Trading Restrictions for NRIs: A Non-Resident Indian can enter the Indian stock markets to perform trading provided they do adhere to the Foreign Exchange Management Act, FEMA.
Besides being allowed to participate in the stock market trading, FEMA has set up some limitations for the NRIs to conduct their stock businesses in India.
Trading Restrictions for NRIs
Are you a NRI? Then here is all you need to know about the segments where you are allowed to conduct stock and mutual fund trading.
In addition, you can also get to know the basic differences in the definitions of NRE/NRO, likewise PIS/Non-PIS.
A small introduction of Zerodha a discount brokerage is mentioned as the company caters to the stock business needs of NRIs better than any.
Equity Delivery and F&O Trading:
NRIs are limited to trade only in certain segments of the stock markets. They are equity delivery and F&O trading. NRIs intending to participate in F&O trading can enter the stock markets provided they are assigned a custodian. The custodian must obtain a custodian participant (CP) code.
Securities (Mutual Fund)
If you are a NRI from the United States or Canada you shall not be permitted to make an investment in mutual funds.
Besides these two countries, if you are an NRI belonging to any other nation, then you are entitled to participate in mutual fund securities but will have to maintain a Non-PIS account.
Do’s and Don’ts for NRIs in Stock Markets:
- If you hold a Non-Resident External Account, NREA, that allows you to transfer funds into Indian banks, then you are entitled to invest in equity trading.
- If you hold a Non-Resident Ordinary Account, NRO, that allows you to manage the income earned in India, can be put to equity delivery or F&O.
- Besides these two countries (USA & Canada), if you are an NRI belonging to any other nation, then you are entitled to participate in mutual fund securities but will have to maintain a Non-PIS account.
- If you are a Non-Resident Indian then your business opportunities at the stock exchange are restricted and some of those are mentioned below.
- You are restricted from doing Intraday trading.
- The SEBI doesn’t allow you to buy today and sell tomorrow (BTST) trading activities
If your business account is entrusted to a custodian account then you can conduct intraday trading in F&O.
- You will be restricted from performing trading in currency and commodities.
- If you are a resident of the USA/Canada then you cannot park your investments in mutual funds.
Difference between NRI & NRO:
When you as a NRI are decisive on entering into Indian stock markets then you must understand the basic difference between NRE and NRO bank account.
The acronyms Non-resident external account and Non-resident ordinary account meaning can be well understood when you come to know the basic features that draw a distinction between both.
The features that differentiate NRE, and NRO such as taxability, retrievability, joint account, deposit and withdrawals, and exchange rate risks.
An NRI account that facilitates you in transferring your foreign earnings to India. And, NRO refers to the management of the income earned in stock markets in India.
You must never forget that the interest earned in the NRE account is a non-taxable entity. Whereas the interest earned is taxable in the case of an NRO account.
You can repatriate your transferred earnings abroad from your NRE account. But in the case of an NRO account, the interest amount can be repatriated while the principal amount can be done within set limits.
In the case of NRE, you are permitted to open a joint account by two NRIs and NRO can open a joint account with an Indian citizen or another NRI.
Deposits and Withdrawals:
The funds that are transferred in the NRE account can be in foreign currency and can be withdrawn in Indian Currency.
You are entitled to deposit the funds in NRO either in foreign currency or Indian currency and the same can be withdrawn in Indian currency.
Exchange Rate Risk:
In an NRE account, you can encounter the exchange rate risk and with an NRO account, your fund is not prone to risk.
Difference between PIS & Non-PIS Accounts:
- Portfolio Investment Scheme (PIS or PINS) permits NRIs to invest in Stocks through stock exchanges in India. Under this scheme, all the transactions are reported to the RBI.
- Portfolio Investment Scheme (PIS or PINS) allows NRIs to make their investment in stocks at National Stock Exchange, or Bombay Stock Exchange in India.
- If you make any investment into stocks or mutual funds the exchanges where you invested shall report every relevant transaction to the Reserve Bank of India, RBI.
- You are entitled to make your investment in the stock markets on the basis of repatriation or non-repatriation. In both cases, the process of trading differs. If your investments follow the repatriation basis, you will have to enable your Portfolio Investment Scheme, PIS with an NRE account.
- If your investment follows the non-repatriation basis, you can make a direct investment in equities by skipping the PIS and routing it through the NRO saving bank account.
- An NRI bank account be it NRO or NRE is known as a Non-PIS account. And, when you fill in the application and submit it to the bank authorities you will be provided with PIS status upon its approval. From thereon, your account will be considered to be a Portfolio Investment Scheme (PIS) account.
Zerodha A Safe Place to Park Your Funds for Stock Businesses
Although the SEBI has set limitations on the NRI to participate in the stock exchange businesses there are many in stock markets to make good money.
As an NRI, you can enter the Indian stock markets provided you submit the required documents to your brokerage company.
Zerodha is the leading stock business company that is made available to you at competitive prices.
Detailing to Obtain a Custodial Service from Zerodha:
For instance, you can trust a leading brokerage company like Zerodha and since you are a NRI you will have to obtain a custodial service.
In this issue, Zerodha has partnered with Orbis and to obtain the relevant information you can visit orbisfinancial.in.
However, to obtain a CP code you must create a ticket.