All About NRE, NRO, NRI Trading Accounts in India

Legally speaking, an Indian spending more than 182 days abroad in a financial year is considered to be an NRI. Once a person changes his citizenship status to an NRI, then he/she is not allowed to use a normal savings account. For such persons, there are separate bank (and demat+trading) accounts - such as NRE and NRO bank accounts. A combination of these two can help an NRI trade in the Indian markets.

Key Points

• The money in an NRE account is fully repatriable i.e. money in an NRE account can be taken/transferred outside of India or money in NRE mode can be converted into a foreign currency.
• An NRO account is used for local payments, or for making remittances from India and abroad.
• All shares purchased through NRI trading accounts can be sold only in Indian equity markets. Any arrangements under private sale or gift are not allowed by the RBI guidelines.

NRO account has restricted repatriation. Money transferred from an NRE to NRO account cannot be transferred back. Let’s understand the bank accounts in more detail first though.

An NRO account is used for local payments, or for making remittances from India and abroad. This account is very important if you want to keep some money in India in Indian currency.

On the other hand, an NRE account allows an NRI to keep money in India in a foreign denomination. An NRE fixed deposit offers an attractive interest income that is not taxable in India. However, if you have a source of income in India, then you can deposit such income in Indian Rupees in an NRO account.

What is NRE bank account?

The NRE in an NRE bank account stands for Non-Resident External. It is an external account, hence any money in an NRE account can be taken outside the country. In other words, the money in an NRE account is fully repatriable. This money can be converted into any foreign currency at the behest of the account holder and can be remitted outside the country.

Money can also be transferred from NRE accounts to NRO accounts freely.

What is NRO bank account?

An NRO bank account is a Non-Resident Ordinary Account. The major distinguishing factor is that money cannot be transferred from an NRO account to an NRE account. Also, money transferred from an NRE account to an NRO account cannot be transferred back to the NRE account. NRO has restricted repatriation. Non-resident Ordinary Account (NRO) is a bank account where principal and interest only upto $1million per year can be repatriated.

Types of Accounts:

• PINS Account: This account lets account holders buy and sell equities through the Indian stock exchanges. Now there is a change in FEMA provisions, according to which there is no need of an NRO PINS account. As an NRO account holder you can buy and sell equities in customer can trade in NRO account without reporting to RBI as a normal accounts. NRE PINS account allows transactions where the funds can be repatriated into foreign currencies.
• Non-PINS Account: A non-PINS account is used for investing in Initial Public Offerings (IPO) [link to article #31] or investments made in mutual funds [link to article #36] as residents. Again, this can be classified as NRE and NRO Non-PINS account. As the rule follows, transactions made through NRE can be repatriated, while NRO transactions cannot be repatriated.

Points to Remember:

• A separate PINS account is mandatory for trading in equities even when NRIs have an NRE account.
• It is also important to note that an NRI can maintain only one PINS account at any point in time.

That was all about banking while being an NRI. But it’s only half the story - to trade, you also need - big surprise - a trading account.

Documents required for an NRI trading account:

• PAN Card
• Passport
• *Indian address proof (mandatory in case of NRO account)
• *Overseas address proof
• Valid visa copy
• PINS permission letter from your designated bank (HDFC & YES Bank if using Upstox account)

*Documents allowed as address proof:

• Utility bills not less than 3 months old
• Bank statement not less than 3 months old
• Passport
• Driving license
• Voter ID/Aadhaar Card (Also valid for Indian address proof)

Documents required for OCI & PIO

OCIs & PIOs require all the documents that NRIs have to submit in order to open a trading account. Additionally, OCIs & PIOs must provide the following documents as well:

• In case you are not an Indian passport holder, you need:
• OCI card with valid passport number
• If your passport is expired, then you need to submit a copy of both the previous and new passports.
• In case you are a PIO, you need:
• PIO declaration form
• Supporting documents that establish that you are a PIO.

If an Indian passport is provided then Visa / resident permit is compulsory. If foreign passport / Indian passport with place of birth outside India then PIO is necessary.

NOTE Copies of Proof submitted by client should be Self- Attested which means copy of proofs must be signed by the client and original must be presented for verification. If original proof is not presented for verification then the document has to be attested/notarized.

Remittance of sales proceeds

Shares sold under repatriation basis can be credited to the NRE or NRO accounts of the investors. On the other hand, funds received for the sale of securities on non-repatriation basis can be credited only to the NRO accounts of the investors.

Transfer of shares

All shares purchased through NRI trading accounts can be sold only in Indian equity markets. Any arrangements under private sale or gift are not allowed by the RBI guidelines.

Importance of NRE, NRO, NRI accounts in stock trading:

• An NRO account is required to invest your overseas earnings back in India.
• Funds, i.e, Principal account and the Interest received are fully repatriable.
• Interest earned in an NRE account is tax free.
• An NRE account is mandatory to manage your income earned in INR like rent, pension, dividend etc.
• NRE account can be opened jointly with a Resident Indian as well.
• The flexibility offered by these various trading accounts ensures NRIs can find one that suits their requirements to invest in the Indian stock markets.
• You can buy IPO, mutual funds and also have the facility to trade both on NSE and BSE.

Wrapping Up

• An Indian spending more than 182 days abroad in a financial year is considered to be an NRI.
• An NRE fixed deposit offers an attractive interest income that is not taxable in India.
• NRO has restricted repatriation.
• An NRI can maintain only one PINS account at any point in time.
• Pan card is a mandatory requirement.
• You can buy IPO, mutual funds and also have the facility to trade both on NSE and BSE.