A Guide To Investing In Apple Stock From India

Apple Inc. is the world's largest technology company in terms of revenue and market capitalization. It is no surprise that the company has been successful in amassing wealth for its investors. If you are looking to invest in Apple from India, there are a few ways to go about it.

One way is to open an overseas trading account with a brokerage firm based in India or a foreign stockbroking company that operates in India. You will need to complete the Know Your Customer (KYC) process by submitting the necessary documents, such as your PAN and Aadhaar Card. Once your account is open, you can add funds and purchase the stocks.

Another way is to invest indirectly through mutual funds or exchange-traded funds (ETFs) that invest in global equities. This is a cost-effective way to invest in Apple shares, as you don't need to open a trading account or pay a deposit.

It is important to note that there are certain rules and regulations that you must follow when investing in the US stock market from India, including adhering to the Liberalized Remittance Scheme (LRS) and foreign exchange rates.

How to buy Apple shares in India

Apple is the world's largest technology company in terms of revenue and the world's most valuable company in terms of market capitalization. As of January 2022, Apple was the first company to hit the three trillion-dollar mark. In addition, Apple has seen massive growth due to its dynamic leadership and its products' popularity in India.

Direct Investment

You can directly invest in Apple shares by opening a US trading account with a platform like Stockal or Angleone. You will need to complete the KYC process by providing documents such as your Aadhaar and PAN card and fulfilling LRS requirements. The RBI allows foreign investments of up to $250,000 each fiscal year.

Indirect Investment

You can also indirectly invest in Apple shares through mutual funds (MFs) and exchange-traded funds (ETFs) in the US equity market via domestic or foreign brokers. This option does not require a trading account or a deposit amount. It is a cost-efficient way to invest in Apple shares, and many brokerage companies hold units of Indian ETFs that track US stock market indices.

Important Considerations

• Ensure you complete the documentation for the Liberalized Remittance Scheme (LRS) and follow the rules and regulations set by the Reserve Bank of India (RBI).
• Indian residents can invest up to $250,000 in an accounting year according to the RBI.
• Transactions to buy Apple shares must be made in US dollars.
• Consider the foreign exchange rates when transferring Indian Rupees to a US trading account.
• Indian investors have the option to buy fractional shares of US-based companies.
• Dividend payments from US stocks are taxed at 25% in the US and are also taxed in India according to your income tax slab rate.
• LTCG tax of 20% is applicable on returns from the sale of shares after two years from the purchase date. Returns from the sale of shares before two years are taxed as per your income tax slab rate.

Direct vs indirect investment

There are two main ways to invest in Apple stocks from India: directly or indirectly. Direct investment involves opening an account with an international broker and buying the company's shares. Indirect investment involves investing through mutual funds (MFs) or exchange-traded funds (ETFs) that invest in global equities.

Direct Investment

Direct investment is the most straightforward method of investing in Apple stocks. You can open a 2-in-1 account through a platform like INDmoney, which allows direct investments in companies listed on American stock exchanges. With direct investment, you have more control over your investment and can choose the exact amount you want to invest. Additionally, direct investment may offer higher returns compared to indirect investment methods like mutual funds or ETFs.

However, there are a few considerations to keep in mind. Direct investment options typically entail higher costs, including fixed foreign exchange conversion costs for each transaction and a high bid-ask spread. You will need to open an account with a brokerage firm, and there may be restrictions on the number of buy or sell orders you can place.

Indirect Investment

Indirect investment through mutual funds or ETFs is a cost-efficient way to invest in Apple stocks. You don't need a trading account or deposit amount to invest indirectly. Mutual funds pool money from multiple investors and invest in a diverse range of shares and securities, including those in the US market. ETFs track an asset, commodity, or index and can provide direct investments in US equities.

While indirect investment may offer lower returns compared to direct investment, it can help reduce risk by diversifying your portfolio. Additionally, investing through ETFs or mutual funds can provide access to US stocks without the need to transact in US dollars, as Indian investors can purchase units of Indian ETFs that track US stock market indices.

How to choose the right brokerage

When choosing a brokerage, it is important to consider several factors to ensure that you make the right decision for your investment needs. Here are some key points to keep in mind:

• Reputation and Regulation: Look for a brokerage firm that is well-established and has a good reputation in the industry. Ensure that the firm is registered and regulated by the relevant authorities, such as the Securities and Exchange Board of India (SEBI), to protect your interests.
• Services and Investment Options: Different brokerage firms offer varying services and investment options. Some firms may provide comprehensive research and educational materials, while others may focus on specific types of investments. Compare multiple brokerages to find one that offers a wide range of investment choices, including stocks, mutual funds, and exchange-traded funds (ETFs).
• Fees and Costs: Brokerage firms typically charge various fees for their services, such as account opening charges, transaction fees, and brokerage fees. Carefully review the fee structure of each firm to understand the costs associated with your investments. Look for firms that offer competitive rates and transparent pricing to ensure there are no hidden charges.
• Customer Support: Opt for a brokerage firm that provides reliable and responsive customer support. This is crucial, especially if you are new to investing. Look for firms that offer multiple channels of communication to ensure you can get timely assistance when needed.
• Technology and Tools: Many brokerage firms now offer online platforms and mobile apps for investing. Consider choosing a firm that provides user-friendly interfaces and robust technological tools to enhance your investment experience.
• Safety and Security: Ensure that the brokerage firm prioritises the safety and security of your investments and personal information. Look for firms that implement robust security measures and have policies in place to protect your investments.

Remember to do your research and compare multiple brokerage firms before making a decision. Consider seeking advice from financial experts or advisors to find the best fit for your investment goals and risk tolerance.

Advantages of investing in Apple

Apple is one of the largest companies in the world, with a market capitalization of trillions of dollars. Here are some advantages of investing in Apple:

Strong Brand and Reputation

Apple is a household name with one of the most recognizable brands in the world. Its strong brand identity has allowed it to market its products with minimal effort and set premium pricing despite the presence of alternative products from competitors. Investing in Apple means investing in its established reputation for producing and selling sought-after products.

Favorable Financial Health

Apple is one of the most valuable companies globally, with a market capitalization of trillions of dollars. It generates substantial profits and maintains sizable cash reserves, allowing it to pursue business expansion initiatives, including next-generation research and development and notable acquisitions.

Demonstrated Track Record

Apple is a transparent company that publishes relevant details about its operations, strategies, achievements, and finances. There is also an abundance of resources from third-party providers, enabling investors to conduct thorough research and make informed investment decisions.

Strong Historical Stock Growth

Apple stock has shown remarkable growth over the years. In 2003, it traded at around $7 per share, rising to approximately $20 per share in 2010. The stock price continued to climb with the release of the iPhone and the iPad, even remaining resilient during the 2007-2008 Financial Crisis and the coronavirus pandemic. The value of Apple's stock has grown by more than 38% over the last two decades.

Commitment to Innovation

Apple has a track record of introducing innovative and disruptive products, such as the iPhone and iPad, which revolutionized the smartphone era. The company has remained at the forefront of remarkable developments in the tech sector and continues to invest in future innovations.

Tax implications of investing in Apple

When investing in Apple stocks from India, it's important to understand the tax implications to ensure compliance with tax regulations and maximize your returns. Here are the key points to consider:

• Capital Gains Tax: If you sell Apple stocks at a profit, you will be subject to capital gains tax. The tax rate depends on how long you hold the stocks. If you hold them for more than 24 months, your profit is considered a long-term capital gain (LTCG) and is taxed at a flat rate of 12.5% plus applicable surcharge and cess in India. On the other hand, if you hold the stocks for 24 months or less, the profit is considered a short-term capital gain (STCG) and is taxed at your applicable income tax slab rate in India.
• Dividend Taxation: US companies often distribute a portion of their profits to shareholders in the form of dividends. The US imposes a 25% withholding tax on these dividends. While you receive only 75% of the dividend, the entire gross dividend amount is considered income for Indian tax purposes. However, the India-US Double Taxation Avoidance Agreement (DTAA) allows you to claim a foreign tax credit, reducing your Indian tax liability by the amount of tax already paid in the US.
• Currency Conversion for Tax Calculations: Converting US dollars to Indian rupees for tax calculations can be complex due to fluctuating exchange rates. The Indian tax authorities use the SBI TT buying rate on the last day of the previous month to determine the conversion rate for tax filing purposes.
• Tax Collection at Source (TCS): If you remit more than INR 7 lakh in a year for investing abroad, there will be an additional tax called TCS on your payments. The current TCS rate is 20%. While this is not an additional tax, it can be adjusted against other tax obligations.
• Documentation and Compliance: Ensure that you complete the necessary documentation, such as the Liberalized Remittance Scheme (LRS) and know your customer (KYC) process. Strictly adhere to the rules and regulations set by the Reserve Bank of India (RBI), which allows Indian residents to invest up to $250,000 in a financial year.
• Transaction Currency: When buying Apple stocks, the transaction must be made in US dollars. Indian investors cannot purchase these stocks with Indian rupees.

Frequently asked questions