NRI Trading Account

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A citizen of India who travels outside of their country for work, business, or any other reason is known as an NRI (Non- Resident Indian). As a resident, you know what are requirements to open a demat account, but what if you are an NRI? Can you then, as an NRI, open a trading account and trade in India? The answer is yes—but can you trade using a regular trading account? No, as an NRI, you require an NRI Trading Account.

What is an NRI Trading Account?

For non-resident Indians (NRIs) who want to trade in the Indian stock market, there is a specific type of trading account called an NRI Trading Account. Through an authorised broker in India, NRIs can purchase and sell Indian stocks as well as other securities like bonds, mutual funds, and derivatives using NRI Trading Accounts. The rules of the RBI (Reserve Bank of India), SEBI (Securities and Exchange Board of India), and other pertinent authorities apply to these accounts.

 

Types of NRI Trading Accounts

Earlier, since the NRI lives in foreign country, they had to appoint a mandate holder or a POA (power of attorney) to manage their accounts. However, today thanks to the internet, several broker’s offer online trading accounts to NRIs. The Indian stock market offers two different kinds of online trading accounts for NRI:

Non-PIS (Portfolio Investment Scheme) Account: This kind of online trading account is for NRIs who desire to make long-term investments in Indian equities and other assets rather than actively trading in the stock market. NRIs may open a Non-PIS Account in India with a bank or broker by providing the requisite documentation and securing the required RBI clearances.

Non-PIS Accounts do not need a separate RBI approval, however the total investment amount is limited to 1% of the Indian company's paid-up capital. Only money sent back from overseas or money from NRE/FCNR(B) accounts can be used for investing by NRIs. Margin trading, shorting, and intra-day trading are not permitted with these accounts.
 

PIS (Portfolio Investment Scheme) Account: NRIs who want to actively trade on the Indian stock market should open this type of account. Under the PIS scheme, NRIs may open a PIS Account with a certified bank that has received RBI approval. With a single trading account, this programme enables NRIs to purchase and sell Indian stocks as well as other securities.

PIS Accounts are subject to a total investment cap of 10% of the paid-up capital of the Indian firm/company and demand separate RBI authorisation. Only money sent back from overseas or money from NRE/FCNR(B) accounts can be used for investing by NRIs. Margin trading, shorting, and intraday trading are all permitted with PIS Accounts.

Requirements to Open an NRI Trading Account Online 

In order to open an online NRI Trading Account in India to trade in the stock market, NRI must first have an NRE (Non-Residential External) or NRO (Non-Residential Ordinary) bank account. The NRI links their NRI trading account to either one of these accounts. The former is an external repatriable account while the latter is a non-repatriable Demat account; if the account is repatriable, the NRI can move funds from India to the country they reside in. 

That said, NRIs must submit the following documents:

  1. A current valid passport or work permit 
  2. a Person of Indian Origin (PIO) or Overseas Citizen of India (OCI) card, as applicable.
  3. a PAN card, which is a document issued by the Indian Income Tax Department.
  4. a utility bill or bank statement as proof of an overseas address
  5. a property tax receipt or rental agreement as verification of an Indian address
  6. a bank remittance certificate or a bank account statement from the NRE/FCNR(B) account

Benefits of NRI Trading Accounts

or NRIs who want to participate in the Indian stock market, NRI Trading Accounts provide a number of advantages, such as:

  1. An extensive access to Indian stocks and other investment instruments and Indian securities
  2. Flexibility to actively trade the Indian markets or make long-term investments
  3. Possibility of utilising foreign currency to invest in Indian stocks
  4. Tax advantages on various investment forms, like bonds and mutual funds
  5. Simpleness of remotely opening and managing an account through web platforms

Conclusion

NRI Trading Accounts have opened up avenues for non-resident Indians to actively participate in the Indian stock market. NRI can either go with types of online NRI Trading Accounts: Non-PIS and PIS. Each caters to different investment preferences and offers various features and limitations.

That said, opening an online NRI Trading Account requires the individual to have an NRE or NRO bank account and submit necessary documents. By linking their trading account to these bank accounts, NRIs can seamlessly manage their investments and repatriate funds if the account is repatriable.

NRI Trading Account FAQS

No, NRIs can only open NRI trading accounts online with Indian brokers or institutions that have received SEBI/RBI approval.

In accordance with the guidelines and regulations of the RBI, NRIs may indeed have both Non-PIS and PIS accounts concurrently.

The majority of instruments traded on the Indian stock market, including derivatives, mutual funds, and shares, are available to NRI investors. They cannot, however, invest in particular securities, including bonds, treasury bills, and government securities.

Opening an NRI trading account does not have a set minimum or maximum investment requirement. The investment cap for PIS and Non-PIS accounts, however, is governed by RBI policies.

Depending on the bank or brokerage business you use, the NRI Trading Account charges in India may change. Account opening costs, annual maintenance fees, brokerage fees, transaction fees, and other regulatory fees are examples of common expenses.

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