Profitable invest in the Indian stock market from Canada: Through several stock market intermediaries, non-resident Indians can easily invest in Indian stocks. Regulators like the Reserve Bank of India have established standards for these investments that must be adhered to while making them.
Through a Portfolio Investment Scheme (PIS) account, an NRI may purchase shares of Indian companies. Particularly when foreign money is being used for investments on a repatriable basis, a PIS account is necessary. NRIs can also use their Indian funds from an NRO account to buy Indian stocks as a different option.
The Foreign Exchange Management Act regulates all NRI investments (FEMA).
Indian Stock Exchanges
In addition to having the fifth-largest economy in the world, India will also have the fifth-largest equities market as of September 2022. Economic and commercial prospects in India are solid and enticing for investors.
Despite being dispersed throughout the globe, Indians constantly want to engage in Indian stock markets. Non-resident Indians are permitted to participate in Indian markets under the Foreign Exchange Management Act (FEMA).
Let’s look at how Canadians can invest in the Indian stock market.
Who is an NRI?
You must be a Person of Indian Origin (PIO), or an Indian citizen residing outside of India, in order to qualify as an NRI. More than 60 days but no more than 182 days in a given fiscal year should be spent in India.
Subject to fulfilling this, you will continue to be recognized as an NRI even if your stay in India was 365 days or longer in the previous four fiscal years. If you are sent to a foreign country for longer than six months, you may also qualify for NRI status.
How to Invest from Canada in the Indian Stock Market?
Profitable invest in the Indian stock market from Canada!
Over the past few years, the Indian Stock Market has experienced remarkable growth, increasing its attraction to both domestic and international investors. Non-Resident Indians (NRI) may invest from other nations, such as Canada, provided they abide by the Foreign Exchange Management Act’s specific guidelines (FEMA).
How to Qualify as an NRI?
First, you must be an Indian citizen or be of Indian ancestry, have a current passport, and have a permanent foreign location in order to be considered an NRI. Additionally, you need to have spent the previous six months or longer living abroad. You qualify as a resident and can invest ordinarily if you have spent at least 365 days in India during the previous four years, with at least 60 of those days occurring in the current year, or if you have lived in India for at least 182 days during that financial year.
The Portfolio Investment Scheme, or PIS, offered by the Reserve Bank of India should allow you to invest in the Indian stock market if you satisfy the qualifications and are recognized as an NRI. Due to this, NRIs are now allowed to purchase shares or convertible debentures using a bank account at a designated branch.
Tax Repercussions for NRI
Indian capital markets offer appealing investment opportunities. They consequently locate investors from all around the world. In this group of investors, NRIs make up a sizable portion. For job, education, and commercial purposes, NRIs may relocate to wealthy nations, but when it comes to equity investments, their home nation continues to be one of their top choices.
Did you realize that capital gains made using equities instruments have some tax repercussions for NRIs? Additionally, these ramifications may disrupt financial plans. Therefore, before diving deeper into equities investments, NRIs should be aware of these repercussions.
Capital gains are profits or gains that result from the transfer of capital assets. Securities held for less than a year are subject to short-term capital gains taxes, whereas financial assets kept for more than a year are subject to long-term capital gains taxes (LTCG) (STCG). Long-term capital gains from stock investments up to Rs. 1 lakh, however, are not subject to tax.
NRIs are subject to long- and short-term capital gains tax in India, which is withheld at the source. The TDS rates as of April 1, 2022, are listed below:
| Segment | Base TDS Rate | Surcharge | Edu. Cess (4%) | Total TDS |
| Equity LTCG | 10 | 1.5 | 0.46 | 11.96 |
| Equity STCG | 15 | 2.25 | 0.69 | 17.94 |
Rules for NRI Investment in India
NRI investments must be made in rupees and not in Canadian dollars or any other currency. NRIs must have an NRE account, often known as an external rupee account for non-residents, in order to invest. They must also directly debit funds from this account using regular banking channels. A draught from that NRE account or a rupee check issued by an exchange house in Canada or the country you are now residing in can be used to invest money. If you choose to pay by check, you must submit your application along with a FIRC, or foreign inward remittance certificate, from the bank proving the source of the funds.
If you don’t already have a Permanent Account Number card or PAN, you must apply for one. You can do this by going to the PAN Services Unit website and providing your permanent address, two passport-sized pictures, proof of identity, and date of birth. The PAN Income Tax Department address, which you can find on the form, must receive via mail. You can trade Indian stocks with the 10-digit PAN number you are given, and the tax authorities can keep track of your stock investment activity.
After that is completed, you have the choice to designate a mandate holder, who will be able to manage your NRE bank account and your NRI investments locally.
You must submit your KYC documents alongside the appointment of mandate holder form from your bank in order to accomplish this. The form cannot be accepted without the signature of the mandate holder. Once the documents are registered, that person can act in your place to make payments, and deposits, use ATM cards and issue checks.
You can give them power of attorney if you wish to give them extra authority. They can make and redeem investments, file papers on your behalf, and perform all other tasks that a mandate holder is capable of.
You can choose to trade on your own through online trading portals if you wish to be in charge of your investments rather than employing a local to manage your FDI and NRI assets in the Indian stock market. There are numerous online trading platforms for various firms. To register online, all you need is an account with the broker you want to use for trading.
How Can Canadians Invest Through PIS In The Stock Market?
Portfolio Investment Scheme is referred to as a PIS account. NRIs can purchase and sell shares and convertible debentures on Indian stock markets using a PIS Account. All NRI transactions in listed securities are routed via it via legitimate banks, which are required to provide the RBI with a report on these transactions.
Sales are credited to the account while purchases are deducted from it. A PIS approval letter from the RBI is required in order to open a trading and Demat account. An NRE or an NRO account can have PIS enabled on it. Unlike NRO accounts, NRE accounts permit the repatriation of funds. Depending on their needs, an NRI can select either one of the options or both.
The NRI’s actual trading procedure
Both native Indians and NRIs go through the identical exact buying and selling process. There are a few things to keep in mind, though. NRIs are prohibited from investing in some equities, for instance, so they must verify with their broker before doing so. The penalty for breaking this negative list is severe.
The trading account is credited once the NRI transfers monies from the NRE or NRO account to the broker. When the transaction is complete, the broker simultaneously transmits the contract note to the NRI and the PINS bank to authorize debits. The NRI’s PINS account will subsequently be appropriately debited or credited by the PINS bank.
Some important considerations for NRIs when trading Indian stocks
Equities’ short- and long-term gains will be taxed at the same rate as for Indian residents. However, in the case of mutual fund investments, the NRI won’t receive the dividend until the TDS has been subtracted.
While trading in stocks can be done through either an NRE or an NRO account, NRIs can only trade F&O through non-repatriable NRO accounts. Before trading in F&O, NRIs must also get a Custodial Participant (CP) code.
Only on a delivery basis are NRIs permitted to trade Indian stocks. Therefore, NRIs are not allowed to engage in intraday trading, BTST trading, STBT trading, or even short selling.
NRIs are currently allowed to trade Indian equities and F&O, but they cannot trade commodities or currency derivatives.
Conclusion
The Indian government encourages investors of all stripes to participate in the stock markets. NRIs are permitted to make stock market investments as long as they abide by the regulations. If you are an NRI and wish to open a Trading and Demat account, get in touch with a broker that is registered with SEBI and begin the process.
FAQ
Ans: Yes, non-resident Indian investors can use an NRI trading account to buy or sell shares and convertible debentures of an Indian company on stock markets. NRIs cannot, however, participate in short selling, BTST trading, or intraday trading.
Ans For Canadian NRIs, there are many profitable investing alternatives accessible. However, you must first sign up for an NRE or NRO savings account with HDFC Bank before you can begin investing. You can use these accounts to transfer foreign earnings in Indian rupees to Indian accounts.
Ans; less than 182 days of that fiscal year were spent in India, or. Present in India for no more than 60 days in that fiscal year and no more than 365 days in total in the four fiscal years prior.