Can NRI Do Intraday Trading In India

Can NRI Do Intraday Trading In India ! Yes NRI’s can do Intraday trading but with certain restrictions. We will discuss all possibilities throughout this article.

Intraday trading has been recently gaining popularity among the people. Also known as day trading, it involves purchasing and selling the stocks on the same day.

Although intraday trading comes with high returns, making it possible to create a more significant profit than regular trading, the disadvantage may be that it is a risky process. If you are someone who is considering getting into intraday trading, you must have the time and patience to monitor the market closely at all times.

In this article, we will be taking a closer look if an can NRI do intraday trading in India.

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Are There Any Trading Restrictions for NRIs?

If you are an NRI residing abroad and confused about the trading rules in India, then you are not alone. India is a lucrative country when it comes to trading. It has a rapidly growing economy and is predicted to become a superpower in the coming few decades. Hence, investing or trading in India is desirable and looked up to by a vast majority of people residing abroad.

NRIs or non-resident Indians do have certain trading restrictions as they are settled abroad, and their trading activities are closely regulated with stricter rules. For example, they are prohibited from investing in specific sectors of the Indian economy.

Thus, gradually the government of India is becoming keen on relaxing some of these norms to make it easier for them to trade. Furthermore, now they have the complete freedom to change in the equity market and reap the profits.

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NRI Trading Restrictions in India

At present, there are certain trading restrictions imposed by the government on non-resident Indians that they need to keep in mind before starting to trade in India. After this section we will have a more clear picture on Can NRI Do Intraday Trading In India.

The NRI trading restrictions in India are

  1. Qualifications – in order to qualify as an Indian citizen, a person is required to stay in India for a minimum of 182 days in that year or reside in India for a minimum of 364 days before 4 years from the current year plus 60 days in that year. Thus, an NRI should disqualify these criteria.
  2. Trade cap – If you are trading in a company with Indian origins, you are eligible to hold only 10% of the complete holdings. However, if it is a public bank, then you can hold up to a 20% share in it.
  3. Short selling – This is strictly prohibited for an NRI in India. Furthermore, they are not allowed to conduct trading activities in all sectors. If they purchase a share, they have to wait for at least 2 days before selling it.
  4. Legality – Any NRI who wishes to trade in India must provide the name of a resident of India so that they can control the assets on their behalf. This is known as a power of attorney. Moreover, the NRI can either assign the person all his assets or only a particular section of his assets.
  5. Tax – A lot of NRIs remain confused about whether they should be paying taxes in both India and the country of their residence. The good news is India has treaties with certain countries to avoid paying taxes in both countries. The NRI is required to pay their tax only in India then. However, if your country of residence does not have such a treaty with India, then you must check their policies before initiating your trading process in India.
  6. Account balance – As an NRI, you must maintain a certain amount of credit in your account at all times. The minimum account balance rule also applies to the Indian citizens, but the amount is comparatively higher for the NRIs.
  7. Overseas corporate bodies – OCBs are the type of companies in which an NRI holds at least 60% of the shares. According to the trading restrictions, OCBs are prohibited from conducting trade in the Indian markets. However, since it is a newly imposed rule, the companies that had invested earlier in Indian companies are permitted to hold their shares till they are sold.

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What is The Penalty for An NRI Trading in A Regular Resident Account?

When an Indian resident has attained the title of a non-Indian resident, then they are not permitted to hold their Indian account for a much longer time. It is mandatory to convert your account into an NRI bank account. If it is not done in the stipulated time, then you will be liable to pay a fine. As a recent NRI, you need to open an NRO account.

According to the FEMA or foreign exchange management act, continuing with your resident account is illegal. Furthermore, a penalty of 3 times the money that was involved would be fined. If the sum is not quantifiable, a penalty of 2 lakh INR will be imposed.

In addition to this, the person would have to pay Rs.5000 each day till the total amount of the penalty is paid. This can result in a lot of legal issues and heavy financial losses. So, it is recommended to convert the resident account to an NRO account as soon as possible.

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Why is Intra-day Trading Unavailable for The NRIs in India?

According to the policies of the RBI (Reserve bank of India), NRIs are now permitted to do intra-day trading in India. They are allowed only to make delivery trades.

This is due to the high risks for the investors that are involved in intra-day trading and the instability it can cause in the Indian markets. Furthermore, NRIs are also not permitted to do short selling, BTST (buy today, sell tomorrow) or STBT (sell today, buy tomorrow). There should be a minimum of two days before purchasing and selling a stock.

In addition to this, even though NRIs can acquire shares of Indian companies, there are limitations when it comes to investments. However, NRIs are permitted to do intra-day trading in the future & the options (F&O) sector using their NRO accounts.

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Can NRI Do Intraday Trading In India !

As you can see, once you have become an NRI, there could be certain hurdles in your way in starting your trading process with Indian companies. One of the most important things to do is to convert your resident account to an NRO account to avoid heavy penalties and legal issues. Unfortunately, as an NRI, you are not permitted to do intra-day trading.

However, it is entirely legal for you to make investments in mutual funds, fixed deposits, real estate, IPO (initial public offering), national pension schemes, etc. It is also essential to go through the trading restrictions imposed by the government for the NRIs to avoid any unnecessary financial loss and legal trouble.

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