Have you ever wondered how NRIs invest in Indian Markets? Are they required to have the same demat account as Indian residents do? Are there different regulations for the same? Let us answer all your questions in the article below.
By the definition, Non-Resident Indian (NRI) means a “person resident outside India” who is a citizen of India or is a person of Indian origin”. In certain ways, NRIs have rights to invest in India just like normal citizens. But since they are abroad, they have different sets of regulations and guidelines. Foreign Institutional Investors (FII), People of Indian Origin(PIO) and NRIs can acquire shares and debentures of the Indian companies under Portfolio Investment Scheme (PINS/ PIS) of RBI. All they need is a NRE/NRO bank account, a demat account and a trading account.
- The NRIs can invest through either NRE or NRO account.While the NRE account is an external account and hence Repatriable (ability to move liquid financial assets from a foreign country to an investor’s country of origin), the NRO account is a resident account and hence the funds are non-Repatriable beyond the limit of $1 million per year. Once a bank account is in place, the next step is to get the PINS approval from RBI.
- The Portfolio Investment Scheme (PINS) is a permission letter given by the RBI to trade in Indian equities and the NRI can open trading account and demat account with a broker.
- Once the requisite documents are submitted and the PINS letter is obtained, the NRI is ready to open the trading cum demat account with a broker.
Regulations regarding NRI trading/investments in shares
- Intraday trades are not allowed for NRI clients. Therefore, they cannot square off their losses the same day.
- Clients can trade only on Delivery basis.
- All contract notes of either Buy or Sell have to be reported to the Authorized Dealer ( PIS Banker) within 24 hours of transactions.
- Every sale transaction will be credited to the client Bank account Net of tax, depending on the gains i.e, short term or long term capital gain tax.
Brokers in India that support NRO/NRE Accounts
Many renowned brokers in India provide services to NRI clients. These include Zerodha, Kotak Mahindra, Motilal Oswal, IIFL, Upstox, 5 Paisa, Trustline etc.
As brokers change their policy anytime at their discretion, advise you to tell the user to check with the broker before opening an account with them.
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