NRI Trading without PIS

Can you perform NRI Trading without PIS? Well, it is one of the most pertinent questions an NRI may have. With an increase in equity trading in India, more and more people are wishing to join the market. These people are limited to not only Indians, but they also include people of Indian origin living abroad.

This is one of the top ways to earn money and due to its increasing demand, RBI has allowed NRIs to join in the trade. Earlier, there was a long procedure with which NRIs could trade in equities. This included getting a Portfolio Investment Scheme (PIS) permission letter from RBI.

NRIs could only trade under this PIS policy. This included tedious procedures and various restrictions. However, the Government of India has now opened new ways in which NRIs can trade in India. Therefore, today we will discuss NRI Trading without PIS.

NRI Trading without PIS – Earlier Days

Earlier, the method through which NRIs could trade was a complicated one. An NRI had to create an NRE or NRO account with the bank. This account needed to be linked with the PIS letter. NRI had to personally get the PIS letter from RBI.

Whenever the NRI made a trade, the amount was adjusted in his/her PIS NRE/NRO account. Once the client made the trade, the value of the trade and its nature was reported to RBI. If the NRI made a sale trade, RBI automatically deducted a certain amount for tax obligations. The resulting amount was credited to the PIS NRI/NRO account.

For example, suppose an NRI bought 100 shares of Wipro at ₹900 each through his/her NRI Demat Account. The ‘buy’ ticket will be sent to RBI. Then the money ₹(900 x 100 = 90,000) will be deducted from the PIS Account. Now take the case if the NRI sold the shares at ₹1000 per share.

The ‘sell’ ticket will go to RBI. RBI will make the tax deductions on the profit. i.e. ₹(1,00,000 – 90,000) – the resulting amount will be credited in the bank.

As you can see, PIS used to make the whole procedure of trading very complicated and time-consuming for the NRI. Due to this, with the recent changes made in the procedure, NRIs can now trade without PIS. They only need an NRO account for the purpose.

NRO account

An NRO account is a bank account opened in India by an NRI. It can be a current account or a savings account. With this account, an NRI can manage any sort of income or savings in India. This management can be done even when an NRI is living abroad.

However, unless the Reserve bank of India provides approval or permission, the money in an NRO account cannot be transferred outside of India.

If an NRI had a savings account in India, that account can easily be converted to NRO account when the NRI becomes a non-resident. An NRO needs a minimum account balance of ₹10,000 on a daily basis to be maintained.

If an NRI wants to take this money out of India, he would need the approval of the RBI.

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NRI Trade without PIS – How is it Possible?

Under new laws, NRIs don’t need PIS for trading. They can now trade with an NRO account. All prior PIS NRE/NRO accounts have been turned into simple NRO accounts as well.

With NRO accounts, NRI can trade in India and keep their money on a non-repatriable basis. Whenever you make a ‘sell’ transaction, the funds are audited for tax and then adjusted to the account directly.

The process of informing the RBI and using the PIS account has been removed completely. This speeds up the process of transactions for NRIs.

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Steps for NRI Trading without PIS

NRI trading without PIS has become a very simple procedure now. To do this, one firstly needs to open an NRO account with the bank. This can be done in two ways:

If the NRI has no savings or current bank account in India, he can contact his bank to open a new NRO account. The bank will ask for some documents. After the document and verification stage, the account will be opened.

In the other way, NRO can convert the existing account to an NRO account. While living in India, if the NRI had a bank account, he can contact the bank to change it into an NRO account due to his status changing to non-resident.

For the next step, the NRI needs to open a DEMAT account. This can be done with any broker in India. A Demat account allows for electronic storage of your money. It stands for a Dematerialized account. Once the Demat account has been opened, link it to your NRO account.

The last step left to do is to open a trading account. A trading account enables the actual handling of the entity, like stocks, commodities, etc. The trading account is linked to the Demat account.

When you want to make a trade, you need to transfer money to your Demat account from your NRO account. For all sale and buy contracts, the money will automatically be adjusted in your Demat account. You can withdraw from your Demat to NRO account whenever you want.

If in case you are looking to get started with an NRI Demat or trading account, let us assist you in taking the next steps forward:

 

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