NSE NRI Trading

More on NRI Trading

NSE NRI Trading has been gathering a lot of interest lately. With a major chunk of policies working towards Investments in India, correspondingly a larger chunk of the NRI population is looking to make the most of these opportunities in the Indian stock market. 

However, most of them are unaware of how to proceed in this direction.

When you are talking about trading in securities or equities, every person must be aware of the Dos and the Dont’s of the market. Without them, even a safe investment can turn into a risky one.

This is why we will discuss all aspects of NSE NRI trading in this detailed guide for you. You will know how to start and how to go about it while taking care of even the smallest and the most minute intricacies involved.

Are You Qualified for NSE NRI Trading?

To begin discussing NSE NRI Trading and then later opening an NRI Demat Account, let us first understand who is classified as an NRI and is eligible for NSE NRI Trading:

A Non-Resident Indian (NRI) is a person who is a citizen of India but resides in another country, and if not a citizen of India, he is a person of Indian origin.

The qualification of a person as an NRI is set by FEMA regulations. If you are doubtful that you classify as an NRI or not, you can check their regulations.

It is important to note that any person of Indian origin is also entitled to NSE NRI Trading. To qualify as a Person of Indian Origin, you need to fulfil any one of the below criteria:

  1. The person must have had an Indian passport at any time
  2. The parents or any of the grandparents of the person are (or were) a citizen of India.
  3. The person is a husband or a wife of an Indian citizen, or a citizen that qualifies as a person of Indian origin through points a or b.

NSE NRI Trading Investment Products

When you are an NRI, you are given a lot of freedom to invest in a diverse range of sectors.

To start with, NRIs doing NSE NRI Trading can buy shares or convertible debentures of any company that is listed in India through the National Stock Exchange (NSE).

If this is done under the Portfolio Investment Scheme, you can choose the mode between repatriation of funds or non-repatriable funds basis.

Further, you are not just limited to company shares. There are other areas to invest in as well. These include:

  • Government Securities (dated, cannot be bearer securities) or treasury bills
  • Domestic mutual funds (in units)
  • Any bonds that are issued by Public Sector Undertaking (PSU) based in India.
  • The shares of any Public sector companies that are being disinvested. This is done by the Government of India.

Further, NRIs can also invest in Exchange Traded Funds (ETFs). An exchange-traded fund is a collection of securities (for example, stocks) which constantly tracks an underlying asset.

The best part is that for ETFs, they can trade on repatriation as well as non-repatriation basis.

At the same time, it really depends on the country you are currently residing in. For example, a major chunk of stockbrokers do not allow any other investment products other than Equity and there are others, who would allow you to trade in Equity Delivery or NRI Trading in Derivatives ONLY!


How to do NSE NRI Trading?

The best method to do NSE NRI Trading in India is through the Portfolio Investment Scheme (PIS). It is a scheme that was laid out by the RBI to facilitate NSE NRI Trading in India.

Although, you can do NRI Trading Without PIS as well.

Under this scheme, an NRI will have to open a PIS account with the branch of any bank that is approved by the RBI for PIS. This PIS account can be of two types:

NRE Account: NRE is an abbreviation of Non-Resident External account. The funds in this account are fully repatriable to the country of residence of the NRI. Further, there are no tax deductions on the interest in this type of account.

For more information, you can check this detailed review on NRI Share Trading Tax.

NRO Account: NRO is an abbreviation of Non-Resident Ordinary account. The funds in this account are held on a non-repatriable basis. If an NRI wants to shift these funds to a foreign bank account, they will need to get the permission of the RBI.


NSE NRI Trading for Overseas Corporate Bodies

An Overseas Corporate Body (termed as OCB) is any company or an agency where at least sixty per cent of the ownership is of Non-Resident Indians.

These also include trusts that are set up overseas where more than sixty per cent of the interest is held by Non-Resident Indians directly or indirectly.

Prior to 2003, Overseas Corporate Bodies were allowed to take part in NSE NRI Trading. However, with effect from September 16, 2003, these are completely prohibited. No OCB can invest in any company listed on the NSE.

However, the OCBs which had purchased shares prior to this date can continue to do so, just until the time these are sold on the stock market.


NSE NRI Trading Documents

These are the documents that you will be required to submit in order to do NSE NRI trading in India:

  1. Any document that ensures the status of the entity. This includes;
    1. For Indian passport, you will need to give the photocopy of a valid passport which lists place of birth in India. Further, you will also need to provide a valid visa.
    2. For foreign passport, you can provide a copy of the passport if the place of birth is listed as any Indian place. Otherwise, you can provide a copy of the card of Person of Indian Origin.
  2. Portfolio Investment Scheme letter from any bank in India.
  3. PAN Card
  4. Address in the country of residence. For this, you can submit a photocopy of any of the following: driving license, foreign passport, utility bills, bank statements, notarized copy of rent statements, sales deed, leave and license agreements, etc. for utility bills and bank statements, the copy shouldn’t be more than 2 months old.
  5. Photograph
  6. Proof of bank accounts.

For more information, you can check this detailed NRI Demat Account checklist.


NSE NRI Trading Account Documentation Execution

When you are registering for an account, you will need to execute the documentation yourself. An NRI cannot send any other person for the execution of documentation, even if the person holds their power of attorney.

When the NRI is doing the in-person verification, they would have to submit the photocopies of the required documents. These copies have to be attested.

For attestation purpose, you can go to Indian embassy / Consulate General in the country of the residence, Notary Public, court, local banker, judge, or magistrate.


NSE NRI Trading Account Precautions

When you are doing NSE NRI trading, you need to take certain precautions to make sure that you and your investment are safe.

  1. You should make sure that the securities that you are investing in are not in the ban list of RBI. If you invest in such securities, it could incur a fine for you.
  2. You should ensure that clear funds are at hand when you are making purchases.
  3. Before you execute any order to sell, you should check that the securities are available in your account.
  4. The payout of any securities will need to be transferred to the Demat account. You should check that the Demat account is linked to the correct NRE or NRO account. You can open two separate trading accounts for each – NRE and NRO account.
  5. When doing any purchase or sale transactions in the cash segment, you should know that NRIs can settle these transactions on a delivery basis only.
  6. NRIs cannot trade in the currency segment of the exchange. This segment is reserved on for Residents of India.

Keeping this information in mind will make sure that all your NSE NRI Trading transactions are safe. Further, you make the most out of your trading career if you always avoid the precautions that I have listed.

For more information on NSE NRI Trading, stay tuned. Happy Trading!

And in case you are looking to invest in the Indian stock market, let us assist you in taking the next steps forward with the utmost ease.

Just fill in a few basic details to get started:

NRI Trading Account

 

Also Read:

If you wish to learn more about NRI Trading, here are a few references:

 

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