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In recent years, NRI trading has gained popularity as more and more NRIs invest in the Indian market. If you are an NRI looking to trade or invest in Indian stock , then you have come to the right place. This article serves as an important guide to understand everything about NRI trading in India such as who is an NRI, types of NRI trading accounts, NRO vs NRE account, NRI trading rules and regulations, trading restrictions for NRIs when investing in India, and much more!
Before we proceed, let’s first understand whether you qualify as an NRI or not.
As per the Income Tax and Foreign Exchange Management Act (FEMA) guidelines, an Indian citizen who resides overseas or abroad for at least 183 days or more in a financial year, is known as a non-resident Indian or NRI.
NRI can stay abroad for any reason be it business, education, employment, or other.
As an NRI, you may be asking yourself whether you are allowed to invest in companies listed on the BSE and NSE or not. The answer is clearly “yes."
As per SEBI regulations, NRIs are allowed to invest in equities, mutual funds, government securities, treasury bills and IPOs and also trade in equity futures and options.
But again, the question arises: why should NRIs invest in India?
Over the past few decades, India has emerged as one of the fastest-growing economies in the world with an average annual GDP of 6.5-7%.
Therefore, investing in India is proving to be a rewarding opportunity for NRIs. They help NRIs not only to diversify their investments geographically but also to diversify their portfolio across various instruments such as equities, bonds, stocks and even across various sectors and industries.
To trade or invest in Indian stock exchanges, NRIs have to open NRI trading and demat accounts in India. It can be opened with any discount broker or full-service broker who offers NRI trading services.
Let's discuss different types of accounts required for NRI trading;
1. NRE or NRO bank account: NRIs tempted to explore investment opportunities in India must first open an NRI bank account. As an NRI, you can open either a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank account.
Know more on NRE Vs NRO Account
Once you open an NRI bank account, you can choose to invest in India through PIS (Portfolio Investment Scheme) or through PIS. PIS is an RBI scheme that allows NRIs to invest in listed Indian companies on the BSE and NSE. RBI has authorized certain banks to provide the PIS letter to NRIs. All transactions processed through the NRI PIS account will be reported to the RBI.
NRIs are even allowed to invest in India using non-PIS NRO trading account thus PIS is not mandatory and NRIs can even trade without PMS.
2. NRI Trading Account: Trading account acts same for residents and non-residents as it is used to place and execute buy and sell orders. With an NRI trading account, they can buy and sell stocks listed on BSE and NSE, F&O contracts, or invest in mutual funds.
As an NRI, you can link either an NRE or NRO bank account to your trading account to invest on a repatriation or non-repatriation basis.
3. NRI Demat Account: The demat account is opened by NRI to receive delivery of shares and securities in dematerialized form. In this way, all equity and mutual fund investments held by NRI will be safely kept in the NRI Demat Account.
Oopening an NRI trading account is the first requirement to invest in Indian market.
NRI 2-in-1 account: An NRI 2-in-1 account combines NRI trading and NRI Demat account. Top discount brokers in India who are not part of any banking house like Zerodha, Angel One, Fyers, Prostocks, etc. avail NRIs to open a 2-in-1 account.
Although these banks partner with RBI-authorized banks to help NRIs to get PIS permission letter.
NRI 3-in-1 account: It is an integrated platform that combines 3 different accounts; NRI Trading Account, NRI Demat Account, and NRE/NRO Bank Account. The most important benefit of having a 3-in-1 NRI account is it allows seamless fund transfer between NRI trading and bank account.
Full-service brokers like ICICI Direct and HDFC Securities provide 3-in-1 account opening facility to NRIs.
There are many discount and full-service stock brokers offering NRI trading services, but among all it is difficult to find the best NRI trading broker.
NRI discount brokers like Zerodha, Prostocks, Fyers, etc. offer 2-in-1 account and fees flat brokerage fees from NRI clients. Full-service brokers, on the other hand, allow NRIs to open an integrated NRI 3-in-1 account and also offer value-added services such as PMS, research, and advisory services, but charge a fixed percentage of the trade value as brokerage fee.
Want to know the best NRI trading accounts in India? Here is a list of the best brokers for NRI account openings. These brokers are recommended because of the cheapest NRI brokerage fees, zero NRI demat AMC account, diverse investment offerings (stocks, F&O, mutual funds, etc.), and dedicated NRI customer service.
The NRI trading process is somewhat similar to the trading and investing done by an India-based investor. Learn how NRI trading works in India in simple steps;
To get started with NRI trading, the first step is to open an NRI trading and demat account with a stock broker in India. NRIs can link either an NRE or an NRO account to their trading account to transfer and withdraw funds. They can also choose to invest through PIS or not through PIS by mapping an NRO bank account.
Once you have opened a PIS account, you will need to transfer funds from your NRE or NRO bank account to the PIS account. Your bank will notify your broker of the PIS account balance, which will then be updated as a trading limit or margin in your NRI trading account.
However, if you do not have PIS NRO account, you can deposit the money directly to your trading account through a payment gateway, IMPS, NEFT or RTGS.
Place buy or sell orders by logging into your NRI trading account on the mobile app or desktop or web platform. If your NRI account has sufficient funds, your order will be executed.
In case of PIS account, a contract note will be sent by the broker to the respective bank to transfer the funds. When an NRI sells shares from his demat account, his bank account (NRE or NRO) is credited with the net balance after deducting TDS. Settlement of shares will be done within T+1 days.
NRIs have certain trading restrictions, here is a list;
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The NRE Bank Account is Non Resident External Account. Since it is an external account, any money lying in NRE account can remitted outside the country which means the money is repatriable. The money can transfer from NRE to NRO Account. It can be a saving or current account. With this account, NRI has to go through the PIS route to trade in Indian Stock Market.
The NRO Bank Account is Non Resident ordinary Account. With the NRO Account you have restricted repatriation of 1 million USD per annum. The money cannot be transferred from the NRO Account to NRE Account. An NRI with NRO saving account is no longer required to open PIS Bank Account for investment in Indian stock market.
| NRE Saving Account | NRO Saving Account | |
| Account Type | NRE account can be a Saving Account or Current Account | NRO Account can be a Saving or Current Account |
| Average Monthly Balance in Account | Rs 10,000 | Rs 10,000 |
| Repatriation | Principal and Interest earn is fully repatriable | Restricted or partially repatriable (upto $ 1 million in a financial year) |
| Taxation | NRE Account is tax free | Interest earn and credit balance has tax liability |
| Earnings in India | Any type of earning in India cannot be deposited in NRE Account | Earnings in India can be deposited in NRO Account |
| Joint Account | NRE Account can only be jointly open with NRE only | Can be open jointly with NRI or close relative in India |
If you like to open NRI Trading Account, Please leave your information here and we will help you to open account ASAP.
Portfolio Investment Scheme PIS is the scheme of RBI through which an NRIs and PIOs can buy and sell shares and convertible debentures of Indian companies on a recognized stock exchange in India by routing all their transactions through a designated bank branch on repatriation benefit basis.
There are few branches of some Banks that are designated by RBI that an NRI can have accounts with to invest in Indian Share Market.
Non Resident Portfolio Investment Scheme Account is called NRI PIS Bank Account. Any NRI or PIO holder wish to invest in Indian Share Market via NRE account must have a PIS Account with one designated Bank in India. Now with the new RBI circular, you only need PIS letter if you want to map NRE account with trading account. However, for NRO account you are not required to get PIS letter and you can map your NRO Account to Trading account with any Broker.
NRI-NRE Account holder can trade in Equity Delivery and Equity F&O Delivery.
An Intraday Trading is not allowed fro NRIs.
Stock holding of an NRI can't exceed 10% in any Indian listed company subject to overall limit for listed equity shares of each company on repatriation benefit basis. Here is the list and limit on stock holding by NRI.
NRI investment in equity shares of listed company without repatriation benefit is treated at par with resident Indian and there is no upper limit. Please refer the recent amendment in FEMA on RBI website at following link1 and link2
If you intent to trade in Equity Derivatives Segment, you have to come through the custodial route. You will need to open NRO Custody Account. Brokers like Zerodha and ProStocks offer NRO Custody account from ISSL, which is IL&FS Group Company. Your settlement obligation for trades in Equity Derivatives Segment will be done by ISSL from your custody account. ISSL charges custody account management charges and you need to do KYC with ISSL also. Your Broker will assist you in opening your custody account with ISSL. ISSL will permit custody account with assets not less than USD 5000.
To open a Custody Account you need to complete certain documents:
You can request your Bank to close your PIS Account and move to non-PIS way. In such case you need to contact your bank and send broker a revocation letter and closure of PIS acknowledgement copy.
The NRO Trading Account is subject to applicable withholding tax. This withholding tax is known as Tax Deducted at Source. Your broker need to deduct withholding tax and deposit to Tax Department, for that brokers need to take external service of Chartered Accountant.
Banks have authority to redesignate such accounts as resident accounts on return of the account holder to India. When you convert your account in resident account, you will get interest till last date.
As per the latest RBI circular, if you have a NRO (non-repatriable) bank account, you can map that to the trading account and it will be like a normal resident account.
Your Broker will calculate the tax with the help of a CA and deduction will be done by the Bank where you are holding the NRI Account.
Axis Bank, HDFC Bank, Yes bank, SBI Bank, ICICI Bank, Indusind Bank, Kotak Bank.
Unlike resident accounts, there is a huge manual process supporting NRI clients. There is incremental efforts involved in all NRI trades including updating balances, reporting contract notes, reconciling receipt/transfer of funds etc and hence the higher charge.
This can’t be done before opening your NRE Bank account, as you want to move fund back to Canada. So in your case –
Step1: To open an NRE bank account with any of the Indian banks in Canada.
Step2: Open and NRE Trading and Demat account. You can follow a list of documents and forms on our NRI Articles.
Step3: Submit dematerialization request for your physical shares.
Step4: Once you have Shares in your demat account, you can exit and get your money in NRE bank account.
Step5: You need to take care of taxation in India and Canada for such income.
