I want to invest in US stocks in my father's Name. I am an NRI, father's a resident Indian.

First things first, If you want to hold securities - any securities - You need a Demat Account.

There are two ways to create a foreign demat account for an Indian Resident.

Way (1) Use an Indian Broker - To Create an offshore Demat Account

Many Indian Banks have agreements with the stockbrokers in US to enable buying and selling of shares directly in India.Some of these options include INDmoney, Vested, or ICICI Direct, among others

This way is a convenient way, as your broker is an Indian Company. In case of any problems you can directly visit the bank branch.

But since the agreement of each broker with the foreign stockbrokers are different, you may face restrictions on the type and the number of investment vehicles you can use.Further, the bank will charge you a brokerage fee for your transactions and also charge currency conversion fees.

As a result this way is also a slightly costly way to open an offshore demat account.

Way (2) Use a Foreign Broker - With Presence in India - To create an offshore Demat Account.

In this way, you can select an US based stock broker which has a presence in India. Example include Ameritrade, Charles Schwab, Interactive Brokers, Webull among others.

The fees and brokerages are mentioned on the contract/agreement with these brokers. You should read the fine print and understand the terms before moving on with this agreement.

I have the offshore demat account, what next?

Congratulations, the most hectic part is complete.

Now, you can directly purchase the foreign shares and securities using your own payment channel, or using the payment channel of a relative.

Since in our case, an NRI is investing in the name of his resident father, the NRI can use his payment channel to make the investment.

Won't this Transaction Attract Tax as per the Income tax Act?

As per the Income tax act, tax is not attracted when securities are purchased. Rather, a tax called capital gains tax is attracted when the shares are finally sold, and the investor has made a gain from the activity.

However, since the shares are paid for by someone else, the amount of this payment constitutes "Gift" as per the Income Tax Act. Tax is attracted if the gift is received from a non-relative only, and only when the gift amount is greater than Rs 50,000 (Indian Rupees).

Since in our case, a son is paying for his father - this amount does not attract tax under the Income tax at all.

Precaution: To save some troubles for your father if the Income tax Department haggles him, you can give your father a signed gift deed to forward to the Income tax department, if needed.

Please note Registration of a gift deed of a movable property, especially between blood relatives, is not compulsory; it gets completed on the delivery of possession.

Still, the benefit of registration of a deed of gift is that it can be received in evidence without examining one of the attestors if the person who has executed the deed of gift has not specifically denied its execution.

If you still want to prepare a gift deed, here is how:

How to prepare an Indian Gift Deed?

Since in our case, we have considered both father and son are outside India, and let's say the son has executed the gift deed from America, the father needs to register this gift deed in India when he returns.

Step (1): Prepare a Gift Deed in the foreign country. Sign it in front of a notary official in the foreign country.

Step (2): Sign A power of Attorney, Authorize any person in India (preferably a relative) to register a gift deed in India in your name. Sign it before a notary official in the foreign country.

Step (3): Notarize the above two documents, execute it before consulate general of Indian embassy of the foreign country, and send it your father.

Now any notary/ attorney in India can register a gift deed between you and your son using these documents.

Your Father can sign in place of the receiver (donee) and the relative authorized in your POA can sign in the place of donor to register and execute the gift deed in India.

When is Income Tax Finally Attracted on these activities?

Tax is attracted when:

(1) The shares are paid for by someone who is not a relative. In this case, the total amount of payment is considered as gift and charged to Income tax if it exceeds Rs 50,000.

(For the purpose of this exemption, relative is a person defined under section 2(77) of the Companies Act,2013.

(2) When the Indian resident finally sells the shares?

Apart from brokerage and currency conversion fees, a capital gains tax (rate depending on the type of security purchased or period of holding thereof) is attracted if the Indian Resident has made any gains from this activity.