrawal instruction to his brokerage account in USD. Broker's bank will remit USD to customer's Iocal (Indian) bank account. The Indian bank will convert USD to INR and credit the customer's bank account.
Please explain in detail how your proposal is in compliance with regulatory requirements of SEBI/RBI & foreign stock exchanges / foreign regulators.
Foreign stock exchanges and regulators need a fully compliant local brokerage license. In our case, Stockal's US brokerage partner and clearing partners have the requisite licenses and are fully compliant. Stockal is a SEBI regulated advisory entity in India that helps with providing investor support, investor communication and maintenance of data locally as needed.
RBI compliance is managed by banks directly as the investors remit money directly from their bank accounts to brokerage accounts.
Has Stockal obtained applicable approvals from respective foreign stock exchanges, foreign regulators, RBI and SEBI for providing their broking services in India.
Stockal's foreign brokerage partner has the relevant approvals and licenses from FINRA and SEC (US regulatory body) that allow them to onboard customers from most countries all over the world, including India. Indian banks have the AD licenses to remit money from investor's bank accounts to US brokerage accounts under LRS purpose code S0001
How do we ensure the suitability of the products to the investor?
Investors are profiled while opening the account. Stockal, via the US broker, allows only high marketcap securities to be offered to Indian investors so that there is low risk of manipulation. Stockal does not offer derivative products and margin accounts as they are disallowed under LRS.
Are user functionalities for sending money from customers’ bank account to overseas brokerage account ‘digitised’ for the purpose of investing?
HDFC, ICICI and IDFC offer a digitized LRS solution for customers. Rest, small banks like RBL and State Bank of Mauritius (India) are able to do this online on a scanned copy basis. Stockal is working on complete digitization with regulator (RBI) and multiple banks. LRS in India is available with ICICI, HDFC, Kotak, Axis, Yes, RBL, IDFC, SBM. Adding HSBC, Citi, DCB and SBI.
What does it mean when you say “Stockal has offered to provide the facility through which clients will be able to access international markets”?
“Facility” is the combination of:
- Platform to access overseas markets through the process of opening brokerage account, seeing/consuming relevant data about securities, buying and selling securities
- Digitized user functionalities for sending money from customers’ bank account to overseas brokerage account for the purpose of investing
- Offline logistics for overseas fund remittance and online/on-call tracking of said remittance
- Maintaining portfolios, generating investment reports, transaction reports, US tax filed acknowledgement etc.
- Withdrawing money to be sent back to India/personal account
Can a client buy fractional share through Stockal?
Are call and trade facility available with Stockal?
No, Only online trading with client’s login is possible.