Can US citizens invest in the Indian stock market

Can US Citizens Invest In The Indian Stock Market ? Yes they can do by opening an account with SEBI registered Indian stock broker.

Many Indian citizens who have settled abroad send back money home. They also prefer to invest in the Indian stock markets. Since people of Indian origin are scattered all over the world, the Indian economy is booming with a high FDI inflow. India is the top receiver of remittance in the world.

Hence, they also look for diverse investment alternatives and routes. For investment purposes, whether in ETFs, mutual funds, stock markets, or convertible debentures, an NRI has to open a Demat account.

A Demat account overcomes the hurdles of paper shares, physical certificates, and related documents. It stores shares and makes an entry in electronic formats. An NRI can have easy access to them through the internet via a smartphone or a laptop.

Also Read: Can NRI Do Intraday Trading In India

Can US Citizens Invest In The Indian Stock Market ?

Can US Citizens Invest In The Indian Stock Market is a very common question amongst all the NRI’s who are leaving in the US either for study purpose or doing job in US. There are many people who are living US either on F1 visa or on H1 visa. Since these all are temporary and people intent to comeback to India someday, they would like to keep investing in Indian stock market.

There are many Indians who have already taken green card or already became the citizens of USA. They also want to invest in Indian stock market, because Indian economy is booming. With the kind of infrastructure and development Indian economy going strong. So reverse migration is also happening.

There are multiple ways using which NRI’s can invest in India such as Exchange Traded Funds (ETFs), Mutual Funds or Direct Stocks.

To start investing in India either you will have to open an account with international brokerage firm regulated by the U.S. Securities or open a demat account with a brokerage firm registered with SEBI-registered Indian stockbroker.  

There are many famous stock brokers available in India such as Zerodha, Sharekhan, Upstox, Groww etc. They all are registered with SEBI and genuine service providers. Once you open your demat account using any of these app, you can start investing in Indian share market.

Also Read: History of Mutual Fund in India

Can NRIs Invest in MF in India?

Under the Portfolio Investment Scheme, NRIs are entitled to invest in the Indian stock markets. Mutual Funds are the most sought-after investment choices for NRIs in the Indian stock market. Mutual funds are transparent, better managed, more tax-efficient, and liquid. Mutual fund investments are quite simple as they avoid the cumbersome compliance requirements of the FATCA.

Both non-residents of India and People of Indian Origin can invest in the Indian stock market on both a repatriation and non-repatriation basis. They should, however, need to abide by the Foreign Exchange Management Act (FEMA).

They also need to open a rupee-dominated NRE account since mutual fund houses only accept investments in the Indian rupee. However, they must be aware of the scheme information document (SID) of their preference.

FEMA defines an NRI as someone who is a citizen of India or Indian origin but resides outside the country. The act also says that when a person stays out of India for more than 182 days in a financial year, he is considered an NRI. It states in which places NRIs can invest whereas according to the definition of the Income Tax Act their investments will be taxed.

Also Read: Advantages And Disadvantages of Mutual Funds !

Can American Citizens Invest in India?

An American citizen with NRO and NRE accounts can invest in mutual funds in India along with stocks, real estate, government securities, and fixed deposits. However, they are subject to well-stated protocols. Along with KYC compliance, he has to fill out the standard mutual fund application form.

He can exercise the following three options:

  • He can use the bank branches directly for the basic transactions, selling, and crediting. Along with the documents he is required to attach the KYC details. He also has to state whether the investment can be repatriated or not.
  • An NRI can give his “Power of Attorney (POA) to another person. On his behalf, the appointed person can take all the decisions regarding investments. At the time of investment application, the signature of both parties should be present on the KYC document.

All the documents like a recent photograph, PAN card, passport, overseas and permanent address proof, identity and residence proof, and PIO card, should be attested. Besides, he needs to make FATCA (Foreign Account Tax Compliance Act) or CRS (Common Reporting Standard) declaration.

Also Read: Stocks or Mutual Funds, Which Is Better !

Can NRIs Open Demat Accounts And Trade in Indian Stock Markets?

Of course, NRIs can open a Demat account but they should follow the prescribed regulations laid down by Foreign Exchange Management Act (FEMA). They can open one with a central depository like the National Securities Depository Ltd. (NSDL) or the Central Depository Services Ltd. (CDSL).

They appoint the Depository Participants (DP) who act for both themselves and the NRIs. A DP can be a reputed bank or any financial institution. Unlike bank accounts where a minimum balance is required, an NRI doesn’t have to keep any money in his Demat account. The 16-digit unique number gives him access to multiple financial products. It will take 2 days to show the debit or credit of shares.

There are three distinct types of Demat accounts that the NRIs can open:

  • The regular Indian citizens who reside in the country can open a regular Demat account.
  • The repatriable Demat account is for the NRIs. It has to be linked to an NRE bank account so that it can aid the process of transferring money abroad.
  • Non-repatriable Demat account is connected to the NRO bank account. It doesn’t allow fund transfers abroad.

Some key advantages of opening a Demat account are:

  • An NRI doesn’t need to stack many paper documents. Moreover, he can avoid the loss of important documents by going online. A permanent digital record of the shares is, hence, preferred by everyone.
  • An online Demat account also allows the NRI to avoid frauds and forgeries, usually done with physical bonds and shares.
  • The account can be used as a security deposit for your savings. The NRI can also get hold of loans through the securities.
  • It is cost-effective. It does away with expenses of stamp duty and handling charges.
  • Being an online account is time-saving as operations can take place within seconds.
  • As physical tracking gets reduced the NRI can monitor everything from the comforts of his home.
  • Since the securities get listed on the NSE and BSE the NRI can avail exemptions from TDS.
  • Demat account promotes global investment. It is, therefore, good for the NRI as well as for the country’s economy.

By investing in India Stock Markets through multiple lucrative opportunities, they can contribute to the country’s growth story. After applying to a designated branch of a bank that deals with Portfolio Investment, they can buy or sell

  • shares
  • convertible debentures of Indian companies on Stock Exchanges
  • Treasury bills or dated government securities
  • units of domestic mutual funds
  • An Indian PSU-issued bond
  • Shares in public sector enterprises were de-invested by the Indian government.

Reserve Bank of India also allows the NRIs to invest in shares through the Indian stock exchange. However, they require you to visit the authorized dealer (bank) for further procedures. The entire trading has to take place only through the bank.

If they wish to open their account offline, they have to visit the DP on their visit to India. They can also do it via an online process from abroad. From fund selection to investment, the monitoring can be done online.

An NRI trading account is an intermediary between his Demat account and financial products like equity, shares, mutual funds, bonds, and similar assets. When you buy shares through your online trading account, they are added to your Demat account. And, when you sell them, your Demat account gets debited. The amount is then transferred to your trading account.

Also Read: Why You Should Buy An Investment Property Before First Home

What Are the Documents Required by An NRI to Open A Demat Account?

Since the Indian equity market is ever-expanding, both the residents and non-residents of the country are investing to make huge profits from the stock markets. According to the Official Valid Documents (OVD) list, an NRI is required to submit the following documents. The details can be acquired from the bank account’s opening form.

  • Photocopy of PAN card
  • Copy of Portfolio Investment Scheme (PINS) letter and FEMA declaration
  • 1 to 3 recent passport-size photographs
  • Indian and foreign passport
  • PIO card
  • OCI card
  • Proof of bank account
  • Canceled bank cheque for bank records
  • Proof of income, for trading in derivatives like current bank account statement, salary slip, copy of income tax return acknowledgment, statement of Demat account holding.
  • Proof of identity like driving license, passport, aadhar card
  • Proof of overseas residence like voter card, utility bills, insurance copy, ration card, passport.

The NRI has to get the official papers attested from the local branch or the Indian Embassy abroad. Only after the verification of the submitted documents by a representative at the DP’s office, and processing of the request in India, an NRI’s Demat account is opened.

Also Read: How Much A Student Can Earn In The USA While Studying

Ranking for Best Demat Account for NRIs- Best Stock Brokers for NRIs

Since NRIs trading in India is gaining popularity they can come across many potential stock brokers, like ICICI Direct, IIFL Securities, Kotak Securities, Share Khan, Tradeplus, Choice Broking, Axis Direct, Ventura, Zerodha, Angel One, HDFC Securities, Motilal Oswal, and Prostocks.

They also offer rewarding opportunities like Low Brokerage NRI Plans, 3-in-1 or 4-in-1 NRI Trading accounts, and Zero AMC NRI Demat Account. Again, they provide investment and trading facilities in IPOs, Equity, Bonds, Derivatives, and Mutual Funds.

NRIs can either choose full-service brokers who offer a wide variety of low-cost, no-frill, and limited discount trading services. The ideal one will provide an easy opening procedure and unparalleled facilities, including convenient investing. Only after thorough research and suitability, an NRI is advised to select his broker.

Also Read: Fun Facts About Stock Market

Final Words !

Thus, as you can see, an NRI can invest in the Indian stock markets. He has to obey certain rules and regulations. Since the online process is widespread, he can find most of the brokers carrying out the investments through the internet.

The Indian stock market promises high liquidity, passive income, and potentially high returns. If the NRI wishes to return to India, and retire, investment in the Indian stock exchange is an excellent choice.

As a last point I would say NRI’s can also start investing in new business like Organic Bamboo Products, Organic Farming etc.

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