The NRI trading community finds it quite difficult to participate in the Indian stock market for various reasons. The pain point begins with the lack of clarity on how to get started and complications surrounding NRE & NRO account. Due to the lack of awareness on the part of both the stockbrokers and willing traders, the participation has been tepid for a long time. At Fyers, we understand this and we’re doing our bit to make things simple and easy for NRIs to trade. In this post, I will explain all the important things that an NRI needs to know before getting started. To trade in Indian Stock Markets, NRIs should open a savings bank account in India. NRIs often face a situation of maintaining a Rupee account in India.
A glimpse on how an NRI can get started in Indian Stock Markets:
Step 1: Open an NRE/NRO savings bank account
An NRI has an option of opening a Non Resident Rupee (NRE) account and/or a Non Resident Ordinary Rupee (NRO) account. Take note that an NRO account can also be opened by a Person of Indian Origin (PIO) and an overseas citizen of India (OCI).
1. : NRE account holder may repatriate all the funds along with the interest earned at any point of time without having to pay tax on the interest amount. Any NRI can open an NRE account. While in case of NRO account holders, they can repatriate up to $1 million per year including principle & interest.
2. : NRE account is Tax free (no Income tax, wealth tax and gift tax) in India. On the other hand the interest earned and credit balances in NRO account are subject to respective income tax bracket and are also subject to applicable wealth and gift tax.
3. : NRE account can be jointly held with another NRI but not with resident Indian. On the other hand NRO account can be held with NRI as well as resident Indian.
Step 2: Getting a PIS letter from the bank
Before getting the PIS letter, it is important to understand what it really means. PIS stands for Portfolio Investment Scheme. NRIs can purchase/sell shares or convertible debentures under portfolio Investment Scheme (PIS). This letter acts as an approval from RBI to the client to invest in Indian Stock Markets. The process of getting this letter will be taken care of by the bank where you open your savings bank account.
Step 3: Open a Trading & Demat account with broker & connect the PIS letter with the same
You can use account opening forms (Trading + Demat account) from our downloads page. When you open an account with us, you have to provide the PIS letter for the link up. Before printing any account opening forms, do get in touch with us.
1. Document ensuring status of entity
a. In case of Indian passport – Valid passport, Place of birth as India
b. Valid Visa – Work/Student/employment/resident permit etc.
c. In case of foreign passport : Valid passport and any of the following
i. Place of Birth as India in foreign passport
ii. Copy of PIO / OCI Card as applicable in case of PIO/OCI
2. Copy of PIS Permission Letter from the respective designated bank
3. Copy of PAN card
4. Overseas address proof – Copy of Driving License/Foreign Passport/Utility Bills/Bank Statement (not more than 2 months)/Notarized copy of rent agreement/Leave & License agreement/ Sale Deed
5. Indian address proof, if any
6. Passport size photographs
7. Proof of Bank account (a canceled cheque leaf of your NRE or NRO savings bank account)
Step 4: Allocate funds to your PIS account
When the trading account is open with us, you can proceed to trade in Indian stock markets. Procedure to take positions:
1. Allocate funds from your NRE/NRO account to PIS account.
2. The amount which you transferred to the savings bank account is updated in your terminal when the bank informs the same to the broker (FYERS).
3. Your PIS account is debited with the amount of buy positions you take & the same is credited to the brokers account.
4. Similarly, your PIS account is credited with the amount you make from selling positions at the end of the day.
5. Note that two separate contract notes are sent for all your buy transactions and sell transactions at the end of every day. The net amount credited/debited to your PIS will be including all charges that appear on the contract note.
Instruments that an NRI can trade:
a. NRI can purchase securities by subscribing to public issue.
b. He/she cannot take intraday transaction in cash segment.
c. NRIs are allowed to invest in futures & options segment of the exchange out of Rupee funds held in India on non-repatriation basis, subject to the limits prescribed by SEBI.
d. NRI cannot trade in Currency derivative segment of the Exchange.
NRI trading at FYERS
Clients who wish to trade with us are requested to open NRO account with Yes Bank as we are associated with them as of now. We shall tie-up with more banks in the future depending on the benefits that each bank provides to NRI clients.
Our brokerage charges are the cheapest for NRIs in the Indian stockbroking Industry, . To open an NRI account, please leave your details here. For more help and clarification during the account opening process, do reach us at email@example.com.
Things to keep in mind:
1. Stock holding of an NRI can’t exceed 10% in any Indian listed company.
2. Short-term capital gains: 15% on any gain made on stocks sold before 1 year.
3. Any long term gain out of stocks, if held for more than a year are totally exempt for tax.
4. If you wish to map both NRE/NRO accounts with the trading account, you have to take 2 client ID’s with the broker.
5. When you make money in the F&O segment, it is considered as business income as per Income Tax department of India.
Feel free to seek clarifications in the comments section below.
Tejas is the Co-Founder & CEO @ www.fyers.in, the youngest team to get NSE’s broker license. FYERS was started as a mission to enhance the terrain for traders and investors in India. He previously worked at Zerodha, Futures First & has been a professional trader for several years.