A guide to invest in Indian stocks for NRIs

As a Non-Resident Indian (NRI) seeking to invest in Indian stocks, you stand at the threshold of a potentially rewarding investment journey. Being one of the fastest growing economies in the region, the Indian stock market offers a prospective avenue to grow your wealth. Read on to understand and uncover essential aspects from the process of opening a demat and trading account for an NRI to key considerations and the advantages of investing in Indian stocks for NRIs.

How can you invest in Indian stocks as an NRI?
 

Investing in Indian stocks as an NRI involves understanding the regulatory frameworks of FEMA (Foreign Exchange Management Act), SEBI (Securities and Exchange Board of India), CDSL (Central Depository Services Limited), and NSDL (National Securities Depository Limited), as well as the account you need for investing. However, the process has been streamlined to encourage participation from across the globe. Each demat account for NRIs comes with its own features and gives you the freedom to invest in the Indian stocks of your choice.

Metra Trust offers a reliable Portfolio Investment Scheme (PIS) where you can invest in stocks on repatriation and non-repatriation basis. To buy and sell stocks, you need to open the PIS account which can easily be linked to your NRE or NRO account. The procedure to open PIS Bank account is available online. It offers you the convenience of operating your account even when you are not residing in your home country.   

What is the difference between NRE and NRO accounts?
 

NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts both offer varying functions and characteristics. Before choosing one of these accounts, you should be aware of their key differences. You can use an NRE account to hold and manage your foreign earnings in Indian rupees. This account is fully repatriable, which means that the funds in the account can be transferred back to the foreign country without restrictions and are not subject to Indian tax laws post deduction on capital gain taxes. On the other hand, you can use an NRO account for managing the income you have earned in India such as dividends, pension, rent, and so on. This account can also be used to deposit funds from foreign sources. However, do note that NRO accounts have restrictions on the repatriation of funds. You can repatriate a maximum amount of USD 1 million per financial year from an NRO account, subject to certain conditions. Also, the funds held in this account are subject to Indian taxes. However, it is important to note that TDS on capital gain is applicable for both NRE and NRO accounts.

What is a PIS?
 

A Portfolio Investment Scheme (PIS) is meant for NRI investors to invest in the Indian securities market. As per Schedule 3 of FEMA 2000, NRIs can buy and sell shares, and convertible debentures of Indian companies through a recognised stock exchange by routing these transactions via their accounts with a designated bank branch. With this provision, NRIs can invest in the Indian stock market without actually having to be physically present in India. A PIS is mandatory for NRIs for routing all secondary market transactions through their PIS-designated account. This involves all the buying and selling of stocks in the secondary market being debited or credited to the PIS-designated account. Under a PIS, every transaction made by an NRI is meticulously monitored to ensure that these transactions remain within the predefined limits set by RBI.

Additionally, RBI regulatory norms have been relaxed for NRO accountholders for completing transactions easily without following the PIS rules. This means that PIS permission is not required for an NRO account. However, for such accounts, do note that the banker would deduct tax at source for all equity trades. Metra Trust offers the NRO settlement account wherein for the trade executed by customers via their NRE demat and trading accounts, TDS is calculated and deducted from the customers’ accounts. 

Process to set up:
 

Step 1: Open an NRE/NRO Savings Account with Metra Trust.

Step 2: Open an NRE PIS/NRO settlement bank account with Metra Trust.

Step 3: Choose from the partner broker available to open a demat & trading account.

Step 4: Complete the KYC requirement to open a demat & trading account with a linked broker of Metra Trust.

Step 5: Link the demat & trading account with your PIS bank account.

Your account is set up to initiate the trade transaction.

How to trade:
 

• The NRI customer who wishes to buy the shares should maintain balance in the demat & trading linked PIS Bank account. Basis the balance available in PIS Bank account, the broker will provide the limit to trade to buy shares.
• The NRI customer can buy shares up to the maximum limit given by the broker.

How does a settlement work:
 

• For any buy trade: Once the trade is executed, it is considered as T Day, and on T+1 day the bank shall debit the equivalent to the trade value amount from the customer’s bank account and transfer it to the broker’s account.
• For any sell trade: Once the trade is executed, it is considered as T Day, and on T+1 day the bank shall debit the equivalent to the trade value amount from the broker’s bank account and transfer it to the customer’s bank account.

Benefits of a demat and trading account for NRIs
 

1. Efficient management: A demat account allows you to hold and manage your Indian securities electronically, eliminating the need for physical certificates.

2. Real-time monitoring: With online trading platforms, NRIs can monitor their investments in real-time, empowering them to make informed decisions.

3. Secure transactions: Demat accounts provide a secure platform for buying and selling stocks. The elimination of paperwork minimises the risk of fraud or loss.

4. Easy repatriation of funds: An NRI investor can easily repatriate funds including capital gains from the sale of securities through their NRE/NRO demat account.

5. Investment options: The demat and trading accounts open the doors to a diverse range of investment options, including equities, mutual funds, and bonds.

How can Metra Trust help you in your investment plans?
 

Choosing the right bank to create wealth is crucial. Metra Trust stands out for several reasons:

• NRI-centric services online: Metra Trust specialises in providing comprehensive services online tailored for NRIs, which ensures a smooth and hassle-free investment experience.   .
• Dedicated NRI support: Metra Trust provides dedicated support to NRIs, addressing queries and concerns promptly, thus ensuring a personalised and efficient service.

Factors you must consider when opening a demat & trading account for NRI
 

1. Charges and fees: Evaluate the charges associated with maintaining the demat and trading accounts. Some of the charges include the account-opening fees, annual maintenance charges, and transaction fees.

2. Research and advisory services: Consider the availability of research and advisory services to assist you in making well-informed investment decisions.

3. Customer support: A responsive and dedicated customer support system is imperative, especially for NRIs who may encounter unique challenges or have specific queries related to their accounts.

4. Regulatory compliance: Make sure that the chosen bank complies with all regulatory requirements to safeguard your investments and provides a transparent and legal investment process.

Conclusion
 

Venturing into Indian stocks as an NRI presents a plethora of opportunities, and a well-managed NRI account is your key to unlocking this potential. With Metra Trust offering a bespoke online platform, you are poised to embark on a secure and prosperous investment journey. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.