NRI Trading Account Charges, Questions, Guide - India Stock Market

NRIs are allowed to trade only in following trading segments in the India Stock Market:

1. Equity Delivery
2. Equity Derivatives (F&O)
3. Currency Derivatives (F&O)

Note: NRIs are NOT permitted to do intradaytrading (day trading) in equity or derivatives.

Note:

• To invest in stocks on a repatriation basis, you need NRE Bank Account with PIS permission.
• To invest in F&O on a repatriation basis, you need PIS permission and CP Code from clearing agency.
• To invest in stocks or trading in F&O on a non-repatriation basis, you just need an NRO Bank Account linked to your trading and demat account. You don't need PIS permission or CP Code.

1. Equity shares or convertible debenture of Indian Companies
2. Exchange Traded Funds (ETFs)
3. Government Securities
4. Government Treasury Bills
5. Mutual Funds
6. Bonds issued by a public sector undertaking (PSU) in India

Yes, NRIs are permitted to invest in IPO, FPO and other public issues provided the issuer company allows NRI to subscribe to their issue. There is no restriction from RBI on the NRI IPO/FPO investment.

However, generally, the issuer company is reluctant to allow NRIs to invest in IPO /FPO due to the additional compliance requirement on the part of the issuer company to inform RBI on NRI shares allocation. Hence, an NRI should check the Red Herring Prospectus (RHP) of the issuer company to check for NRI eligibility for investment.

Yes, NRIs are permitted to trade in Exchange Traded Currency Derivatives as per RBI circular

Intra-day trading leads to speculation thereby creating volatility in the markets and increasing risk for the investors. Hence as per the RBI guidelines, NRIs are not allowed to do intraday trading in India. However, NRIs can do the Intraday Trading in the F&O segment restricting to square off their positions and not for speculative purposes.

Zerodha brokerage charges for the NRI trading account is flat Rs 200 or 0.1% (whichever is lower) per executed order in the equity segment and Rs 100 per trade in the F&O segment. Besides brokerage, an NRI customer has to pay taxes, clearing fees, exchange transaction charges, PIS charges, etc.

ICICI charges a brokerage fee of 0.50% to 1.25% based on your monthly transactions for equity delivery trading. For Equity derivatives, ICICI charges 0.03% to 0.05% for equity futures and Rs 70 to Rs 95 per trade for equity options.

Stock brokers charge higher brokerage to NRI customers because of additional complexity with NRI trading due to RBI and FEMA regulations.

While trading on a repatriation basis through PIS-NRE Account, every time a customer buys the shares, the broker sends the Contract Note to the bank and then the bank release the funds to the broker.

The process is more complicated when NRI trading on repatriation basis in equity derivatives segments (F&O's). An NRI needs an additional account with Clearing Agents who does the settlement of the trades instead of the broker.

Note:

• NRI's trading with NRO Non-PIS Account is much simpler in terms of managing compliance. The broker does not have to involve banks and clearing agent for trading in equity or F&O.
• Zerodha charges Rs 20 per trade for resident Indian account and Rs 200 per trade brokerage for the NRI trading account.
• ICICI Directcharges 1.25% brokerage for NRI equity delivery trading for monthly transactions less than Rs 5 lakhs. The charges are below 0.50% for resident Indian trading account.

Shares purchased under the PIS route shall be sold on the stock exchange only. Such shares cannot be transferred by way of sale under private arrangement or by way of gift to a person resident in India or outside India.

Once investor opens NRI account, the PIS received is mapped with the trading account. When NRI investor does this, the bank shares the account balance with the broker. This available balance is updated on the trading platform.

When NRI investor buy the shares, the Contract Note is shared with the Bank by the broker. Once bank receives the Contract Note, they transfer the money to the broker.

When NRI investor sells the equity shares, the funds are automatically credited to the NRI Account.

Yes, the PIO and OCI can invest in the same way as NRIs. The rules applicable to NRIs for investing in Indian stock markets get applied for PIO and OCI as well.

As per section 6(5) of FEMA, an NRI can continue to hold the securities which they had purchased as a resident Indian, even after they have become a non-resident Indian, on a non-repatriable basis. However, in case an NRI wishes to make any fresh investments, an NRI cannot use the resident Demat account and is required to convert the existing Demat account to the Non-Resident Demat account.

An NRI can convert the existing Demat account to NRO Demat account for trading on a non-repatriation basis or open a new NRE Demat account for trading on a repatriation basis. Note the shares purchased as resident Indian can be transferred only to the NRO Demat account only and not NRE Demat Account.

Yes, an investor needs to open a new trading account with the broker with the change in their residency status. An NRI cannot invest with a normal resident trading account and requires to open an NRI trading account and a resident Indian cannot invest with an NRI trading account and requires a resident trading account.

Following are the document needed to open the NRI Trading Account. Please note that this list is just for reference. Your broker will provide you the actual list at the time of account opening.

1. Document about your current Status:
   • In case of Indian passport:
     • Valid passport and
     • Place of birth as India and
     • Valid Visa - Work/Student/employment/resident permit etc.
   • In case of foreign passport: Valid passport and any of the following:
     • Place of Birth as India in foreign passport or
     • Copy of PIO / OCI Card
2. The PIS Permission Letter from the respective designated bank for trading on repatriation basis.
3. The PIS FEMA NRE/NRO bank accounts cancelled check leaf.
4. PAN Card.
5. Overseas Address Proof - Driving License/ Foreign passport /Utility Bills/Bank statement (not more than 2 months old)/Notarized copy of rent agreement/ leave & license agreement/ Sale deed.
6. Photograph of Investor.
7. Proof of respective bank accounts & depository accounts.
8. Account opening fee check + Demat Account Opening Fee check.
9. Duly signed account opening forms.

Opening an NRI Investment Account is a complex process and the charges for opening and maintaining the account are high. If you are on a short term assignment and are not a frequent trader, you can use some workarounds to avoid this complexity. Here are few suggestions:

1. If you already have a trading and demat account in India as resident Indian, continue using it. As long as you keep your bank account (which is linked to trading account) as-is and do not convert in NRI account, you should be fine.
2. As an Indian resident in past, if you still have a normal bank account in India (not the NRI account), the easiest way to open a trading account is as a normal trading account (as you are living in India as resident Indian).
3. Note that you will have to provide the required document which shows that you are an Indian resident (i.e. Address proof in India)
4. Open the account on your family member's name who lives in India.

These approaches are commonly used by people who are on short term assignment in foreign or frequently visit oversees i.e. software professionals, students etc. You can still use international address for correspondence. Trading and Demat account can be easily managed online.

Though the above approaches exist as a workaround, it is always recommended to trade via NRI accounts on becoming an NRI. This is to avoid any issues in the future in case of any investigations since the investments done by an NRI are closely monitored by the Government of India.

As such there is no problem with this kind of arrangement (proxy account) as long as the IT Returns are filed (when income exceeds the exemption limits) in the name of the family member who owns the trading account.

Even though you are using the account, technically you don't own the account.

Note that moving money between your personal accounts and your family members account in large amount could also be problem.

Yes, you can open the NRI trading account with the discount broker and move the shares from your existing demat account to new demat account through offline transaction.

Technically, there are no problems in continuing to operate with residential trading/Demat/bank accounts if proper documents are submitted to prove that investments are done in the capacity of resident Indians.

You can open an account in your mother's name but you cannot link your bank account to her trading account. As per law, the trading linked bank account should belong to the same person.

You would have to first transfer funds to your mother's bank account and from there to her trading account for trade.

Following are two main types of bank accounts which can be maintained by NRI / PIO in India:

1. Non-Resident Ordinary Rupee Account (NRO Account)

   Any person resident outside India (including NRI or foreign national or non-Indian origin visiting India) can open NRO bank account with an authorized bank in India for the transactions in Indian Rupees. NRO Account can be of types including current, savings, recurring or fixed deposit accounts.

   NRI/PIO can remit money (transfer money to their foreign account) from the NRO account as long as they paid taxes in India.

2. Non-Resident (External) Rupee Account (NRE Account)

   Any Non Resident Indian can open NRE Account. NRE account is usually opened by NRIs with their resident close relatives in India. The resident close relative are eligible to operate the account as a Power of Attorney holder for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself. NRE Account can be of types including current, savings, recurring or fixed deposit accounts. NRE account is maintained in Indian Rupees.

Both NRO and NRE accounts can be used to trade in the India Stock Market.

Click here to read the detailed comparison of NRE and NRO Bank Account.

To open a Custody Account you need to complete certain documents.

• A Custody Account Opening Form
• A Custody Agreement
• A Power of Attorney granted in favor of Custodian.
• All other standard documents related to Proof of Address, Identity etc.
• If the documents are executed outside India then the consularisation / notorisation is required on all the documents.

No, NRIs do not require any PIS permission to purchase shares in the primary market. The application money can be paid through a regular NRE / NRO bank account or inward remittance.

Yes, NRI can receive the shares in inheritance without any RBI permission. The shares so obtained are to be held on a non-repatriable basis.

As per FEMA, a Non-Resident Indian (NRI) cannot operate and maintain a resident savings account. Hence as soon as an individual becomes an NRI, the existing resident bank account should be either closed or converted to NRO Bank Account. Moreover, when a resident Indian person moves abroad and becomes an NRI, the easiest and efficient way to access and use the money and investments already made in India, is to convert the savings bank account with the Indian bank into an NRO bank account.

The NRO accounts can receive foreign remittances (money transfers from aboard to India), can have a joint holder who is a resident Indian, and RBI also permits repatriations abroad limited by a maximum annual amount.

An NRI Bank account can be either opened online or offline by approaching your bank requesting them for conversion for an existing resident bank account or to open a new NRI Bank account. To open any non-resident account in an Indian bank, it is important to provide proof that the account holder is now a non-resident as defined in the Indian tax laws.

The conversion of a resident account into a non-resident account requires submitting identity proof, NRI status proof, proof of foreign address, and two photographs. The applicant has to provide proof of residence abroad in the form of employment details, student status, dependent visa status, or a copy of the resident permit in the overseas destination. This proof has to be attested by the Indian embassy, notary, or an Indian bank with an overseas branch. If the applicant wants to mention a local Indian address for ease of operation, in addition to an overseas address, proof of such an address should also be provided with attestations.