Investing in Indian Stock Market from USA

investing in indian stock market from USA

Investing in Indian Stock Market from USA

Are you an NRI in the USA interested to invest in the Indian stock market? Sure, the task is tough, but reading this post will provide you great clarity on this investing in Indian Stock Market from USA.

Being an NRI poses numerous difficulties while investing in the Indian stock market. Lack of proper clarity on how to start and the various complications associated with it makes investment all the more challenging. Long distance makes it difficult to manage the paperwork and operations involved in practicing such investments.

But despite all these difficulties and challenges, the good thing is that you can still invest in the Indian stock market. Just read these quick tips that make an investment in the Indian stock market for NRIs much easier and efficient.

  1. Appointing a Stock Holder to Open NRO or NRE Account

An NRI can open an (NRO) Non-Resident Ordinary or (NRE) Non-Resident Rupee account in an Indian bank. An Indian citizen overseas or a Pearson of Indian Origin can open such type of account.

With an NRE account, it is possible to recover entire funds and interest money at one point in time without paying any tax on the interest earned. NRE account does not involve any wealth tax, gift tax, or income tax. Also, it is possible to hold NRE account on a joint basis with another NRI not belonging to India.

The NRO account allows repatriating of income up to $1 million each year including interest and principle. Also, you need to pay a specific amount of tax on interest earned. You can hold an NRO account with another NRI or an Indian resident.

  1. Obtaining a Portfolio Investment Scheme

Once you open the respective bank account, the next step is to obtain a Portfolio Investment Scheme or PIS. This scheme is available in the form of a letter confirming RBI’s approval for the client to invest in Indian stock market. The PIS scheme would allow you to sell or buy convertible debentures and shares with ease.

  1. Open a Demat and Trading Account

You can ask help of a stock broker to open a demat account.

  1. Linking PIS to Your Trading Account

Once you open a trading account, you need to link to your PIS letter. Getting help from an experienced and reliable stock broker would be of great help in this regard.

  1. Allocating Funds to the Trading account

When you invest in Indian stock market, you need to allocate sufficient funds to your trading account from the NRO or NRE account. Your bank will update your terminal with the allocated amount will inform the same to the broker. The net sum of money debited or credited to your PIS account will include all charges appearing on the contract note.

What can all Instruments NRIs Trade?

Being an NRI would allow you to trade in different niches of the Indian stock market.

  • You can buy securities by availing a subscription of a public
  • You can invest in future segments belonging to the exchange of Rupee funds organized in the country on non-repatriation basis. But this investment is subject to some limitations from SEBI.
  • You cannot trade in Currency derivative section of the stock market.
  • You cannot invest in intraday transactions in the cash section.

Important Things to Consider While Investing in Indian Stock Market from USA

When investing in Indian stock market from the USA, there are some important points to consider. Considering these points will help you make risk-free investments in the stock market.

  1. You can set the maximum amount debited from your bank account by the mandate holder. This way, excess money being debited from your account should not be a worry.
  2. When you make an investment through POA, it is essential to submit a notarized copy of POA. In addition to this, you also have to submit some important documents.
  3. It might be difficult to invest in the stock market because of differences in time zones. But taking help from a reliable stock broker can resolve the problem completely.
  4. You cannot exceed your stock holding in an Indian listed company by 10%.
  5. It is possible for you to obtain short-term gains. The gain can be of 15% made on stocks sold within a year.
  6. If you intend to earn long-term capital gains on stocks held for more than one year, then you would be totally exempted from tax.
  7. In order to map NRO as well as NRE account with your trading account, you need to provide 2 different user ID’s.
  8. Any money invested in the F7O segment is deemed as business income according to Indian Income Tax department.

Investing in Indian stock market can be challenging for NRIs, but at the same time, it can be highly beneficial. The Indian stock market is booming. It is a free-market economy ensuring there are fewer chances of companies getting bankrupt or failures. You will rarely experience the problem of a big drop given the overall control of the Indian economy.

So, if you wish to double your earnings and avail gains from the Indian stock market, then invest wisely and only after obtaining complete knowledge beforehand.

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Jake Gibson
Jake Gibson