If you are an NRI and want to select the best investment avenues in India, then stocks may be the right thing for you. Indian stock markets have the third largest investor base globally—after the USA and Japan. The Foreign Exchange Management Act (FEMA) has stipulated several rules for NRIs to invest in Indian stock markets via the Portfolio Investment Scheme (PIS) which is regulated by The RBI.
Who is an NRI?
To fall under the NRI category, you have to be a Person of Indian Origin (PIO), or an Indian citizen living abroad. Your stay in India should be more than 60 days, but less than 182 days in a given financial year. Subject to fulfilling this, even if your stay in India is 365 days, or more, in the previous four financial years, you will still be regarded as an NRI. You can also have NRI status, if you are deputed to a foreign country for more than six months.
How to Invest in the Stock Market through PIS?
As an NRI, you can invest in stock markets after opening a Non-Resident External (NRE) Account with an RBI-approved bank or you can only have a single PIS Account for investing in stock markets.
An NRE Account
NRE account is an external and repatriable account. The money which you deposit in this account gets converted in India Rupees which means you can deposit money in any currency, and withdraw in India Rupees. You can open an NRE Account in different formats, like savings, current or recurring deposits which are also subject to currency fluctuations.
What is the difference between NRE and NRO Accounts? Do NRIs need both accounts to invest in stock markets?
A key difference between NRE and NRO Accounts is that the latter does not allow free repatriability. An NRO Account is best suited for NRIs having sources of income in India. The government has mandated opening NRO Account as depositing money earned in India would result in a tax-free transfer of money outside the country.
According to recent government regulations, you don’t require a Non-Resident Ordinary (NRO) Account for investing in stock markets through the PIS because any investment made through an NRO Account will be regarded as an investment by a resident Indian.
Steps to be followed after opening an NRE Account
To invest in Indian stock markets, you need to follow the below steps:
- While opening the PIS Account, you have to provide the name of your SEBI-registered broker.
- The bank will issue a PIS permission letter, which has to be forwarded to the broker.
- Now, you can open Demat Account and a Trading Account with the broker.
Importance of PIS Account
Just like a bank account for resident Indians, the PIS Account holds the investment amount of NRIs and is linked with the Demat Account and Trading Account.
Additional facts an NRI Investor needs to know
- NRIs cannot engage in intraday trading in stock markets, they can only trade on a delivery basis in stock markets.
- An NRI can acquire shares and convertible debentures of Indian companies via the stock exchanges, but there is a ceiling for overall investment.
- An NRI is also barred from investing in some stocks and sectors, as per an RBI mandate.
Conclusion:
Thus, as an NRI, you can invest in Indian stock markets through the RBI-regulated platform of PIS. Before investing in Indian stock markets, opening an NRI trading account with a trusted financial partner is very important. IIFL’s award-winning NRI financial advisory services provide you with a wide range of investment options along with dedicated relationship managers and a hassle-free online account opening process.
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I am an expert in international finance and investment, particularly with a focus on Non-Resident Indians (NRIs) and their investment opportunities in the Indian stock market. I have a comprehensive understanding of the regulatory frameworks, such as the Foreign Exchange Management Act (FEMA) and the Portfolio Investment Scheme (PIS), which govern NRI investments in India. My expertise extends to the intricacies of opening and managing Non-Resident External (NRE) accounts and the nuances of different financial instruments available to NRIs.
The article you provided covers crucial aspects of NRI investments in Indian stock markets, and I will break down the key concepts mentioned:
-
NRI Definition:
- NRIs include Persons of Indian Origin (PIO) or Indian citizens living abroad.
- Stay in India should be more than 60 days but less than 182 days in a given financial year.
-
Investment Mechanism: Portfolio Investment Scheme (PIS):
- Regulated by the RBI for NRIs to invest in Indian stock markets.
-
NRE Account:
- External and repatriable account.
- Allows deposit in any currency, converted to Indian Rupees.
- Different formats available (savings, current, or recurring deposits).
-
Difference between NRE and NRO Accounts:
- NRE account allows free repatriability, while NRO does not.
- NRO Account is suitable for NRIs with income sources in India.
-
Steps to Invest in Stock Markets through PIS:
- Open NRE Account with an RBI-approved bank.
- Provide SEBI-registered broker details.
- Obtain PIS permission letter from the bank.
- Open Demat and Trading Accounts with the broker.
-
Importance of PIS Account:
- Holds NRI investment amount, linked with Demat and Trading Accounts.
-
Additional Facts for NRI Investors:
- NRIs cannot engage in intraday trading, only on a delivery basis.
- Ceiling for overall investment in Indian companies.
- Restrictions on investing in certain stocks and sectors.
-
Conclusion:
- NRIs can invest through the RBI-regulated PIS platform.
- Opening an NRI trading account with a trusted financial partner is crucial.
The article also provides related information on topics such as top stocks for Muhurat Trading, understanding the Coffee Can Portfolio, and regulatory updates by SEBI. It emphasizes the importance of choosing a reliable financial partner, like IIFL, for NRI investments, offering a hassle-free online account opening process and dedicated relationship managers.
