Zerodha (India’s top Discount Broker) spread its network not only to Indians but also to Non-residence Indians. So, there is a scope for NRI to invest in the Indian share exchange with Zerodha. The main objective of the blog is to simplify the NRI Account in Zerodha. Let us provide the entire procedure, rules, and regulations here.
Benefits for NRIs Trading in the Indian Stock Markets
- Diversification: Non-resident Indians (NRIs) can invest in the Indian stock market as a form of portfolio diversification, thus reducing risk and increasing returns.
- Access to Local Information: As NRIs are based abroad, they have access to various sources pertaining to local information that meet investors’ requirements better than what would be available at domestic sources.
- Tax Benefits: NRIs investing in the Indian stock market enjoy numerous tax benefits that may not be available otherwise when compared with investments made by other non-residents from different countries due to different rules and regulations imposed by government authorities across nations like capital gains exemptions or self-explanatory bonds for NRIs etc.
- Economic Growth Perspective: The inflow of foreign investment into India allows citizens here direct exposure to global markets, paving the way for economic growth opportunities within the country through an enlarged investor base and increased liquidity on exchanges aiding the overall development of financial infrastructure including fair price discovery mechanisms, etc, which are all possible with NRI participation in Indian capital markets trading activity
NRI Account Opening Process in Zerodha
As the account opening process is for Non-residence Indians, for some obvious reason, the rules and regulations are different. In order to open an NRI account with Zerodha, one must follow certain steps:
Step #1 Open NRE or NRO Savings Bank Account in India
It is the first stage of making an entry in the Indian stock market, by opening a Non-resident external account (NRE) or Non-resident ordinary account (NRO). Through an NRE bank a/c, both the principal and the interest can be repatriated. Conversion of dollar and rupee is possible between foreign and NRE accounts.
NRO account is almost the same as NRE, the only difference is NRO has the capacity of up to $ 1 million repatriation per year (both principal and interest).
Step #2 Get RBI (Reserve Bank of India) Approval
Before opening a trading or demat account the next step is to get PIS (Portfolio Investment Scheme) permission letter from RBI. Now, the question is from where one can get a PIS letter. The bank through one open NRE or NRO account will take care of this. One just needs to submit the requisite documents for this.
Step #3 Open Trading and Demat Account
After NRE and PIS confirmation, NRI trading and demat account can be opened with Zerodha. Along with other documents, a copy of the PIS has to be submitted. You can get the application form from the Zerodha account. In case you have both NRE and NRO accounts, you have to specify which one you need to map to the trading account. By mapping the NRE account, only equity trading is possible while through the NRO account, one can trade in both equity and derivative segments.
Step #4 Documents Required to Open Account
The last step of opening an account is to submit necessary documents like a Copy of the PIS letter, a Copy of the FEMA declaration (available on the Zerodha site), a Copy of the PAN card, Overseas address proof, Indian address proof, passport size photograph, bank account proof, etc. In the case of an Indian passport, a valid visa and Indian birth proof are mandatory. On the other side, in the case of a foreign passport, they require a copy of a valid passport and PIO (person of Indian origin)/OCI (overseas citizen of India) cards.
Other Aspects of NRI Account in Zerodha
Now, we will discuss the other aspects of the NRI account, such as charges, taxation, trading process, etc.
The Charges for NRI Account
The account opening charges for the NRI account is as the same as the resident individual accounts, rs.300 for trading and DEMAT. The brokerage charges are as follows:
- For F&O Rs.100 per order
- 0.01% or Rs.200/ executed order for equity (whichever is a lower amount)
- GST, STT, Transaction charges, and SEBI charges are applicable as per the normal charges.
- Stamp duty is chargeable as per the state.
Trading Process
In order to simplify the process, let me provide the steps below:
- Allocate funds from the NRE or NRO bank account to PIS (Portfolio Investment Scheme).
- After that, the particular bank informs the broker of fund allocation. The fund will reflect on the trading account.
- When an NRI purchases a stock, at the end of the day, the broker sends the buy contract note to the bank. The bank, in turn, debits the PIS account to that extent and credits the broker.
- Similarly in the selling process also, the broker sells a sell contract note to the bank at the end of the day and credits the PIS bank account.
- At the end of each day, two separate contract notes are sent for all buy-sell transactions. The net amount will be reflected on the contract note.
Taxation
NRI users must keep in mind Indian Finance rules and regulations:
- In India, the Financial year ends on March 31st
- In India, the last date for filing IT returns is July 31st
- Long-term gains: Any gain from stocks, held for more than 1 year is exempt from any kind of taxes.
- Short-term gains: 15 percent on any gain made on stocks sold before 1 year.
- Trading income from Futures and Options: For business income, taxes are applied as per the Income Tax slabs in India.
Important Points to Keep in Mind
There are other things or restrictions which an NRI must keep in mind:
- In any Indian listed company stock holding capacity of an NRI can’t exceed 10%.
- NRI can trade in delivery trading, but not in intraday (on equity).
- Only equity and equity F&O are available for NRIs to trade; they can not trade in commodities or currencies.
PIS Accounts
- At present, Zerodha is servicing only those clients who have PIS accounts with Axis, HDFC, or Yes Bank. Zerodha is in the process of tying up with more banks.
Conversion Process from Indian Account to NRI Account
Clients can convert their existing account into an NRO trading and Demat account. Conversion to NRE trading and Demat account is not allowed. For the conversion process, they require some documents. One can check the entire document list from the Zerodha site.
Conclusion
NRI Accounts offered by Zerodha offer customers a great way to invest in the Indian markets while residing outside India. The account offers various benefits such as the freedom to invest without geographical barriers, ease of international fund transfers, low costs, and best customer service. These factors make it one of the most attractive NRI accounts available today with Zerodha’s reliable and powerful platform allowing you access to everything that a regular trading account allows in India. Thus making NRI Accounts offered by Zerodha an ideal choice among NRIs interested in investing in stocks or other instruments from their residence abroad.
