Non-Resident Indians (NRI) are allowed to purchase stocks, Mutual Funds, ETFs and convertible debentures of a domestic organization through stock exchanges. Such investments are made through an NRE or NRO trading account.
NRI Trading Account
The guidelines of the Reserve Bank of India (RBI) mandate NRIs to open a trading account (NRE/NRO) with a designated institution (Broker) authorized by the SEBI. To avail benefits of investment, NRI must also open a PIS and NON-PIS account with the designated Institution (Banks) with RBI.
Types of Accounts
NRE/NRO Trading Account:
This account allows buying and selling of equities through the Indian stock exchanges. It is available only for equity segment trading in the Indian share market. Investors can’t use a PIS account to invest in other segments.
It can be further classified as NRE and NRO PIS accounts. NRE PIS account allows transactions where the funds can be repatriated to foreign countries. On the other hand, the NRO PIS account does not allow fund repatriation for executed transactions.
NRE/NRO NON-PIS Account:
To invest in Initial Public Offerings (IPO) or in mutual funds investors must open a non-PIS account. This is, again, classified as an NRE and NRO Non-PIS account. Transactions made through the NRE account can be repatriated, while NRO doesn’t allow repatriation. Moreover, the NRO Non-PIS accounts allow trading in futures and options.
Angel One doesn’t offer non-PIS accounts for NRE and NRO investors.
A PIS account (Portfolio Investment Scheme) is mandatory for NRI investors to settle shares/funds for the investment done through a Trading account. Our customers can open NRE/NRO PIS accounts with designated banks associated with Angel One. Users need to remember that they can open only one PIS account at a time.
Angel One has partnered with several leading Indian banks to offer NRE/NRO PIS account opening. All transactions in the PIS account are reported to the RBI.
Why are two different accounts required for an NRI?
To create a seamless process, you must link your trading NRO trading account to your NRO bank account(non-repatriable account). One must complete the process to manage their funds earned in India. NRO account doesn’t allow the transfer of money overseas; only the principal investment amount is repatriable after you pay taxes.
According to RBI rules, overseas transfer of up to 1 million USD is permitted in one financial year. After TDS is deducted, the interest earned can be transferred to a foreign account.
So in all, adhering to RBI rules and regulations, NRIs are supposed to open two separate accounts for non-repatriable and repatriable investments.
Several banks and brokerage firms offer trading account facilities. With the diversity of options available, investors need the knowledge to make informed choices.
Make sure to keep a few things in mind.
- For easy account opening, choose an intermediary depository with the SEBI.
- Brokers will charge certain account opening and brokerage charges, which you must consider. Choose the option that will cost you the least amount. Find more details regarding Trading & Demat account opening and transaction charges regarding NRI accounts.
- The interface between the bank and Demat accounts should be seamless. The depository participant is expected to provide analytics related to valuation, diversification, profitability, and a direct call of action to the traders.
- The broker or depository you finalize must also have certain plus points, offers, or extra services that set them apart from the competition.
You can determine the best Demat account for NRI based on these factors.
NRI Trading Account Opening
To avail of the NRI Trading account, users need to fill out an application form to the designated branch of an authorized dealer. Moreover, clients must provide all details relating to any transactions done in the primary markets. You should submit the PIS Demat account details along with the application form.
Account Opening Documents
You can find a complete list of documents required for NRIs to open a trading account with AngelOne, here.
With the knowledge of a trading account, NRIs must also understand how settlements for their investment purchases/sales are made. Payments or receipts for investments made on a repatriation basis are completed through an outward or inward remittance through regular bank channels or funds maintained in the NRE/NRO PIS account. If buying/selling happens on a non-repatriation basis, the payment/receipt can be made through the NRO savings account.
Points to remember before opening a PIS account
- • NRI investors can only participate in delivery transactions.
- • Intraday and Buy Today, Sell Tomorrow (BTST) trades are not an option if you are an NRI investor.
- • Funds should be available in the customer’s NRE/NRO PIS account, linked to Angel One, to conduct trades.
- • RBI restricts NRIs from selling shares purchased on the Indian stock exchanges through private arrangements or gifting.
You can research and open an NRO account based on your unique needs and preferences. You may also choose to go with an NRE account, which offers advantages such as repatriation benefits for both interest and principal and tax exemption on interest earned. Once you have accounts ready, you can invest in nearly all sectors, excluding companies in chit funds, print media, plantation, real estate (besides real estate development), transferable development rights and agriculture. Capital gains are taxable at a 15.00% + applicable cess for shares held for less than a year. However, the capital gain tax is exempted if the shares are held for over a year. Generally, the broker will withhold income tax while remitting bank accounts.