Stock Trading for NRIs: Rules, Eligibility & How to Start

For Non-Resident Indians (NRIs) with an inclination towards the stock market, trading in Indian stocks can be both a lucrative investment opportunity and a chance to stay connected to the domestic market dynamics.

However, trading in India comes with its own set of rules and regulations for NRIs.

This comprehensive guide will help unravel the intricacies of stock trading for NRIs.


India’s burgeoning stock market, coupled with its status as one of the world’s fastest-growing economies, makes it an attractive investment destination for NRIs. With companies spanning various sectors showcasing promising growth, the allure is undeniable.

Eligibility for NRIs to Trade in Indian Stock Market

  1. Residency Status: The individual must have a certified NRI, PIO (Persons of Indian Origin), or OCI (Overseas Citizen of India) status.
  2. Age: There is no specific age requirement for stock trading. However, one must be of legal age (18 years and above) to enter into a contractual agreement in India.

NRI Trading Rules in India

1. Account Requirements:
Before trading, NRIs need to set up necessary accounts:

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  • NRE (Non-Resident External) or NRO (Non-Resident Ordinary) Bank Account: These accounts help NRIs manage and repatriate their earnings from stock trading.
  • Portfolio Investment Scheme (PIS) Account: Approved by the RBI, this account allows NRIs to trade in the Indian stock market.

2. Demat & Trading Account:
An NRI must also open a Demat and a trading account with a registered stockbroker in India. This facilitates buying and selling of securities.

3. Daily Trading Limit:
Under PIS, an NRI can’t trade beyond a certain limit in any specific stock on a given day. This is to prevent large volume trades that can manipulate stock prices.

4. Tax Deduction at Source (TDS):
For any profit made from selling stocks, the brokerage will deduct tax at source (TDS) before crediting the amount to the NRI’s account. This TDS rate is predetermined for short-term and long-term capital gains.

5. Reporting:
An NRI’s bank, under the PIS, will report the NRI’s stock transactions to the RBI. This ensures that the investments are being monitored and are within allowable limits.

NRI Trading Restrictions

1. Prohibited Sectors:
NRIs are barred from investing in particular sectors such as agricultural or plantation activities and real estate, aligning with FDI norms.

2. Limit on Investment:
An NRI’s individual holding in any Indian company is capped at 10% of the company’s total capital. But, this percentage might be lower in certain sectors.

3. Short Selling:
NRIs are not allowed to engage in short selling in India. They must own the stocks before selling them.

4. Intraday Trading:
NRIs cannot do intraday trading (buying and selling a stock on the same day). Every trade they initiate must result in delivery.

5. Derivatives Trading:
NRIs can trade in the futures and options segment of the exchange. However, they must ensure that the total exposure in this segment doesn’t exceed the prescribed limits.

6. Stock Restrictions:
The RBI periodically shares a list of stocks where the foreign holding limit has been reached. NRIs cannot buy these stocks until they are removed from the restriction list.

7. Multiple PIS Accounts:
An NRI cannot operate multiple PIS accounts. They can maintain one PIS account each with designated banks for repatriable and non-repatriable shares.

Things to keep in mind when starting trading

  1. Portfolio Investment Scheme (PIS): The Reserve Bank of India (RBI) mandates NRIs to trade in the stock market under the PIS. It allows them to trade stocks but with certain restrictions, ensuring they don’t possess more than 10% of the total paid-up capital of the company.
  2. Types of Accounts: NRIs need specific accounts to start trading:
    • NRE (Non-Resident External) Account: Allows you to repatriate the principal and interest amount. Suitable for those who wish to transfer their earnings back to their resident country.
    • NRO (Non-Resident Ordinary) Account: Restricted repatriability, primarily meant for managing income earned in India.
    • PIS Account: This account links with either the NRE or NRO savings account for trading purposes.
  3. Custodial Account: To trade in derivatives, NRIs must open a custodial account.
  4. Trading Through Designated Brokers: Not every stockbroker in India caters to NRIs. Only brokers with an NRI license from SEBI can provide such services. Always check the broker’s credentials before opening an account.
  5. Daily Trading Limit: NRIs are subjected to trade on a delivery basis only. This means intraday trading (buying and selling a stock on the same day) is off the table.
  6. Taxation: Capital gains tax applies to NRIs just as it does for resident Indians. The rate and application (short-term or long-term) depend on the duration of the investment.

Key Considerations

  1. Repatriability of Funds: Always be clear about your intentions regarding transferring funds back to your resident country. The type of account (NRE or NRO) plays a pivotal role here.
  2. Monitoring Investments: While technology has made tracking investments easier, the time zone difference can be a challenge. Many NRIs opt for PMS (Portfolio Management Services) for efficient management.
  3. Exchange Rate Fluctuations: Currency movement can impact your returns. It’s essential to factor this in, especially if you plan on repatriating your earnings.
  4. Stay Updated: The Indian stock market, like any other, is influenced by a plethora of domestic and global events. Regularly monitor news and trends.


Stock trading for NRIs in India is filled with opportunities, but it also requires meticulous planning and adherence to regulatory mandates.

It’s advisable to consult with financial advisors or professionals who specialize in NRI services to make informed decisions.

With the right approach, NRIs can indeed reap the benefits of India’s growth story.

FAQs on stock trading for NRIs

1. Can NRIs invest in all types of Indian stocks?

Yes, NRIs can invest in most stocks listed on the Indian stock exchanges. However, they cannot invest in certain sectors, such as agriculture, as these are restricted under the Foreign Direct Investment (FDI) policy.

2. How does the repatriation of funds work for NRIs trading in stocks?

Funds from an NRE account can be repatriated (transferred back to one’s home country) without any restrictions. For funds in an NRO account, there’s a limit of $1 million USD per financial year, and a certificate from a chartered accountant is required to ensure compliance with tax regulations.

3. Are there any specific sectors where NRIs face restrictions in stock investment?

Yes, NRIs face restrictions in sectors where the FDI limit is reached. The RBI releases a list of such stocks periodically, where NRIs cannot purchase further until notified otherwise.

4. Do NRIs need to be physically present in India to open a trading account?

No. NRIs can open a trading account remotely. Many banks and brokerage firms offer online processes. However, document attestation and certain formalities might require a visit or coordination with the Indian embassy in the NRI’s resident country.

5. What happens if an NRI, having a trading account in India, changes his/her status to a resident Indian?

In such cases, the NRI should inform the bank and the broker. The PIS permission will be withdrawn, and the individual must close the NRE/NRO accounts and open regular resident accounts.

6. Are NRIs subject to Double Taxation?

India has Double Taxation Avoidance Agreements (DTAAs) with several countries. If an NRI resides in one of these countries, they can get tax relief and avoid being taxed twice on the same income.

7. Can NRIs invest in IPOs in India?

Yes, NRIs can invest in IPOs without any PIS account. However, the investment should be done through their NRE/NRO savings bank account.

8. Can an NRI use multiple PIS accounts?

No, an NRI can have only one PIS account each for repatriable and non-repatriable shares.

9. How do NRIs handle tax obligations in India on stock trading?

NRIs are subject to tax on short-term and long-term capital gains from stock trading. They should consult an Indian tax expert or CA to ensure compliance with Indian tax laws.

10. Can NRIs set off their losses in stock trading against other income in India?

Yes, they can set off short-term capital loss against any capital gains (short-term or long-term). However, long-term capital loss can only be set off against long-term capital gains.

Remember, while these FAQs cover many essential aspects, specific queries and unique situations might require consultation with financial advisors or professionals familiar with NRI stock trading.

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