NRI trading on Indian stock markets

NRIs may find it easy to trade on Indian stock exchanges. This can make them extremely wealthy. It can be difficult to identify an NRI. FEMA guidelines state that an individual who has not been in India for at least 182 days within a financial year cannot be considered an NRI. A person who has been in India at least 60 days during the current year and for 365 days in the last four years is not considered an NRI. NRI trading is becoming more popular in recent years.

NRIs have different rules when it comes Indian stock exchanges than resident Indians. Indian stock exchanges can be a bit difficult for NRIs. This article will explain everything you need about trading on Indian stock exchanges for NRIs.

How do I get started

These 4 factors will help you to start your trading journey on Indian stock markets.

1. Open a NRE or NRO savings bank in India

It is important that you open an NRE (Non Resident External Rupee), NRO (Non Resident Ordinary Rupee) or FCNR (Foreign Currency Non Residential). Most people choose to open an NRE savings account rather than an NRO savings. An NRE account can be described as a rupee account. This savings account allows you to send money back home.

It is important to keep in mind that an NRO account is not re-exportable. An FCNR account, on the other hand, is similar to an NRO account but will have foreign currency funds. You can choose to withdraw capital from your bank account directly or use cheques or drafts to fund trades. No additional documentation is required if you have a direct debit from your bank account. If you have a cheque or draft, you will need to submit a FIR (Foreign Inward Remittance Certificate), or a letter typically issued by your bank that confirms the source.

1. Apply to the RBI

After you have opened your savings account in India the next step is to obtain a permission letter (RBI) from the Reserve Bank of India. Before you open your Demat and trading accounts, make sure that this letter is received.

1. Download the PIS letter

The Portfolio Investment Scheme letter (PIS) must be obtained from the RBI. The bank that holds your savings account NRE/NRO/FCNR would normally facilitate this.

1. Create a Demat and a Trading account

It is also important to open a Demat and a Trading account for NRIs in India. This can be done with any brokerage that best suits your needs. You will need to provide your documents and the PIS letter from your bank when you apply for these accounts.

You have the option of opening an NRE or NRO account. It is important to indicate which bank account will be linked to your trading accounts. You will be able to trade in the equity section if you link your NRE account to a trading account. If you map your NRO account to your trading account, you will be able to trade in both the equity and derivative segments.

The documents required to open a Trading and Demat account as an NRI

The first step in opening an NRI trading account is to gather the necessary documentation. The following documents will need to be submitted when you open your NRI trading or Demat account.

- A copy of your PAN card

- Copie of PIS Letter

- Copy the FEMA Declaration

- FATCA Declaration Form

Passport-sized photo

- Proof of overseas address such as utility bills, driver’s license, passport etc.

- Indian address proof (if possible)

- Bank account proof

- Declaration of P.O.Box within your country

- For Indian passports: A copy of the Passport and a Copy of Visa

- Foreign passports: A copy of the passport and a copy of the PIO card

How does NRIs trade?

NRIs trade differently to Indian residents. These are the typical steps involved in trading for NRIs.

1. You will first need to transfer the funds from your NRE/NRO/FCNR savings to your PIS.

2. Once the funds are updated by the bank into your NRI trading accounts, you will be able to purchase any stock. At the close of each trading day, the stockbroker would send a contract to the bank. Your PIS account would be further debited by the bank.

3. If you decide to sell a stock, your brokerage will send your bank a contract note. Your bank will credit your PIS account with the profits from the sale.

How do you trade derivatives?

To trade options and futures, your NRO account (Non Resident External Rupee account) must be linked to your trading account. You can trade on derivatives with the NRO account, which is non-repatriable. To trade options and futures as an NRI, you will need a CP code. Stockbrokers often work with other agencies to assign and facilitate the CP code.

Tax liabilities

The tax liability difference is one of the most important distinguishing factors between Indian residents and NRI investors or traders on the Indian stock exchange. NRI investors are subject to the deduction of the tax at source. Many wonder if NRIs will be subject to double taxation. They may first be taxed in India and then they are taxed at home. It all depends on where the NRI is located. If the Indian government has an ADTT with the NRI's country of residence, the NRI will not be required to pay twice their taxes.

Conclusion

NRIs can trade on India's stock exchange using an NRI trading account. This allows them to take advantage of the huge difference in conversion rates. The process can be a little tedious and requires a lot of paperwork. You can start your NRI trading career in India stock exchange by following a few easy steps and being organized. Angel One can assist you with opening an NRI trading or Demat account quickly and easily.