A great start for aspiring investors to invest in the Indian stock market is to open a Demat account for a Non-Resident Indian (NRI). It is not devoid of certain risks that one should bear in mind and the overall process may be probably long. Here, you will get to know about some common mistakes to avoid while applying for an NRI Demat Account which makes it easier for you.
- Choosing the Wrong Account Type
The most crucial decisions are about selecting account type while opening an NRI Demat Account. The two broad categories available are the Non-Resident Ordinary (NRO) accounts and the Non-Resident External (NRE) accounts. Both come with its own policies and benefits and have a different purpose.
NRO accounts are especially designed for money produced from sources within India including income from assets located in India such as profits or rental income from immovable property. It means money can be deposited in these accounts in foreign currency or in Indian Rupees.
- Overlooking Documentation Requirements
Documentation is extensive when one is opening an NRI Demat account. Too many applicants fail to estimate the volume of paperwork required, and the account opening takes time and becomes a source of stress. For one to ensure that the application process is well processed, then he or she should ensure they have all the required documents.
A current passport, visa or authorization for permanent residence abroad is required generally to prove the applicant’s NR status. Accompanying these documents you need to submit latest photographs, proof of stay in foreign country, your PAN card and cancelled cheques from NRE/NRO bank account. Specific documents which some brokers may require include a photocopy of your international bank statement or proof of income.
- Neglecting to Research Brokerage Firms
It can be tempting to choose the first option you come across or the one that a friend recommends when there are so many brokerage houses offering NRI Demat accounts. But in the long run, this strategy may result in disappointment as well as even financial losses.
Every brokerage company has a different price schedule, trading platforms, research resources, and level of client service. Some might focus only on serving NRI clients or have particular expertise in particular investing categories.
- Misunderstanding Tax Implications
Winding the tax consequences is one of the most challenging aspects of investing in non-residential properties. This mistake is highly prevalent among the Non-Resident Indians (NRIs) as they think they have to worry about the taxes only in their home country or their investment in India to explore the tax benefits. A peculiarity of this misperception is that it can have negative consequences in the financial and legal aspects of an organization.
- Ignoring Compliance with FEMA Regulations
All foreign exchange transactions in India, including investments made by non-resident Indians (NRIs), are governed by the Foreign Exchange Management Act (FEMA). NRI investors frequently make the error of ignoring or failing to comprehend the FEMA rules that govern their Demat account along with investing activity.
Conclusion
Overseas Indians can be a part of India’s booming stock market by opening as well as holding an NRI Demat Account which is also a very satisfying experience for any investor. So, if anyone has a question ‘can NRI invest in Indian stock market,’ the answer is Yes. NRIs are permitted to invest in Indian stocks, bonds, and mutual funds through the proper channels. However, it’s important to understand the risks that are attached to the procedure so that you’ll have a certain guarded approach.
