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Top Indian brokers Zerodha, Groww, Angel One, and Upstox have received IFSCA approval to facilitate US stock investments via GIFT City. This move creates a regulated channel for global investing, though investors must navigate TCS requirements and currency risks.
What Happened
Major Indian brokerage firms—Zerodha, Groww, Angel One, and Upstox—have secured approvals from the International Financial Services Centres Authority (IFSCA). This allows them to offer international stock trading services, specifically focused on US markets, through platforms based in GIFT City (Gujarat International Finance Tec-City). The companies are expected to roll out these services to customers in the coming months, provided they complete technical and compliance requirements.
Why This Matters For Investors
Previously, Indian retail investors accessed US markets through various third-party apps that operated under the Liberalised Remittance Scheme (LRS) framework. The shift to GIFT City offers a more regulated environment. By operating through this financial hub, these brokers can establish a direct, streamlined pipeline for Indian capital to flow into international markets. For the investor, this may simplify the account opening process and improve the integration between domestic and international trading accounts.
Business Models Explained
The structure of these new services varies by broker. Zerodha and Upstox are set to operate as broker-dealers. This means they will act as a primary interface for trades, routing orders through foreign clearing firms such as Alpaca Securities, Interactive Brokers, and ViewTrade International. Conversely, Groww and Angel One will function as Global Access Providers (GAP). This model focuses on providing the gateway for users to connect with US-based platforms, effectively bridging the gap between Indian investors and international brokerage houses like Charles Schwab or Robinhood.
Understanding the Tax and Financial Reality
While the infrastructure is becoming more accessible, investors must account for the specific tax rules involved in foreign investing. Under current Indian regulations, any investment amount transferred via the LRS or similar routes attracts a 20% Tax Collected at Source (TCS) if the amount exceeds ₹10 lakh in a financial year. This tax is not an expense but an advance tax payment that can be adjusted against the individual's final tax liability when filing returns.
Furthermore, gains from these investments are subject to capital gains tax. For holdings of less than 24 months, gains are taxed at the investor's applicable income tax slab rate. For longer-term holdings, the tax rate is set at 12.5%. Investors should factor these costs into their return expectations, as the net profit must cover these tax outflows.
Risks and Monitorables
There are several factors beyond market performance that investors should monitor. The first is currency risk. Since the investment is denominated in US dollars, any depreciation of the Indian Rupee against the dollar could enhance returns, while an appreciation could reduce them. Second, as these platforms are new, investors should watch for the actual user experience, hidden fees, and the reliability of the trading execution systems during the rollout phase.
Finally, the success of this initiative will depend on how efficiently these brokers manage the technical integration with their foreign clearing partners. Any delay in settlement or technical glitches during high market volatility could impact trading operations. Investors should also stay updated on any future changes to IFSCA regulations, as policies governing offshore financial services can evolve.