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.
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:
- Tax 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.
- 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.
Note that tax laws are subject to change and may vary in how they apply depending on the circumstances. You can read more here.
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 fixed fee for the transfer. We do not take any cut from this fee and are working towards reducing it substantially. Currently this fee is 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 Aadhaar number, an image of your Aadhaar card, and proof of address (You can use 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?
Fractional shares allow us to lower the barrier to investing. A fractional share represents less than one full stock. With fractional shares, you can invest as little as you want in any stock. For example, on Dec 14 2018 when Amazon’s share price was $1,591, you could invest $100 and buy 0.06 of an Amazon share.
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.
Furthermore, we partner with an SEC registered broker dealer that is a member of FINRA and SIPC.
What will happen to my account if Vested goes out of business?
Since our broker partner is a member of SIPC, your money and investments are protected by SIPC insurance. Please see the next question for more information regarding this.
Are there any other protections on my account?
SIPC (securities investment protection program) protects against the loss of cash and securities – such as stocks and bonds – held by an investor at a financially-troubled SIPC-member brokerage firm. In other words, in the event our brokerage partner goes under, money and shares held in your account is protected by SIPC insurance. SIPC protects up to $500,000, and includes a $250,000 limit for cash. However, SIPC protection does not cover loss due to market conditions. For more details, please read here.
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 Artificial Intelligence, Blockchain, the China growth story and more. To read more about ETFs, click here.
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