Zerodha (Trading & Demat Account)
FREE Equity Delivery and MF
Flat ₹20/trade Intra-day/F&O
Zerodha (Trading & Demat Account)
FREE Equity Delivery and MF
Flat ₹20/trade Intra-day/F&O
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NRI (Non-Resident Indian) trading in India offers non-residents of India the opportunity to invest in the growing Indian market. NRI trading in India provides a pathway for Indians residing abroad to invest in the Indian stock markets.
Content:
The Indian government allows NRIs to trade in both the equity and debt markets under certain regulations and guidelines. The Indian equity market offers a variety of trading and investment opportunities. NRIs can invest in stocks, futures and options (F&O), IPOs and mutual funds, and many more instruments.
Non-resident Indians can trade in India if they have a bank account, demat account and trading account. Let us understand in detail the type of accounts NRI requires for trading in Indian markets.
NRI stands for Non-Resident Indian. NRI is a term that refers to an Indian citizen who resides outside India for a period of 182 days or more in a fiscal year.
An NRI is different from PIO (Person of Indian Origin) and OCI (Overseas Citizen of India). However, in terms of trading, they all abide by the same rules and regulations.
The Overseas Citizens of India (OCI) are issued OCI cards by the Government of India.
Below is the list of individuals eligible for OCI Card:
The PIO card scheme was merged with the Overseas Citizen of India (OCI) scheme in 2015. PIO cardholders were advised to convert their PIO cards to OCI cards.
An NRI can invest in India on repatriation or non-repatriation basis. The trading account requirement differs based on this. Thus, before we proceed further, let us understand these two basic terms which may help an NRI assess the type of accounts they would require for trading.
a. Repatriation
Repatriation is the process that allows NRIs to transfer money from their NRI bank account in India to their foreign bank account.
In simple words, NRIs can transfer money from their Indian accounts to their bank account in their country of residence. When funds are repatriated, they are converted from Indian rupees (INR) into the desired foreign currency.
The NRI bank account designed for the repatriation of funds is known as the NRE bank account (Non-Resident External)
For example: Ms. Patel, an NRI living in the United Kingdom, has savings of INR 2,000,000 in her NRE account in India. She wishes to transfer a part of these savings, say INR 1,500,000 to her UK bank account.
The bank converts the INR amount to GBP (British Pounds) at the prevailing exchange rate and transfers the amount to Ms Patel�s UK-based bank account.
b. Non-repatriation
Non-repatriation refers to the process whereby profits, dividends or other income from investments made in India cannot be freely repatriated to the investor's home country. There are restrictions and limits involved in repatriation of such funds.
The NRI bank account designed for investment on a non-repatriation basis is known as the NRO bank account (Non-Resident Ordinary).
NRIs can repatriate up to USD 1 million per financial year from an account after paying the applicable taxes subject to the documents provided supporting sources of funds. Any amount above this limit is considered non-repatriable and must remain in India.
For example: Mr. Gupta, an NRI living in Canada. He has an NRO account in India. He has accumulated INR 5,000,000 (INR 5 million).
Mr. Gupta can repatriate the maximum permissible amount of USD 1 million (or its equivalent in INR). The bank converts the INR amount into USD at the current exchange rate. If the exchange rate is USD 1 = INR 75, he can repatriate a maximum of INR 75,000,000 (equivalent to USD 1 million). The repatriation is subject to the documents submitted supporting the source of funds in the NRO account.
The remaining amount remains in the NRO account in Indian rupees and can only be transferred to Mr Gupta�s account in Canada in the next financial year.
NRI trading is regulated by SEBI and RBI. They have established specific guidelines and frameworks to ensure that NRI investments are conducted smoothly and within legal and regulatory boundaries.
The RBI sets the regulations and guidelines for NRI investments under the Foreign Exchange Management Act (FEMA). It ensures compliance with repatriation rules and monitors foreign exchange transactions.
SEBI regulates the securities markets and ensures that all investments comply with Indian laws. It oversees the functioning of stock exchanges, mutual funds, and other market intermediaries.
FEMA rules (Foreign Exchange Management Act) outline the regulations for NRIs (Non-Resident Indians) concerning foreign exchange transactions and investments in India. FEMA sets guidelines for foreign exchange transactions and ensures that these transactions are conducted legally and transparently. These rules ensure that NRIs comply with Indian laws when repatriating funds, investing in Indian securities and managing bank accounts such as NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts.
NRI has a wide range of choices to invest in India in any of the below:
In this book, we will cover the instruments related to the Indian stock market.
An NRI should also take note of the below list wherein NRI investments are not permitted:
Like any investor requires a demat account, trading account and a bank account to invest in Indian stock markets, an NRI also requires these three accounts. However, the nature of these accounts for NRI are slightly different.
An NRI requires:
Let us understand the basics of these accounts which can help an NRI to know the type of accounts required to invest in different instruments of the Indian stock market.
An NRI bank account is a specially designed bank account for NRIs to manage their money earned within and outside India. An NRI bank account is of two types - NRE and NRO.
An NRE account is a bank account designed for Non-Resident Indians (NRIs) to facilitate the transfer of their foreign earnings to India. This account is denominated in Indian Rupees (INR) but allows deposits in various foreign currencies. The money gets converted in Indian rupees when deposited in this account.
The funds in an NRE account are fully and freely repatriable without any restrictions. And hence this account is known as Non-Resident External (NRE) and is used for repatriable purposes.
An NRO account is designed for NRIs to manage their income earned in India. Account holders can deposit money earned in India and also receive funds from outside. The Indian income could be from various sources such as rent, dividends, pensions, and other forms of earnings.
However, there are restrictions on repatriation from NRO accounts. The funds in NRO account are not easily repatriable and are subject to various conditions, documentations and has a limit.
PIS approval (Portfolio Investment Scheme)
PIS stands for Portfolio Investment Scheme. PIS is a scheme for NRIs by the RBI that enables NRIs to invest in listed Indian companies on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). It allows them to buy and sell shares in Indian stocks. Investments can be made from both NRE and NRO bank accounts.
Under PIS, all trades get reported to the RBI. After opening an NRI bank account, the NRI should approach the bank for the PIS form. Once RBI approves the PIS request, the specified accounts get the tag of PIS account. If the PIS approval was for NRE bank account, it becomes the NRE PIS account and if the approval was taken for NRO account, the NRO account becomes NRO PIS account.
Earlier PIS was mandatory to invest and transact in the secondary market. However,in 2020-21, RBI relaxed the requirement of PIS approval and allowed NRIs to trade without PIS using their NRO account. But still not many brokers offer the facility to trade using NRO Non-PIS accounts.
It is important to note that NRIs can have only one PIS account with any designated bank branch.
An NRI account without Portfolio Investment Scheme approval is a Non-PIS account. The transactions under Non-PIS account are not reported to RBI.RBI allows NRI to invest in
many instruments like IPO, MFs, Debt, Rights, F&O without PIS approval except for equity share trading.
An NRE account without PIS approval is known as an NRE Non-PIS account and an NRO account without PIS approval is known as NRO Non-PIS account.
An NRI Demat account is a demat account for non-residents of India (NRI) that allows NRIs to invest in the Indian equity markets.
An NRI Demat account is similar to the demat account of a resident Indian to hold securities (such as shares, bonds, mutual funds, etc.) in electronic form The main difference is the linkage of NRI Demat account to NRE or NRO account based on repatriation of funds.
The NRI Demat account linked to NRE bank account is called NRE Demat account or NRI Repatriable Demat account and the NRI Demat account linked to NRO bank account is called NRO Demat account or NRI Non-Repatriable Demat account.
AN NRI Demat account can be opened through a bank, broker or depository participant.
An NRI trading account is an account with a stock broker that allows NRIs to invest in the Indian stock markets. For trading, NRIs have to link their trading account with the NRE or NRO bank account based on the basis of their repatriation needs.
An NRI trading account gives online access to NRIs to trade from anywhere across the world.
An NRI trading account linked to NRE account is known as NRE trading account and when linked to NRO bank account is known as NRO trading account.
Now that we know about the basic trading requirements, bank account types, PIS accounts, repatriation and non-repatriation, let us understand the NRI account type required for investing in each asset class/type.
In a nutshell, we can observe that:
NRI Investors Trading in India involves the following:
Yes, NRI can do online trading in India.
To trade in India stock markets, an NRI should open the following accounts.
An NRE account is to trade on repatriation basis and NRO is to trade on non-repatriation basis.
Note: F&O trading is permitted only using NRO non-PIS accounts.
The NRI trading account is an account that allows NRI investors to trade in financial instruments in India. The trading account is opened with a broker. It provides access to trading platforms for trading in securities. The trading account is linked to NRI bank and NRI Demat accounts.
The type of NRI account determines the instrument category in which NRIs can invest.
NRI investors can choose to open any of the following types of accounts and can link with the NRI trading account:
An NRI demat account is a demat account opened by a Non-Resident Indian (NRI), Person of Indian Origin (PIO) or Overseas Citizen of India (OCI) cardholder. It holds securities like stocks, mutual funds, bonds, etc. in electronic format.
NRI Demat account linked to NRE trading and bank account is NRI Repatriable Demat account and NRI Demat account linked to NRO trading account is NRI Non-Repatriable Demat account.
The corporate action benefits like dividend earned on securites in NRI Repatriable Demat account gets credited to linked NRE bank account and benefits earned on securities in NRI Non-Repatriable account gets credited to linked NRO bank account.
The following personnel are eligible to open NRI investment account.
Yes, NRIs are allowed to do share trading in India.
NRIs require PIS approval, an approval from RBI, to invest and trade in equity shares through stock exchanges. The trades under PIS get reported to RBI.
An NRI can open an NRE PIS or NRO PIS account to invest in shares. NRIs also have flexibility to invest using NRO Non PIS accounts. However, not all brokers provide the facility to trade using a Non-PIS account.
NRI trading in the Indian stock market is possible if they follow the established laws of the country.
NRIs are required to open NRI bank accounts (NRE or NRO), NRI Demat account and NRI trading account to invest in Indian markets.
The bank account must be opened with a PIS scheme. PIS is an RBI scheme that enables trading in the Indian stock market.
The type of accounts to be opened depends on the asset class and source of funds that can be used for trading.
Refer below to know the NRI account types required to invest in India.
An NRE (Non-Resident External) account itself cannot be used directly for trading in the Indian stock markets. However, it can be linked to a PIS (Portfolio Investment Scheme) account which allows NRIs to invest in Indian equities (Buy and sell shares in the secondary market). Only the purchase and sale of listed shares are permitted.
With an NRE Non PIS account, NRIs can invest in IPOs, pre-IPOs, ESOPs and mutual funds through an NRE account.
An NRE PIS account is specifically meant for NRIs who wish to trade in the Indian equity markets. It operates under the guidelines of the Portfolio Investment Scheme of the RBI. All trades done through NRE PIS account get reported to RBI.
Yes, a Non-Resident Ordinary (NRO) account can be used for trading in the Indian stock markets.
Earlier, only NRO accounts with PIS approval were allowed to trade in the Indian equity market. However, now NRIs can trade using NRO Non-PIS accounts as well provided their broker facilitates them to do so.
Apart from Equities, NRI can invest in various other instruments in IPO, MFs, Debt, Rights, Bonus, ESOPs, etc, using NRO Non-PIS account.
NRIs can Invest in the Indian stock market based on repatriation and non-repatriation:
Repatriation vs Non-Repatriation
Repatriation:
Non-Repatriation:
NRI status is given to non-resident Indians who meet the following criteria:
Indian citizens working abroad, business people residing overseas, and students studying in foreign countries.
An individual who is not a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan and who:
Foreign nationals of Indian origin who have obtained OCI status from the Government of India.
Difference between PIS and Non-PIS accounts:
|
Feature |
PIS |
Non-PIS |
|
Purpose |
Enables NRIs to invest in listed Indian companies on the BSE and NSE |
Allows NRIs to invest in equity shares, IPOs, mutual funds, and bonds. |
|
Investment Type |
Only equity investments in the secondary market (shares of listed Indian companies). |
Equity shares, IPOs, mutual funds, and bonds. |
|
Repatriation Basis |
Investments can be made on a repatriation basis from both NRE and NRO bank accounts. |
Investments are made on a non-repatriation basis. |
|
Transaction Reporting |
Transactions are reported to the RBI. |
Transactions are not reported to the RBI. |
|
Restrictions on Investments |
NRIs cannot invest in IPOs, pre-IPOs, direct mutual funds, and derivatives. Only equity investments in the secondary market are allowed. |
No restrictions on the type of investments; can invest in equity shares, IPOs, mutual funds, and bonds. |
|
Repatriation of Earnings |
Income or money earned can be freely repatriated abroad. |
Follows the general repatriation rules of NRE/NRO accounts. |
|
Account Requirements |
Requires a separate PIS account with a designated bank branch authorized by the RBI. |
Does not require a separate PIS account; investments can be made through a non-PIS NRO trading account |
|
Applicability |
Applies only to trading on Indian stock markets for the equity segment and for bonds of listed companies. |
This applies to trading on the Indian stock markets for shares and investment mutual funds. |
|
Flexibility |
Restricted to trading in the equity segment on the BSE and NSE; no investment in other instruments such as IPOs, mutual funds, or derivatives. |
More flexible; allows investment in a variety of instruments including equity shares, IPOs, mutual funds, and bonds. |
|
Bank Role |
The banks manage the PIS account and report all transactions to the RBI. |
The banks do not report transactions to the RBI; investments are made via the general banking system. |
NRE and NRO are types of NRI bank accounts designed for different purposes. Let us have a look at some key difference between them
NRE vs NRO account
|
Feature |
NRE Account |
NRO Account |
|
Meaning |
NRI bank account designed to deposit/transfer funds from foreign bank account. |
NRO bank account designed to deposit/transfer funds from foreign bank account or Indian bank account. |
|
Purpose |
To save, hold, park or invest foreign earnings in India. |
Used to manage income earned in India, such as rent, dividends, pension, or any other income received in India in INR. |
|
Account types |
Can be opened in a Saving, current, FD or RD account form |
Can be opened in a Saving, current, FD or RD account form |
|
Repatriation |
Allows transfer of funds (principal and interest) back to the foreign country without any restrictions. |
The interest amount is fully repatriable after paying applicable taxes. The principal amount can be repatriated up to USD 1 million per financial year after fulfilling certain compliance requirements, including payment of applicable taxes. |
|
PIS Accounts |
NRE accounts can be designated as PIS accounts, allowing NRIs to invest in Indian stock markets on a repatriation basis. |
NRO accounts can also be designated as PIS accounts for investing in Indian stock markets, but the investments and returns are non-repatriable, meaning the entire amount cannot be transferred back abroad. |
|
Non-PIS |
NRE Non- PIS account allows NRIs to invest in IPOs, pre-IPOs, and ESOPs. |
NRO accounts can also be used for non-PIS transactions such as IPO, pre-IPO, mutual funds, real estate, government securities etc. |
|
Taxation |
Interest earned on the balance in an NRE account is tax-free in India. |
Interest earned is subject to Indian income tax, which includes Tax Deducted at Source (TDS). |
|
Currency Type |
Maintained in INR. |
Maintained in INR. |
|
Deposits and Withdrawals |
Deposits are allowed in foreign currency only, converted to Indian Rupees (INR). Withdrawals are made in INR. |
Deposits can be made in both foreign currency and Indian Rupees. Withdrawals are made in INR. |
|
Account Holding |
It can be held jointly with another NRI. Cannot be held jointly with a resident Indian. |
It can be held jointly with another NRI or a resident Indian. |
|
Exchange Rate Risk |
Subject to exchange rate risk the account is maintained in INR while the deposits are in foreign currency. |
Also subject to exchange rate risk, but since it can accept deposits in INR, this risk is associated only with the foreign currency component. |
|
Currency Conversion |
Deposits in foreign currency are converted to INR. |
Can accept both INR and foreign currency deposits, which are converted to INR if they are in a foreign currency. |
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