NRI stands for Non Resident Indian. An NRI is one who stays abroad, but is a citizen of India or a person of Indian origin.
Can NRI's invest their money at the Indian stock markets?
NRIs can buy shares online using the Portfolio Investment Scheme or PIS. The NRI has to appoint a share or a stock broker who is a resident of India. The fund manager or the stock broker can buy shares online on behalf of the NRI. NRIs need to strictly comply with the guidelines as specified on the PIS. These guidelines are usually laid down by Reserve Bank of India or RBI.
Who is deemed to be an NRI?
To know who a non-resident Indian is, you need to clearly understand who is a resident of India. A person who has been residing for more than 182 days or more in India during the current financial year and has been residing for more than 365 days during the preceding four financial years qualifies to be a resident of India. Now it’s quite easy to understand who is a non-resident.
If a person is staying in India for less than 182 days in the current year but has stayed for more than 365 days during the preceding four financial years is also deemed to be a Nonresident Indian. In other words, a person who is deputed in an overseas country for 6 months or more is deemed to be a Nonresident Indian or an NRI.
Set of rules involved for an NRI to invest money at the Indian stock Exchange
Note: An NRI can invest his/her money at two stock exchanges based in India. These are BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).
- NRI’s can invest their money in Indian stock markets with the help of Portfolio Investment Scheme or PIS.
-The PIS scheme is advocated by the Reserve Bank of India.
-The NRI has to open an India based account. This is usually referred to as NRE/ NRO. NRE stands for Non-Resident External Rupee. NRO stands for Nonresident Ordinary account.
-An independent individual can only open one single account with the PIS.
-The aggregate investment by NRIs cannot exceed 10% of the paid up capital in an Indian company. The PIS scheme makes sure the NRI does not cross this particular limit.
Steps involved for an NRI to open an account with a Stock broking firm
-The NRI has to open a demat account and a trading account with SEBI registered brokerage firm. SEBI stands for Securities Exchange Board of India. De-mat account provides an NRI with an online trading account, to carry on transactions in an effective manner.
-The NRI needs to necessarily transact with the help of a stock broker.
-The NRI cannot involve in intraday trading or in short-selling.
-If the NRI purchases a stock today, he/she would be able to sell it only after two days.
-NRI’s can participate in the IPO program. IPO stands for Initial Public Offering. When a Private limited company decides to go public for the very first time, it issues shares to investors in order to raise capital. The capital raised by issue of shares in various denominations is utilized to promote diversified lines of business, pertaining to the company under consideration. However the NRIs would require an NRO/NRE account to participate in the IPO.
-The shares that were acquired through IPO can be sold even if the NRI does not have a PIS account. However the NRIs would clearly have to furnish their banking details, date of allotment and cost of acquisition of the shares. These details are required to calculate the tax on any gains they may have made.
The NRIs can open a dummy online trading account and understand how the Indian markets behave. After analyzing the trend with which Indian companies evolve and operate, they can try investing their real-time money with the stock markets.