For all NRIs who want to be part of the Indian growth story by investing in the Indian stock market, it is mandatory to open NRI trading and demat account. However, the process of opening an NRI account is slightly different from that of residents and challenging too as NRIs have to follow certain Foreign Exchange Management Act (FEMA) guidelines. Are you an NRI and want to open NRI trading account in India but don’t know how? Here is the complete guide for you.
Before we proceed, let us first understand who is a NRI?
Who is a NRI?
Under the FEMA Act of 1999, any person of Indian origin or any citizen of India who stays abroad for business, employment, or other reasons is designated as a non-resident Indian (NRI).
Under income tax regulations, a person is considered NRI if any of the following conditions are met:
- An Indian citizen who has resided in India for less than 182 days in a fiscal year is considered NRI.
- A person who has not been in India for at least 60 days in the preceding year OR, has not been in India for at least 365 days in the four years preceding the preceding year.
Hope now you can clearly see whether your residence status is considered as NRI or not.
Who is Eligible to open NRI Trading Account?
Any non-resident Indian (NRI), Person of Indian Origin (PIO), and Overseas Citizen of India (OCI) cardholder can open a NRI Trading and Demat account in India.
Can NRI trade or invest in the Indian market?
NRI investments are an important source of capital for the Indian economy. Therefore, they are permitted to invest in certain asset classes or investment opportunities. NRIs can buy and sell stocks of Indian companies, bonds, and mutual funds.
NRIs can invest in Indian stock exchanges through the Portfolio Investment Scheme (PIS) – a scheme developed by the RBI that allows NRIs to invest in Indian companies listed on the BSE and NSE. PIS can be opened only at bank branches authorized by the RBI.
At PIS, NRI can link either NRE or NRO bank account with his demat and trading account. Through NRE account, NRIs can invest in Indian companies on a repatriation basis, while through NRO account, investments are made on a non-repatriation basis. Repatriation here means that the proceeds of sale of shares or securities can be freely transferred abroad or outside India.
Learn the difference between NRE and NRO account here.
NRI can also choose to invest without PIS or PINS by mapping NRO bank account. In other words, PIS approval is no longer required for NRI investments made through NRO account. An account without PIS NRO allows NRIs to directly approach the broker to trade or invest on the Indian exchanges.
Can NRI open Demat Account?
Yes, both residents and non-residents can open a demat account in India to hold shares, mutual funds and other securities. An NRI demat account can be an NRE Repatriable demat account or an NRO non-repatriable demat account.
Money from an NRE-Demat account with PIS is free and fully repatriable, i.e., all sale proceeds from shares can be transferred abroad. However, when an NRO account is linked to an NRI demat account, it is referred to as a non-repatriable demat account. In a fiscal year, a principal amount of up to $ 1 million can be transferred abroad. The interest earned is fully repatriable after the deduction of TDS.
As per RBI guidelines, an NRI can invest up to 5% of the paid-up capital in a company. The total investment by an NRI in an Indian company listed on the BSE or NSE shall not exceed 10% of the total paid-up capital.
NRI Trading Account
An NRI trading account allows NRI to buy and sell stocks, IPOs, mutual funds, bonds and other instruments. Thus, the trading account works the same for residents and NRIs.
In the case of PIS enabled NRE trading account, the NRI does not need to transfer money from PIS to his trading account as your broker will update the margins according to the balance in your PIS account.
On the other hand, if an NRI wants to invest through an NRO account without PIS, he will have to transfer money from his NRO bank account to the trading account through Net Banking, NEFT, RTGS or IMPS.
How to open NRI Trading and Demat Account in India?
To invest in the Indian market, NRIs must open a trading account and a demat account. When opening an NRI account, they must comply with the applicable rules and regulations of FEMA.
Many stock brokers in India, including discount brokers and bank-based full-service brokers, offer NRI trading services. Discount brokers offer a 2-in-1 account for NRI (trading + demat), while full-service brokers offer a 3-in-1 account for NRI (NRE/NRO bank account + NRI demat + NRI trading account). Choose the right NRI broker to suit your needs and requirements.
Whether you want to invest as an NRI through PIS or through PIS, the process of opening an NRI trading account is slightly different. Opening an NRI account is offline with most brokers. Here are the details;
- Open an NRE or NRO bank account in India
- To invest through PIS route, obtain a PIS approval letter from RBI authorized dealer banks. Stock brokers also partner with many banks to help NRIs to receive PIS permission. (Skip this step to invest through NRO non-PIS account).
- Get the NRI account opening form from your depository participant or broker.
- Fill out the required details like name, address, bank details (NRE or NRO), and sign it.
- Enclose self-attested copies of required documents for NRI account opening. (Check below)
- Courier the duly filled NRI form along with the documents to the broker’s head office address.
- Once documents are received by the DP, it will take nearly 7-10 days to open an NRI account.
NRI has to pay applicable trading and demat account opening and account maintenance charges to the broker.
NRI Demat Account Opening Documents
Like residents,non-residents also have to provide certain documents as proof to open an NRI demat account in India, listed below:
- NRI's recent passport-size photograph
- Scanned copy of PAN Card
- Duly filled and signed NRI AOF
- PIS letter from RBI
- Copy of Visa or Passport
- Overseas address proof
- Cancelled cheque leaf as a bank proof to your NRE or NRO Account
Note: All of the above documents should be attested by Banker, Notary, Indian Embassy, or any other competent authority.
Best NRI Demat Accounts in India
Among hundreds of stock brokers offering NRI investments, you may be confused about which one to choose. You can find out the right NRI broker by comparing NRI account opening fees, demat account maintenance fees, trading platform features and NRI trading brokerage fees.
If you want to open an NRI trading and demat account, discount brokers are the best for you as they have the lowest or cheapest NRI brokerage fees.
If you want to open a 3-in-1 NRI account and avail additional services like research, investment advisory, PMS, etc., an NRI full service is the right choice.
Know the best NRI trading brokers in India, here
NRI Demat Account Benefits
- NRI Demat account is a one place to keep all bought shares, debentures, mutual funds, ETFs, and more.
- Eliminates physical documentation requirements.
- Fast and seamless transaction as all the shares purchased are safely stored in the NRI Demat account.
- NRI can hold even a single or one share of a company.
Final words
NRIs can invest in stocks, mutual funds, bonds, and other investment vehicles in India. To do so, they must open an NRI demat and trading account by creating either an NRE or NRO bank account. Also, approval from PIS is not mandatory for NRIs as they can even invest through a non-PIS NRO trading account.
