India’s largest stock broker by volume, Groww recently announced a halt in its US stocks investment service. In a communication to customers, Groww said that new investments in US stocks would cease after 27 February 2024. Furthermore, customers will not be able to add funds to their US dollar wallets beyond this date. The broker also informed that all withdrawals would be stopped after 31 March 2024, giving customers the choice to either withdraw their funds before this deadline or transfer their holdings to another US broker. Groww later extended this deadline to 30 June 2024.
According to a person with knowledge of the matter, who requested anonymity, the decision to halt the service was influenced by the 20% Tax Collected at Source (TCS) and high costs associated with international remittances.
Transferring holdings to another broker typically involves a cost, which was not specified by Groww at the time of this report. However, a senior executive at Groww, preferring anonymity, mentioned that the company would absorb the migration costs. An alternative option for customers is to withdraw their investments, which would mean selling all their US stock holdings. This action could lead to a tax liability, as selling US stocks within two years of purchase attracts taxes at the slab rate, while sales after two years are taxed at 20% with indexation benefits. Additionally, Indian residents are required to report their foreign assets annually in Schedule FA of their income tax return.
“I was one of the earliest people to sign up for the Groww US stock service. I chose Groww as I already had a very large Mutual Fund portfolio with them. There were no commissions, all was free, there was a small charge on withdrawals,” said a Bangalore-based Groww user who declined to be named. “I have never withdrawn until now as they are forcing me to. It would cost at least a $100 to initiate the transfer (this is standard fees in US for all broker migration). Was quoted this figure by IND Money. Yet to get figures for ICICI etc.”
As of October 2023, Groww had approximately 6.6 million active users in India, with a relatively small number, about 2,000, investing in US stocks.
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The Indian government introduced a TCS on overseas remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) for amounts exceeding ₹700,000 annually. Initially set at 5% in the 2021 Budget, it was increased to 20% from 1 October 2023.
Besides TCS, LRS remittances also incur significant foreign exchange conversion expenses and require extensive paperwork. Despite Groww’s withdrawal, other fintech and brokerage firms like Vested Finance, Stockal, and Indmoney continue to offer US stock investments to Indian customers.
