Published on Sunday, March 15, 2015 by Chittorgarh.com Team | Modified on Thursday, December 6, 2018
If you are a NRI, looking for investment in Mutual Funds or trading in the Indian stock market, you came at the right place.
Yes, the NRI's can invest in equity shares, etf, debt funds, mutual funds and IPO's in India. NRIs can also trade in Equity Derivatives (F&O) at the exchanges like BSE, NSE and MCX. NRI's are permitted by RBI to invest and trade in the India Stock Market through the PIS route and CP route. Note that the NRI's are not permitted to trade in Currency Derivatives.
In this article we will try to address common questions asked by the NRI's regarding investment and trading in the India Share Market. We will also explain the process of opening the trading and Demat account for NRIs. This could be your best NRI trading beginners guide.
Note: RBI has provided guidelines for trading and investments by NRI customers in India. Each broker in India interprets the RBI guideline in a different way. This results in the confusion in terms of offerings. It is important ask as many questions as you could before opening an account with a broker.
Let's begin this article with a clarification about who is qualified as NRI.
NRI (Non Resident Indian) is Indian citizen holding an Indian passport and has temporarily immigrated to another country for six months or more for employment, residence, education or any other purpose. NRIs can maintain bank accounts in India, Invest in shares, and deposits with Indian companies and invest in immovable properties in India. A person of Indian origin (PIO), who were born in India or other countries but have Indian ancestry but is not a citizen of India and is the citizen of another country.
A trust and a partnership firm incorporated outside India and owned and controlled by non-resident Indians, may also acquire and hold, on non-repatriation basis, equity shares in an Indian company.
In June 2013, SEBI instructed, the PIS route, a foreign investment route to simplify the registration and investment procedure by bringing all categories of foreign investors under a single channel called PIS.
Foreign investors investing under the PIS route are classified in to three categories; category I, II and III investors and the Know Your Customer (KYC) procedures varies by them.
To trade in stock market in India, NRI investor has to open 3 different accounts and link them together.
The NRI Equity Trading account include:
There are 3 types of financial institutions in India whom with you can open these accounts:
Some of the banks in India (ICICI, HDFC, Kotak etc.) offers 3-in-1 account. This means all 3 accounts can be opened with the same financial institution. These accounts are extremely popular because of the seamless transactions among the accounts. The ease of use comes at the cost of higher AMC and brokerage charges. Note: ICICI Bank is no more allow opening online 3-in-1 NRI account from forign land. If you are an NRI and present in India, you could open the NRI 3-in-1 account with them.
Some brokers in India offers 2-in-1 account which include a trading account and a Dmat account. These brokers also have an exclusive partnership with a specific bank for seamless-integration. (i.e. Sharekhan offers 2-in-1 account and have partnership with HDFC for NRI Bank Account). These brokers are cheaper than the brokers who offer 3-in-1 account.
These brokers are specialised in trading only and provide only trading account. They offer excellent trading platforms, extremely cheap brokerage fees and free softwares for trading. They have exclusive partnership with the DP service provider (for demat account) and the banks (for NRI bank account).
ProStocks, a Mumbai India based discount broker offers 2-in-1 NRI trading account. They offer excellent trading platform and cheapest brokerage charges for NRI (Rs 100 per trade).
Note that along with these account, based on the trading segments you are interested to trade, you may need the PIS and the CP codes. The Bank helps you to get the PIS along with the NRI Account and DP Service provider helps you to get the CP Code for F&O trading.
Here are the step by step guide to open these accounts:
Contact any bank in India (or its foreign branch) which offers the NRI Bank Account under the PIS (Portfolio Investment Scheme). The account is called NRE (PIS) Account.
NRI needs approval by the RBI for open this account though the PIS route. Banks whom which you are opening the account usually takes care of it. Once you get the necessary approvals through the bank, you will be given the PIS (Portfolio Investment Scheme) Letter. This PIS letter is required to open the trading and demat account.
ICICI Bank, Axis Bank, HDFC Bank, Kotak Bank etc are the popular banks offering NRI Bank Account.
Choose the right broker and contact them to open the trading account and Demat account.
If the stock broker doesn't offer the Demat Account Services (DP Services), they direct you to the preferred DP service provider (i.e. IL&FS). You can open the Demat account with the DP service provider and link it to the trading account.
That's it. Once you have the NRI Bank Account, the Demat Account and the Trading Account opened and linked together, you are all set for trading.
Note: If you are interested in trading in F&O segment, please read the next section for additional requirement.
Yes, NRIs are allowed to trade in Futures and Options segment (F&O). It has to happen through the Custodial Participant (CP Code) facility offered by the exchange. Along with opening a trading account with a broker, you will need to get a CP code for yourself (through a custodian).
Trade in F&O's for NRI is quite a complex process. Based on the feedback from people who have gone through this process, getting a CP code itself is difficult.
To trade in equity derivatives (Equity Futures and Options segment):
I was trading in F&O segment with my broker in India but now I moved to Dubai. Can I continue using the same trading account?
Yes you can continue using the same account. If your residential status has changed to NRI with your bank account, then you will need to open a NRI trading account too.
|Broker||Account Opening Charges|
|ICICI NRI Account Opening Fee||Rs 4000|
|ICICI NRI Bank Account AMC||Rs 1000 per year|
|Kotak Security Account Opening Fee||Rs 3750|
|Kotak NRI Bank Account AMC||Rs 1000 per year|
|Kotak NRI Demat Account AMC||Rs 75 + tax per month|
|ICICI||Equity Delivery||1.25% to 0.50%|
|Equity Future||0.05% to 0.03%|
|Equity Options||Rs 95 to Rs 75|
|Kotak Securities||Equity Delivery||1%|
|Zerodha||Equity Delivery||Flat Rs 200 per trade|
|Equity Derivatives (F&O)||Flat Rs 200 per trade|
RKSV, the 2nd largest discount broker by number of clients started offering NRI Trading and Demat account services since Jan 2016. The one time account opening charges by RKSV for NRI trading account are explained as below:
1. What all trading segments are available for share trading to the NRI's in India?
NRI's are allowed to trade only in following trading segments in the India Stock Market:
Note: NRI's are NOT allowed to trade in Equity Intraday segment (day trading) and Currency derivatives.
2. What all investment instruments are available for NRI or PIO Card Holders in India?
3. Can NRI apply in IPO, FPO or other public issues?
4. Can NRI trade in currency derivatives?
No, NRI's are not permitted to trade in Currency F&O's.
5. Why 'Day Trading' is not available for NRI's in India Stock Market?
The Equity Intraday Trading is not allowed to NRI's by RBI. The NRIs can do the Intraday Trading in F&O segment.
6. How much brokerage does Zerodha charges to NRI account holders?
Zerodha, the popular discount broker charges flat Rs 200 or 0.1% whichever lower per executed order in all segments including equity cash and F&O.
7. What are ICICI NRI account brokerage charges?
ICICI charges brokerage fee of 1.25% to 0.50% based on your monthly transactions for equity delivery trading. The ICICI brokerage charges are explained below in another section.
8. Why does broker charges higher brokerage for NRI trading account?
ICICI Direct charges 1.25% brokerage for NRI equity delivery trading for monthly transactions less then Rs 5 lakhs. The charges are below 0.50% for resident Indian trading account.
Zerodha, the largest discount broker in India charges Rs 20 per trade for resident Indian account. Zerodha charges Rs 200 per trade brokerage for NRI trading account.
The higher brokerage charge is because of extra complexity the NRI accounts add for the broker.
When NRI customer buy the shares through the broker, the broker send the Contract Note to the bank and then only bank release the funds to the broker. This causes an incremental effort to service a NRI and thus the higher brokerage charges.
The process is more complicated if NRI trades in equity derivatives segments (F&O's). As there is a separates clearing or settlement process for NRI's through CP codes.
9. Can I transfer the shares I bought though the PIS route as NRI to another demat account?
Shares purchased under the PIS route on the stock exchange 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.
10. How does money get transferred between my Trading Account and my NRI Bank Account?
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.
11. Can PIO (Person of Indian Origin) and OCI (Overseas Citizen of India) invest in the India Share Market?
Yes, in the same way as NRI. This article is very well valid for the PIO and OCI card holders.
12. In case a person who is resident in India becomes a non-resident, will he be required to change the status of his holding from Resident to Non-Resident?
As per section 6(5) of FEMA, 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.
13. In case a non-resident Indian becomes a resident in India or vice versa, will he/she be required to open a new trading account?
Yes, the investor has to open a new trading account with the broker.
14. What are the documents required to open a NRI 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.
15. Is there an easy way around to avoid the complexity of NRI Trading Account opening and handling?
Open NRI Investment Account is complex and 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:
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.
16. I have a trading account with my broker whom I don't like. Since I moved to abroad and become the NRI, I was thinking of converting my trading account into NRI account. But after reading about complexity involve with NRI trading account, I decided to open a regular trading account with another broker in the name of my family member in India. Will there be any problem?
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.
17. I was using an ICICIDirect Trading and Demat account when I was resident Indian. My status is now changed to NRI and I wish to open it with discount broker. Can I transfer my existing holdings to the new broker?
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.
18. What are the negatives of operating the resident trading and demat account instead of NRI?
As such there is no problem in continue operating the residential trading/demat/bank accounts.
19. I am NRI. As the services being offered to NRIs by brokers in India leads to a lot of additional charges, I am planning to open the trading and demat account on my mother's name who lives in India. Now, while opening the account with a broker, in the bank account details section can I put my NRI account number while the demat and trading will belong to my mother?
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.
20. What is an NRO and NRE Bank Account?
Following are two main types of bank accounts which can be maintained by NRI / PIO in India:
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.
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.
|NRO (Non Resident Ordinary) Account||NRE (Non Resident External) Account|
|Who can open this Account?||Any person resident outside India can open NRO account.||Any NRI (Indian passport holder) can open NRE account. A Power of Attorney is usually given to a close relative in India to allow them to operate the account.|
|Repatriation of Fund||Both the principal and interest amount is freely repatriable.||Only the interest is repatriable.|
|Exposure||Account is exposed to the fluctuations in the value of the Indian Rupees for both the principal and interest.||The account holder is exposed to the fluctuations in the value of the Indian Rupee only for the interest component.|
20. What all documents are required for Custody Account?
To open a Custody Account you need to complete certain documents.
21. Does an NRI requires PIS permission to purchase shares in IPOs?
No, NRIs can purchase shares in primary market and application money can be paid through regular NRE / NRO bank account or through inward remittance.
22. Can NRIs receive shares in inheritance?
Yes, NRI can receive shares in inheritance. RBI permission is not required to be obtained and the shares.
Note: Apart from opening a NRE/NRO Account, the PIS account also needs to be opened by NRI if he wants to trade in the stock market.
ProStocks, a popular discount stock broker based out of Mumbai offers 2-in-1 NRI Trading account.
ProStocks NRI Brokerage Charges: Rs 100 Per Trade (All Segments)
ProStocks NRI Account Charges:
ICICI offers a 3-in-1 account for NRI's to invest in India. This include the seamlessly integrated Bank Account, Demat Account and Share Broking Account. This online account allows you to invest in Stocks, Mutual Funds, IPOs, Bonds, EFTs and trade in equity derivatives (futures and options) in India Stock Market.
ICICI NRI Account Charges:
|Total Turnover (per month)||Equity Delivery|
|Above Rs 50 lakhs||0.50%|
|Rs 25 lakhs to Rs 50 lakhs||0.75%|
|Rs 10 lakhs to Rs 25 lakhs||0.90%|
|Rs 5 lakhs to Rs 10 lakhs||1.00%|
|Up to Rs 5 lakhs||1.25%|
|Total Turnover (per month)||ICICI NRI Brokerage Charged|
|Above Rs 20 Crores||0.03%|
|Rs 10 Crores to Rs 20 Crores||0.035%|
|Rs 5 Crores to Rs 10 Crores||0.04%|
|Up to Rs 5 Crores||0.05%|
|Total Turnover (per month)||Per Lot Brokerage|
|Above Rs 20 Lakhs||Rs 70|
|Rs 10 Lakhs to Rs 20 Lakhs||Rs 75|
|Rs 5 Lakhs to Rs 10 Lakhs||Rs 85|
|Up to Rs 5 Lakhs||Rs 85|
How to open the ICICI NRI trading Account?
Sharekhan, India's leading stock broker offers NRI Investment Service though partnership with HDFC Bank for NRI Bank Account.
How to open an online NRI Trading Account with Sharekhan?
Kotak securities offers NRI 3-in-1 Account (known as Trinity Account), a combination of Bank, Demat and Trading Account to provide you a seamless platform to trade and invest in India Stock Market.
|Account Opening Charges||Rs 3750|
|Bank Account maintenance fee||Rs 1000 per year|
|Demat Account maintenance fee||Rs 75 per month|
|Brokerage Charges||1% of the turnover or 10 Paise per share, whichever is higher|
DISCLAIMER: All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.
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