The Indian stock market is one of the most exciting and fascinating platforms to invest in and make tremendous profits. For investors like you, who may have spent years on understanding the Indian stock market, shifting outside India may include the idea of losing your demat account, demat holdings and your love for the Indian stock market.
However, all is not lost, and you can still easily trade and invest in Indian equities from anywhere in the world. You just need to open an NRI trading account, and you are right back into the world of Indian stocks and securities. But before you open an NRI trading account, you must first understand the working of the NRI trading account.
This blog details everything you need to know about NRI trading accounts working and how you can define NRI trading accounts.
What is an NRI Trading account?
If you do not reside in India but are an Indian citizen (you hold the citizenship of India), you are allowed certain rights and are termed as a Non-Resident Indian (NRI). Once you are defined as an NRI, your current demat or trading account is no longer applicable to invest in Indian securities. If, as an NRI, you want to trade in Indian securities, you need to open an NRI trading account.
An NRI trading account allows an NRI to trade and invest in Indian securities such as IPOs, Mutual Funds, Stock Derivatives (Futures and Options), Equities and Bonds listed on Indian exchanges such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).
If you are an NRI, you are permitted to trade in the following securities through your NRI trading account:
Currency Derivatives (through Authorised Dealer Category I Bank)
However, your NRI trading account won’t be applicable to trade/ invest in:
Types of NRI Account
There are four major types of NRI Accounts:
1. NRE Account: This type of account is opened by NRIs who are earning in foreign currency in their country of residence but remit the money into the account to be held in Indian currency denominations.
2. NRO Account: An NRO account is opened to keep the income earned in India through rent, business etc. and is kept in the account in Indian currency denomination.
3. FCNR (B) Account: The FCNR (B) account keeps the foreign currency earned in the country of residence in that same country’s currency denomination.
4. PIS Account: Portfolio Investment Scheme account allows NRIs to buy or sell stocks or convertible debentures of Indian companies.
Types of NRI trading account
Working of NRI trading account can be attributed to the following two types of NRI trading accounts:
NRI trading account 3 in 1: NRI 3-in-1 trading accounts are one of the most convenient ways for NRIs to trade in Indian securities. Three accounts are opened in this process: NRI Demat account, the NRI trading account, and the NRI bank account. Sometimes, the account is also referred to as 4-in-1 as some stockbrokers open two bank accounts (PIS and Non-PIS).
NRI trading 2-in-1 account: Under the NRI 2-in-1 account, only two accounts are opened: the NRI trading account and the NRI Demat account. For the bank account, the NRIs have to open the NRE, NRO, or the PIS account independently. Stockbrokers who do not have a banking license open a 2-in-1 NRI trading account.
Advantages and Disadvantages of NRI Trading account
For an NRI, the NRI account may come with some advantages and disadvantages. These can be:
The account allows NRIs to buy and sell Indian securities easily.
NRIs with NRE and FCNR (B) accounts enjoy tax-free interest earnings on their savings.
Through the FCNR (B) account, the NRIs can avoid currency rate fluctuations.
NRIs can trade from any country hassle-free using an NRI account.
NRIs who choose to invest in FCNR can only do so through a fixed deposit account with a tenure of 1-3 years.
Foreign currencies kept in an NRI account are prone to risk if they are subject to currency conversion.
Understanding an NRI account and how it works can be complex to understand.
How to open an NRI trading account with IIFL?
You can follow the below process for opening an NRI trading account with IIFL:
Step 1: Compile all the necessary identification documents. Among these, the most essential is your PAN card, details of your NRI bank account, and a PIS permission letter issued by the Reserve Bank of India.
Step 2: Ensure that all your documents are verified by the local Indian Embassy or by a competent authority approved as per the guidelines laid out by SEBI.
Step 3: Visit the IIFL’s website and the NRI trading account section here. Fill out all the necessary information and submit all the required documents.
Step 4: Upon submitting all the relevant documents, IIFL will contact you to ensure your NRI trading cum Demat account is opened as soon as possible.
IIFL NRI Trading Process
Once all the accounts are opened, NRIs can trade online in desired stocks. Here are steps to trade online through the NRI trading account:
1. Transfer money into PIS account
NRIs have to transfer the money for investing or trading in their PIS Bank Account. The bank will inform IIFL about the account balance in PIS Account, and IIFL will update the trading limit accordingly.
2. Place Buy/Sell Order
Using any of the IIFL NRI trading platforms, you can buy or sell stocks. If the bank has sufficient funds to proceed with the order, the trade will be executed on an order basis. You will receive a confirmation message for the same.
3. Submit Contract Note
IIFL will send the contract notes for buy/sell transactions to the respective bank at the end of the day. The bank will then transfer the funds to IIFL, or vice versa based on the buy/sell order.
4. Stock Settlement
The stocks are then credited or debited to/from your NRI Demat account in T+2 days based on buy or sell order requests.
The Indian stock market offers numerous wealth multiplying opportunities, and the shift over in the stock market of a new country can prove to be tedious. As you are already familiar with how the Indian stock market works, you can open a comprehensive NRI trading account with IIFL that comes with investor-oriented features, research reports and industry best tools such as trader terminal, TT Iris etc. Now that you know the meaning of an NRI trading account, you can resume your investing journey in any part of the world.
Q.1: Can I open an NRI trading account online?
Ans: Yes, IIFL offers a fully digital NRI Trading account opening process with simple steps. An IIFL expert will assist you if you have any problems while opening the account.
Q.2: What are NRI Demat and trading account charges?
Ans: IIFL Securities NRI brokerage charges for trading in Equity and Equity Derivatives are as follows:
NRI Account Opening Charges
NRI Account AMC
Equity Delivery Brokerage
Q.3: Which is the best NRI trading account in India?
Ans: If you are an NRI on the lookout for a trusted DP with a high-performing trading platform, IIFL may just be the right one for you. IIFL allows traders and investors to open an all-in-one NRI trading account to trade in multiple securities online and offers high-quality market analysis and research.