3 Steps To Start NRI Investment In India (2024)

So if you are NRI living in Canada, USA, UK, Australia, New Zealand, or somewhere else and want to invest in the Indian stock market, then here are the 3 simple steps guide to starting NRI Investment In India in 2024, follow the steps from which you can start your investing journey.

How Can NRI Invest In The Indian Market?

So if you are an NRI and want to invest in Indian markets then you need to follow these few steps before NRI investment in India.

#1 Creating NRE or NRO Account

Step 1 – NRE/NRO Account that is the first step, to open NRE or NRO account by contacting an RBI approved Indian bank.

NRE stands for non-resident external account and NRO stands for nonresident ordinary account. So in these NRO and NRE accounts you can send your foreign currency investments which will be converted in Indian rupees for your investments.

Which Is Better NRE vs NRO Account?

So now the most confusing question arises that which account is better NRE Vs NRO Account? To open an NRO or NRE account.

Now it depends on person to person however, to simply explain if you have any income generating from within India, such as rent, dividends, pension or business income, then you must have to opt for a Non-Resident External Account (NRO) account.

And if you don’t have any sort of Indian income, then you can choose either NRE or NRO.

• So there are quite a few differences between NRE or NRO. Some of them are as follows, in NRE Account is repatriable means you can transfer your money from your Indian investment account to your home country where you are living without any restrictions. Whereas in an NRO Account, you have a cap of 1 million U.S. dollars per year that can transfer back to your current country of living, say, Canada or the US.

• Another point to consider is that in the NRE account interest earned is nontaxable, whereas in the NRO account, the interest earned is taxable.

Here is the table of the main difference between NRO and NRE Account:

ParameterNRE AccountNRO AccountDeposits and WithdrawalsCan deposit in foreign currency, and withdraw in Indian currencyCan deposit in foreign as well as Indian currency, and withdraw in Indian currencyTransfer of FundsAn NRE account allows you to transfer funds to another NRE account as well as to an NRO accountYou can transfer funds from an NRO account to another NRO account, but not to an NRE accountTaxationThe interest earned on an NRE account is tax-freeThe interest earned on an NRO account is subject to Tax Deducted at Source (TDS)RepatriationDeposits in an NRE account, including the interest earned, are fully repatriableRepatriation from an NRO account is restricted to $1 million per financial yearJoint Account HoldingCan be held jointly by two NRIs or an NRI and a resident IndianCan be held jointly by an NRI and another NRI or a resident IndianExchange Rate FluctuationsNRE accounts are subject to conversion loss and fluctuation in the value of the rupeeNRO accounts are less likely to be affected by daily exchange rate fluctuations

Enabling Your NRE or NRO Account

Step 2 – is enabling your NRE or NRO Account. So the second step is that you have to enable your NRE or NRO account which you just opened in step number one to invest in the Indian stock market and the enabling of those.

NRE or NRO account can be done by opening PIS account, which stands for Portfolio Investments Scheme (PIS) Account, which is nothing but receiving the permission letter from RBI, which is again in most cases handled by your bank where you already have your NRE or NRO account.

One thing to note is that you can avoid the Step Number 2 of opening your PIS account if you have the NRO account and you opt for non PIS.

READ: What Are PIS And Non-PIS Account For NRI Investment In India

So up until this point you already have your NRE or NRO account opened and you also have the PIS account opened if needed.

#3 Opening A Demat or Trading Account

Step 3 – is opening a Demate or Trading Account. So NRE or NRO account, PIS account will allow you to open your Demate or trading account to be the broker from which you can actually buy and sell the Indian stocks.

And to open your demand account, you will have to provide all the necessary documents to complete your KYC along with the PIS letter because your payments account will be linked to the PIS account and trading account from which the RBI will be able to track your investment.

So finally, after having Demate account open, you can transfer the funds from your NRE or NRO account to the broker for investing.

So now you are also doing Short Cut Investing the rest in the Indian stock market and start your investing journey.

Important Things Before NRI Investment In India

There are a few things to note before NRI Investment In India:

• The first thing is that intraday trading is not allowed through your NRE or NRO account.
• The second thing, which you have to keep in mind, is that there has some limitations on where you can invest your money and how much, for example, you cannot invest in commodities, currency, derivatives, post office schemes, and some other things.
• Now the third thing is that consider the capital gain tax in your investment calculations. So if you held the securities for less than one year, then the short term capital gains tax of 15% is applicable.And if you held the securities for more than a year, then the long term capital gains tax of 10% is applicable after one lakh of capital gain. So please consider that in your calculations while making the investment.