2 min read.Updated: 27 Sep 2021, 12:30 PM ISTNeil Borate
INDmoney is a platform and not a broker. It connects the local banking channel with US brokers. Consumers' US stocks are managed by DriveWealth, and similar brokers, and they get a unique account with this entity
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INDmoney, a fintech platform founded in April 2019, plans to offer US stocks to its customers as rewards for their credit card spends. The US allows holding of fractional shares which makes credit of small amounts of stocks possible.
An INDmoney customer would open a rupee account on the app which would be maintained with INDmoney’s partner bank in India. A favourable deal with the partner bank and use of technology has eliminated the high fixed charges associated with small forex transfers, said Ashish Kashyap, founder and CEO, INDmoney. “Hence your customers can remit small amounts of money to a US broker that we have partnered with for a very small markup (in the order of 5 to 20 basis points) and buy US stocks and bonds. The new rewards programme goes one step further. It credits fractional US shares to your customer's brokerage account (with Drivewealth) linked to the customer's credit card spend. It is over and above what that person would get from his credit card provider and is roughly in the region of a 1-1.5% reward of the monthly spend. The customer's credit card statement gets automatically pulled from their email account based on customer consent and he/she does not have to upload it every month," Kashyap added.
In other words, a customer who who spends ₹1 lakh per month on his credit card will receive US stocks worth Rs1,000-1,500 in the US brokerage account. According to Kashyap, rewards are capped at Rs200 per month.
INDmoney is not charging any money for this service. “Our aim is to make investing in India and global markets at zero commission. And we want to continue this way. Our business model is freemium. While all these services are free, a percentage of people convert to become our ‘Gold members’ so as to access a host of premium services," Kashyap said in response to a Mint query.
Customers opting for this service should take note of two important aspects. First, INDmoney is only facilitating the investment. Since the stocks are credited to a US brokerage account, the investor is reliant on the US broker as the ultimate custodian, if INDmoney ceases functions.
For customer service however, INDmoney says it has a dedicated team. “INDmoney is a platform and not a broker. It connects the local banking channel with the US brokers. Consumers' US stocks are managed by DriveWealth (and similar brokers) and they get a unique account with this entity. DriveWealth is a member of the SPIC (Securities Investor Protection Corporation). SPIC in turn protects customers of SPIC-member broker dealers. Coverage is upto $500000 per customer," Kashyap said.
Second, holding US stocks brings forth an additional compliance requirement in terms of disclosing both the investment value and any income from it in the Indian income tax return. Capital gains on US stocks are taxed at slab rate if the stock is sold within 2 years and at 20% with indexation thereafter. Dividends are taxed at slab rate and the US imposes withholding taxes on them. However, these can be claimed back while filing income tax returns in India under the Double Tax Avoidance Treaty (DTAA) between the US and India.