Investing in a NRE Account
TABLE OF CONTENTS
- How to fund my Trading Account for Investment?
- What are the PIS Charges?
- What happens after a trade is punched in a NRE account?
- Which transactions cannot be funded from a PIS account?
- Are there any restriction on trades?
- I have sold shares but have not received the sale proceeds to my bank account. Why?
- If I want to take out funds, it is possible or How easy it is to repatriate funds?
How to fund my Trading Account for Investment?
As per RBI Rules all investments in a NRE account should be funded from the PIS Bank account and it should be to the paise. For eg., if a purchase is made for Rupees 1091000.91, the funds should also received only to the tune of 1091000.91 and not a paise more or less. It is actually impossible to transfer funds to the paise before making an investment as the purchase value might slightly differ depending on the price, charges etc., To overcome this, you need not transfer funds to us before making a purchase.
All that you need to do is to fund your PIS Bank account. This PIS balance will be shared by the bank to us on a daily basis at the End of the Day and this amount - your ledger debit, if any, will be uploaded in your trading terminal on a daily basis. You may buy stocks based on it and the purchase obligation will be retrieved from the bank by us.
So kindly ensure that your PIS account is sufficiently funded on the previous working day itself.
What are the PIS Charges?
PIS charges are debited by your bank on NRE transactions. Following are charges that could be applicable on your PIS Bank Account:
- PIS Account Opening charges
- Annual Maintenance Charges for your PIS Bank Account
- Processing charges for the transactions done by you in the secondary market. This will be debited each day you transact.
These charges can vary from one Bank to another. For latest updates please visit the NRI section of the respective bank's website.
What happens after a trade is punched in a NRE account?
The following are the activities carried out by the broker when you purchase a share:
- The bank shares your PIS Bank balance on a daily basis
- This balance is added to your ledger balance and uploaded in the Trading Terminal. This is your available balance at the beginning of the day.
- You purchase shares with product code CNC based on the funds updated
- At the end of the day, the contract note for the purchase trade is generated and sent to you and to the banker.
- The banker will transfer the exact value of purchase value as per contract note from your PIS Bank account to your account with Tradeplus. This generally happens within 1 working day of the banker receiving the contract note from our end. Once the amount is received by us, we credit your trading ledger with the receipt of funds.
The following are the activities carried out by the banker when you purchase a share:
- On receipt of contract note from us, the bank will transfer the exact amount as mentioned in contract note to us.
- The bank will also enter the purchase details in their software to keep track of purchase rate for tax deduction at the time of sale.
- The bank will report this transaction to RBI.
The following are the activities carried out by the broker when you sell a share:
- As a NRI you are allowed to sell a share only if the same is available in your Depository account (Demat Account). The shares in your Depository account are automatically uploaded in the trading system.
- To sell the share you need to select product type as CNC.
- At the end of the day, the contract note for the sale trade is generated and sent to the banker.
- We will transfer the amount to your bank account debiting your trading ledger based on the value mentioned in the contract note. This generally happens within 1 day of trade.
The following are the activities carried out by the banker when you sell a share:
- When contract note and funds are received by the bank from the broker, the bank will calculate the profit/loss on the transaction and deduct the applicable long term/short term tax and credit the balance amount in your bank ledger. This generally takes 1 working day on receipt of contract note and funds from the broker.
- The bank will also report this transaction to RBI.
Which transactions cannot be funded from a PIS account?
The following transactions cannot be funded from the PIS Bank account. It has to be funded from the Non PIS or the Savings bank account.
- Investments in IPO
- Investments in MF
- Investments in Bonds
- Payments for ESOP exercise
- Payments for Promoter's share holding
- Payments for non-brokerage charges including demat.
- Other payments not related to your investments
Are there any restriction on trades?
Yes, investments in NRE mode are subject to limitations fixed in pursuant to SEBI guidelines. This is basically to monitor Foreign Investment limits in listed companies. Hence, the stocks where such limits are already hit or close to be hit, are restricted for fresh investments in NRE account. The list of such stocks are released by the Exchange from time to time.
Check here the list of such stocks.
You may however invest in any stock without any restriction in a NRO account.
Added to this, you will also not be able to make Intraday trades, Buy Today and Sell Tomorrow (BTST) and funding transactions as these are not allowed in NRE mode. These are however, open for NRO accounts
I have sold shares but have not received the sale proceeds to my bank account. Why?
The sale proceeds are credited by your bank to your account based on the contract notes that we send. The contract notes of every transaction is sent to the bank by us each time you execute a transaction. If you do not receive sale value credited to your bank account beyond T+1 days, it is possible that the bank does not have the corresponding purchase details.
Each time you execute a sale transaction, the bank will refer back to the purchase details such as date of purchase, rate of purchase, quantity etc., to compute tax. The tax amount payable, if any, will be deducted at source by the bank and only the remaining money, net off tax, will be deposited to your bank account. If for some reasons, the bank doesn't have the purchase details, they will not be able to deposit the amount to your bank account. You will then get an intimation on this and will be required to provide the necessary details for further processing.
If I want to take out funds, it is possible or How easy it is to repatriate funds?
It is very easy. You may do it online from your bank portal itself.
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