Frequently Asked Questions
Can investors from India invest in the US?
YES! Under the Liberalised Remittance Scheme (LRS), the Reserve Bank of India (RBI) allows an Indian resident to invest up to USD $250,000 per year in overseas markets.
What is the LRS?
Instituted by the RBI, the LRS is a set of policies that governs the maximum amount and purposes of remittance. Under the LRS, an individual can annually send up to USD $250,000 abroad without seeking approval from the RBI. The LRS has made it easier for Indian residents to study abroad, travel, and make investments in other countries. For more information, you can read more here.
For the most up to date regulations regarding the LRS please visit here. Please see article 6(iii) for specific LRS regulations regarding investments in equity.
How do I fund my account?
Investments in US equities must be made in USD. You must wire (remit) USD to Vested’s partner bank in the US to fund your account. In order to do this, you must fill out an LRS form (it’s called the A2 form) and submit it to your bank. Do not worry! We will make this process easy for you. When you sign up on our platform, we will guide you through this process.
How will taxes work?
For investors in India, there are two types of taxation events when you have returns from your investments in US stocks:
1.) Taxes on investment gains: You will be taxed in India for this 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.
To qualify as a long term capital asset, the shares of the foreign company must be held for at least 24 months. The gain will then be taxed at a long term capital gains tax rate of 20% (plus applicable surcharges and cess fees), with indexation benefit.
If you hold the shares for less than 24 months, the gain qualifies as short-term capital gain and will be taxed as normal income in India. The tax rate is based on the tax bracket that you fall under, according to your income.
2.) Taxes on dividends: Unlike investment gain, dividends will be taxed in the US at a flat rate of 25%. This means that the company paying the dividend will subtract the 25% taxes before distributing the remaining 75% to the investor. For example, if Microsoft gives an investor $100 of dividend, it will withhold $25 as tax, and will give the investor the post tax dividend of $75. Subsequently, this post tax dividend is included as taxable income in India (as normal income).
Fortunately, 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.
This article is meant to be informative and not to be taken as a tax advice. Tax laws are subject to change and may vary depending on your circumstances. Consult with a finance professional, attorney or tax professional regarding your specific financial, legal or tax situation.
How much can I invest in the US?
In accordance to the LRS, an individual can remit a maximum of $250,000 USD per year for investments.
How do I withdraw money from my account?
You can withdraw cash from your account any time. All you have to do is initiate the withdrawal process from the ‘Withdrawal’ tab on the platform. The money will be wired directly to your bank account in India. It may take 3 – 5 business days for the wire to come through.
Please note that the remitting bank will charge a fee for the transfer. We do not take any cut from this fee and are working towards reducing it substantially. Currently this fee is approximately USD $35. Thus, you must have a minimum of this amount to make a withdrawal.
What documents do I need to open an account?
In order to open an account, you will need your PAN number, an image of your PAN card, and proof of address (You can use Aadhar card, your utility bill, mobile phone bill, bank, or credit card statement. Note: All bills and statements must be within the last 3 months and must have your name on it). The whole process is paperless and can be completed in minutes.
How do fractional shares work?
On the Vested platform you can invest in either full or fractional shares. When your investment is in full shares, our broker partner (DriveWealth) will route the orders to market centers on an Agency basis. When the investment is fractional shares, our broker partner will satisfy the order from its own account, on a Principal basis, at the National Best Bid or Offer (NBBO). NBBO means that DriveWealth cannot add margin to the price. So, if the market price of 1 share of Amazon is $1000, and you purchase 0.1 share of Amazon, you will pay $100 for the 0.1 share. Any orders for both full or fractional shares will be executed via both methods, part as Agent and part as Principal.
As an investor, when you hold fractional shares, you will get fractional dividend (if the company gives out dividend) that is proportional to your fractional ownership. However, you will not have voting rights for the fraction of a share owned.
Who is Vested?
Vested is an SEC registered Investment Adviser. By law, it is our job to act in your best interest. For more information, please see our SEC registration page here. Please note that registration with the United States Securities and Exchange Commission (SEC) or any state securities authority does not imply a certain level of skill or training.
Furthermore, we partner with Drivewealth, an SEC registered broker dealer that is a member of FINRA and SIPC.
What will happen to my account if Vested or DriveWealth goes out of business?
If Vested shuts down, you would still have access to all your cash and securities. Your assets are held at a 3rd party custodian, we do not ever touch or hold your money. We will ensure that direct DriveWealth access is established for you to further buy or sell securities. In the highly unlikely event that both Vested and DriveWealth both shut down, your SIPC insurance kicks in. Each brokerage account opened with Vested is insured by SIPC (Securities Investor Protection Corporation) up to $500,000, this includes $250,000 in cash. For more details, please read here.
How can I verify ownership of the shares?
Share ownership verification works slightly differently in the US than in India. The US follows the custodian model and hence does not have share depositories. As per SEC guidelines, if you want to confirm your share ownership within your Vested account, you can contactDriveWealth, our broker partner, directly at email@example.com. They will be happy to help.
Can I invest in US mutual funds or ETFs?
While we do not offer mutual funds, we do offer ETFs on our platform. ETFs are similar to mutual funds and provide diversification advantages by spreading investing across multiple stocks or asset classes. ETFs are highly liquid and offer transparent pricing as they are traded on exchanges like a stock. On Vested’s platform, we have curated a list of ETFs so that you can gain exposure to exciting themes such as the China growth story, global stock exposure and the rise of the internet
Can I buy derivatives or leveraged (margin) products through my Vested account?
Unfortunately, the RBI does not currently allow money remitted under the LRS to be used for trading derivatives or any kind of leveraged products.
Where can I find your terms of service?
Our terms of service can be found here