In the previous blog we saw how NRI’s can invest in Indian Mutual Funds. Here is a quick guide on the steps NRI’s need to follow for investing in stocks directly.
Step 1: Open an NRE Account/NRO Account
Open an NRE (Non-Resident External) and/or an NRO (Non-Resident Ordinary) account. Read the details regarding these accounts.
To invest directly in stocks, an NRI also needs approval under the PIS (Portfolio Investment Scheme) by the RBI and a couple of other documents eg FATCA which allows one to invest in the Indian stock market. PIS permission letters allow NRIs to purchase/sell shares and debentures under the Portfolio Investment Scheme. The bank where you open your NRE/NRO savings account takes care of this process.
Step 2: Open a Demat Account and link it to your NRE/NRO Account
In case, you are a first time investor, you need to open a Demat account with a registered broker. A Demat (Dematerialized) account enables you to hold shares in electronic form. You will also get a trading account through which you can carry out the actual buying and selling. The broker will require the details of your NRE/NRO account and will ensure they are linked. And voila! You are good to go.
If you are already investing in the stocks prior to moving abroad, you need to close your existing domestic Demat/Trading account and open new ones. You will need to have one NRO account linked Demat account in which you can transfer your existing holding. Repatriation will be as per rules applicable for NRO account. In case you want to invest with your money earned abroad which you can repatriate you will need to open a separate Demat account linked to your NRE account.
Some important details:
As per RBI mandates, there are certain restrictions on NRI investments in India. Here are some additional details that you will need to be on top of:
An NRI cannot hold more than 10% of an Indian listed company (20%, in case of public banks).Company need to pass a special resolution in case the limit is to be extended up to 24%.
NRIs cannot trade shares in India on a non-delivery basis, which means they cannot do day trading or short-selling. If they buy a stock today, they can sell it only after two days.
An NRI cannot hold more than one PIS account each for repatriable and non-repatriable shares. To map both NRE/NRO accounts with the trading account, you need to get two client IDs from the broker
On a change of status, it is important to update the KYC details with your banks.
Last but not the least, the tax liabilities arising out of the stock investments should not be ignored (We will see tax implications in detail in next blog). Tax liabilities of an NRI investing in India are the same as that of a resident investor. However, tax is deducted at source in case of NRIs.
This leads to a question that, ‘Are NRIs subjected to double taxation once in India and again in the country of their residence?’ Well, it depends on the country of residence. If the Indian government has an avoidance of double taxation treaty with that country, NRI will be saved from double taxation.
You still need to get your stock investing decisions right to grow your wealth
The opening and managing of an account is a procedural aspect of investing in Indian stocks. To do so profitably, it is important to take the right investment decisions. To invest in stocks successfully, you need to know:
- Which is the right stock to invest in?
- What is the right price to invest in it?
- How much of each stock should you own?
You may find it difficult and time consuming to find the answers to the above questions by yourself. However, you may also be uncomfortable leaving it all to others even experts and having no control on how your money is invested. Now you have a solution that provides you the framework, process, processed information and tools to answer these 3 questions with ease and retain control over how your money is invested.
With MoneyWorks4me you can invest successfully because you:
- Invest in stocks of great businesses and be comfortable holding them for a long time
- Invest at attractively low prices-the right price
- Manage a diversified portfolio (of not more than 20 such stocks)
- What an NRI needs to do to Invest in Indian Mutual Funds?
- What Bank Accounts an NRI must have to Start Investing in India?
- I’m an NRI. How should I Invest in Indian Stocks?
If you are registered with Moneyworks4me.com you can use the valuable free features. This will help you invest only in fundamentally strong stocks and avoid the others thus saving you from making costly mistakes.