Trade in the Indian stock market is an attractive alternative for many non-residents (NRIs) who want to invest in their country. However, navigation of Indian market rules, taxation and account layouts can be difficult from abroad. Many NRIS make unintentional mistakes while trading that can cause problems with compliance, loss or lack of opportunities. Here are some common errors that NRI should avoid doing business in India:

1. Using a Resident Trading Account

One of the most common errors continues to use a resident trade and demat account after becoming NRI. In accordance with the RBI and SEBI guidelines, NRI requires NRE/NRO-connected PIs (Portfolio Investment Scheme) to open NRI-specific accounts for trade.

2. Ignoring PIS Regulations

There are specific rules in trade in the Indian stock market during the PIS route. NRI often forgets to inform the bank to activate its bank in its account or misunderstand what kind of transactions are allowed under PIs (eg, only delivery-based stock trading mistakes is allowed, not intraday). Many NRI mistakes in stock trading arise from using resident accounts instead of NRI-compliant accounts, leading to regulatory issues.

3. Intraday Trading & Derivatives Without Permission

NRI is not allowed to do intraday trade in the stock segment and should follow F&O trade restrictions, which require custody accounts and special approval. Many NRIS accidentally violates these rules, causing punishment or account pension.

4. Incorrect Tax Filing or Double Taxation

Indian income from the business is taxable. Many NRIs fail to register taxes in India or do not declare this income in their home, which causes double taxation or penalty reports. It is necessary to understand DTAA (double -tax family agreement) and seek professional help when needed.

5. Choosing the Wrong Type of Account (NRE vs NRO)

A NRE account is a refund (money can be taken abroad), while NRO is non-not-perfect (limited transfer allowed). NRIs often choose the wrong type for trade, which affects the fund's Mobility and tax liability.

6. Not Updating KYC & Residency Status

Failure to update KYC with NRI position, new addresses and foreign contact numbers can be a freezing in accounts. All changes should be informed with the correct documentation to the bank and broker.

7. Neglecting Currency Conversion Costs

NRIS trade from the NRE account often ignores the exchange rate fee and the conversion fee, which can eat in profits. Strategic currency programs are required to manage costs.

8. Lack of Monitoring & Poor Research

Due to lack of differences in the time sector or access to information, a link from the Indian market can lead to poor investment decisions. Many NRIs depend on old data or rejected tips.

9. Overlooking Repatriation Rules

There is limited repetition (up to $ 1 million per year) in profits earned through a NRO account. If returning is a goal, NRI should act through an NRE-PIS account.

10. Ignoring Brokerage & Account Charges

The NRI trade accounts are often accompanied by high brokerage fees, annual maintenance fees (AMC) and currency fee. Always compare claims before choosing a broker.

Conclusion

Trade in India can be rewarded, but only if done correctly. Understanding rules, choosing the right accounts, staying in line with the RBI and SEBI regulations, and consulting financial advisors can protect NRIs from expensive errors.

Read Also