US ETFs: A Complete Guide for Indian Investors

Last Updated on Sep 30, 2026 by Aishika Banerjee

US ETFs held a record $15.78 tn in assets across 5,463 funds at the end of June 2026, and investors poured over $1 tn into them in just six months. For Indian investors, these funds offer a simple route to the world’s largest stock market without picking individual companies. In this article, we will cover what US ETFs are, how they work, what they cost, how they are taxed in India, and how you can start investing in them on Tickertape.

What are US ETFs?

A US ETF (exchange-traded fund) pools money from many investors and puts it into a basket of assets, such as stocks, bonds or commodities. The fund lists on a US exchange like the NYSE or Nasdaq, and you buy or sell its units during market hours, just like a share of Apple or Microsoft.

Most US ETFs track an index. The SPDR S&P 500 ETF Trust (SPY), for example, holds the same 500 companies as the S&P 500, in the same proportion. When the index moves, the ETF moves with it, minus a small cost. So a single ETF unit can give you a slice of hundreds of companies at once.

How do US ETFs work?

An ETF has two layers of trading. On the stock exchange, investors like you buy and sell units from each other at the market price. Behind the scenes, large institutions called authorised participants create new units or redeem existing ones directly with the fund house.

This creation-and-redemption process keeps the ETF’s market price close to its net asset value (NAV), which is the actual value of the assets it holds. If the price drifts above the NAV, authorised participants create units and sell them, pulling the price back down. The reverse happens when the price slips below the NAV.

The fund house charges an annual fee, called the expense ratio, which it deducts from the fund’s assets. Large US index ETFs charge very little. Vanguard’s S&P 500 ETF (VOO), for instance, has an expense ratio of 0.03%, which works out to $3 a year on a $10,000 investment.

How to Invest in US ETFs from India on Tickertape?

You can invest in US ETFs directly from the Tickertape app or website. Tickertape holds your US investment account with ViewTrade International IFSC, an IFSCA-registered Global Access Provider in GIFT City. Here is how to get started:

1. Create your account: Log in to Tickertape, go to US Stocks and click ‘Get Started’.
2. Complete your KYC: Verify your details digitally through DigiLocker or upload your documents manually. The process usually takes 15–30 minutes.
3. Link your bank account: Connect an eligible bank account to send money under LRS. Supported banks currently include HDFC Bank, Axis Bank, ICICI Bank, Kotak Mahindra Bank and IDFC FIRST Bank.
4. Fund your US wallet: Transfer money from your bank to your US wallet. The funds can take up to 7 business days to reflect, depending on your bank.
5. Pick your ETF and invest: Search for the US ETF you want, check its details on Tickertape, and place your order. You can start with as little as $1 through fractional investing.

Charges on Tickertape

Charge	Amount
Account opening, platform and maintenance fees	₹0
Brokerage	0.15% per transaction (maximum $25)
Deposit fee	1perdeposit(0 for PRO users)
Withdrawal fee	₹0
Regulatory fees	SEC and FINRA fees on sell orders, plus IFSCA turnover and CAT fees

All charges attract GST. See the full list on Tickertape’s US stocks pricing page.

Types of US ETFs

The US market lists ETFs for almost every asset class, strategy and theme. Here are the main categories you will come across:

Type	What it holds
Broad market index ETFs	Stocks in a benchmark such as the S&P 500, Nasdaq-100 or total US market
Sector ETFs	Companies from one sector, such as technology, healthcare or energy
Thematic ETFs	Companies tied to a theme, such as semiconductors, AI, clean energy or cybersecurity
Bond ETFs	US Treasuries, corporate bonds or high-yield debt
Commodity ETFs	Physical commodities or futures, such as gold, silver or oil
International ETFs	Stocks outside the US, including developed and emerging markets
Dividend ETFs	Companies with a record of steady or rising dividends
Factor or smart-beta ETFs	Stocks picked by factors like value, growth, momentum or low volatility
Active ETFs	Portfolios run by a fund manager instead of tracking an index
Leveraged and inverse ETFs	Derivatives that aim for 2x or 3x the daily index return, or the opposite of it

Leveraged and inverse ETFs reset daily, so their returns over weeks or months can differ sharply from the multiple they target. They suit short-term traders who understand that risk, not long-term investors.

Why Indian investors are looking at US ETFs

India makes up only a few per cent of global stock market value, while the US accounts for roughly half of it. Many of the companies that shape everyday life, from smartphones and search engines to AI chips and cloud computing, list only in the US. A US ETF lets you own a share of that growth without researching each company.

The domestic route has also become harder. SEBI caps overseas investments by Indian mutual funds at $7 bn for the industry and $1 billion per fund house. With that limit close to full, fund houses such as Nippon India and Axis stopped taking fresh money into several international schemes in April and May 2026, while Kotak capped fresh investments at ₹1 lakh per PAN a month. When international funds and feeder funds close their doors, investing directly in US ETFs becomes the main way left to add fresh US exposure.

US ETFs vs Indian International Funds

Point of difference	US ETFs (direct)	Indian international FoFs and ETFs
Where they trade	NYSE, Nasdaq and other US exchanges	NSE, BSE or through the AMC
Currency	US dollars	Indian rupees
Choice	5,400+ ETFs across assets and themes	A limited set of schemes
Costs	Expense ratios as low as 0.03% on large index ETFs	Fund of funds charges plus the underlying fund’s fee
Availability	Open, within your LRS limit of $250,000 a year	Often paused because of SEBI’s overseas limit
Price vs NAV	Usually trades close to NAV	Indian-listed international ETFs can trade at a premium when inflows are capped
Remittance	Goes through LRS; TCS applies above ₹10 lakh a year	No LRS remittance needed

Advantages of investing in US ETFs

• Geographical diversification: Indian and US markets do not always move together. Adding US ETFs spreads your portfolio across two economies, which can soften the blow when one market has a rough year.
• Access to global leaders: One Nasdaq-100 or S&P 500 ETF gives you a stake in companies like Apple, Microsoft, Nvidia, Alphabet and Amazon, many of which have no listed presence in India.
• Instant diversification within a theme: Instead of betting on one chipmaker or one bank, a sector or thematic ETF spreads your money across dozens of companies in that space.
• Low costs: Competition among iShares, Vanguard and State Street, which together manage about 70% of US ETF assets, has pushed expense ratios on broad index ETFs down to a few basis points.
• Rupee depreciation hedge: Your US ETFs are priced in dollars. When the rupee weakens against the dollar, the rupee value of your holdings rises, even if the ETF’s dollar price stays flat.
• Liquidity and transparency: Popular US ETFs trade in huge volumes with tight bid-ask spreads. Most publish their full holdings daily, so you always know what you own.
• Small ticket sizes: With fractional investing, you can buy a part of an ETF unit. On Tickertape, you can start with as little as $1.

Risks of investing in US ETFs

• Market risk: An ETF moves with its index. If the S&P 500 or Nasdaq falls sharply, your ETF falls too. Diversification spreads company-specific risk but does not remove market-wide risk.
• Currency risk: The rupee-dollar rate works both ways. If the rupee strengthens, it eats into your returns when you convert them back into rupees.
• Concentration risk: A handful of large tech companies make up a big share of indices like the S&P 500 and Nasdaq-100. A slump in those stocks can drag the whole ETF down, even if the rest of the index holds up.
• Tracking error: An ETF may not match its index exactly because of fees, cash holdings and rebalancing costs. Thinly traded ETFs can also show wider bid-ask spreads.
• Tax and compliance load: You pay 25% US withholding tax on dividends, report foreign assets in your ITR, and track currency rates for every buy and sell to work out capital gains.
• US estate tax exposure: US law treats US-listed ETFs as US assets. If a non-resident holder dies, holdings above $60,000 can attract US estate tax at rates of up to 40%, and the India-US tax treaty does not cover estate tax.
• Complex products: Leveraged, inverse and some thematic ETFs carry much higher risk than plain index funds. Read the fund’s objective and methodology before you invest.

Factors to consider before investing in US ETFs

1. Investment goal and horizon: Decide what role the ETF plays in your portfolio. A broad index ETF suits long-term wealth building, while a sector or thematic ETF adds a targeted bet. Holding for more than 24 months also lowers your tax rate.
2. Underlying index and holdings: Check which index the ETF tracks and look at its top 10 holdings. Two ETFs with different names can end up owning many of the same stocks.
3. Expense ratio: Even small differences in fees add up over 10 or 20 years. Compare ETFs that track the same index before you pick one.
4. Assets under management (AUM) and liquidity: Larger ETFs with high daily trading volumes usually have tighter bid-ask spreads and a lower risk of closure.
5. Tracking error: Compare the ETF’s past returns with its index. A consistently wide gap points to higher hidden costs.
6. Dividend policy: Some ETFs pay regular dividends, which attract 25% US withholding tax. If you prefer growth over income, look at ETFs with lower dividend yields.
7. Overlap with your Indian portfolio: If you already hold international funds, check whether a new US ETF adds anything new or simply repeats your existing exposure.
8. Total cost of investing: Add up brokerage, currency conversion, remittance charges and TCS cash flow, not just the expense ratio.

Taxation of US ETFs for Indian investors

India taxes US ETFs as foreign (unlisted in India) assets. Here is how the rules work:

Income	How it is taxed
Short-term capital gains (held 24 months or less)	Added to your income and taxed at your slab rate
Long-term capital gains (held more than 24 months)	12.5% without indexation
Dividends	25% withheld in the US (after you submit Form W-8BEN); also taxable in India at your slab rate, with credit for US tax paid under the India-US DTAA
TCS on remittance	20% on LRS remittances for investment above ₹10 lakh in a financial year; you can claim it back or adjust it against your tax liability when you file your ITR

A few compliance points to keep in mind:

• Form W-8BEN: This form cuts US dividend withholding from 30% to 25%. It stays valid for about three years, after which you need to renew it.
• Form 67: File this form before your ITR to claim foreign tax credit for the US tax withheld on your dividends.
• Schedule FA: List your US ETF holdings under foreign assets in your ITR every year, even if you did not sell anything.
• Currency conversion: Work out your capital gains in rupees, using the exchange rate on the dates you bought and sold.

LRS limits

Under the RBI’s Liberalised Remittance Scheme (LRS), a resident Indian can send up to $250,000 abroad in a financial year for permitted purposes, including investing in US stocks and ETFs. This limit covers all your LRS remittances together, such as travel, education and gifts.

Tax rules can change. Consult a tax advisor before making decisions based on this section.

Conclusion

US ETFs give Indian investors a low-cost way to own the world’s largest companies, spread risk beyond India and hold assets in dollars. With many international mutual funds closed to fresh money, buying US Liquid ETFs directly under LRS has become a practical route for global exposure.

That said, these funds come with currency swings, dividend withholding, estate tax exposure and extra tax paperwork. Know what the ETF holds, what it costs and how it fits your goals before you invest. You can explore and compare US Liquid ETFs on Tickertape and start with as little as $1.

Frequently Asked Questions (FAQs) About US ETFs