Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

NRI Investing in Indian Stock Market and Mutual Funds

2 min read

As an NRI (Non-Resident Indian), an individual can invest in the Indian stocks and mutual funds and take advantage of the high growth rate in the country. There are certain steps which need to be followed as per the Indian regulations.

NRIIt is important to know, who are termed as Non-Resident Indians according to the Indian law. Foreign Exchange Management Act (FEMA) defines NRI, as a person residing outside India who is either a citizen of India or a Person of Indian Origin (PIO). FEMA further classified PIO as a foreign citizen of Indian origin who resides outside India, but has Indian passport and who himself or his father or grandfather was a citizen of India.

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For making any investments, as KYC (Know Your Customers) documents, an NRI have to submit a copy of their passport with relevant pages that include name, date of birth, photo and address. A document with overseas address proof is mandatory.

Get started with the investments:

Any form of investments made by the NRI’s in the Indian stock market has to be in Rupee (the local currency). According to the Indian regulations, mutual funds in India are not allowed to accept investments in foreign currency. For investing the NRI has to open any of the three bank accounts- Foreign Currency Non-Resident (FCNR) account, Non-Resident External Rupee (NRE) account, Non Resident Ordinary Rupee (NRO) account with any Indian Banks.

The amount that is to be invested can be received by inward remittances through banking channels or can be directly debited from an NRE/NRO account. An NRI needs to give a rupee cheque or draft from his NRE/NRO account. In case if the investments are made through drafts and cheques, the investor have to attach the Foreign Inward Remittance Certificate (FIRC) application form or a letter issued by the bank (he has account with) confirming the relevance of the source of the funds.

Once the investment is made, if it becomes out of reach for the investors to keep track of the money he has invested and react as per the market movements, the investor can allow his Power of Attorney (PoA) holder to take his decisions on his behalf. The PoA holder needs to submit the attested copy of the PoA document (that has the signature of the investor and the PoA holder in it) to the fund house. An NRI can also make an Indian resident as his nominee in the mutual fund scheme. Even the process can be a vice versa, an NRI can also be hold as the nominee for the investments made by the resident Indian.

Redemption of the investments:
Redemption of the investments are either made by cheques or directly credited to the investor’s account. All the earnings are paid in local currency, rupee. Investments made through NRE or FCNR accounts or inward remittances are completely repatriable. If the investments are made through NRO, the capital is repatriable and not the principle amount.

The tax liabilities of any NRI investing in India remain same as the investors of residential Indians. The tax deduction at source is available for both. Furthermore, NRIs could be subject to double taxation, depending on the regulations of his country of residence.

Investing in the Indian stock market and mutual funds requires the correct documents and the right bank account, in order to reap benefits from the Indian investment options.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

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