NRIs invest in Indian stocks through a broker with an NRE or NRO demat and trading account. Buying on a repatriable basis also needs Portfolio Investment Scheme (PIS) permission from one designated bank branch. You can buy and sell listed shares on delivery, and trade futures and options with rupee funds on a non-repatriation basis. Intraday trading, short selling and currency derivatives are not allowed. Gains are taxed in India at 20% short term and 12.5% long term above ₹1.25 lakh, and tax is deducted before the money reaches you.
Below: the two routes RBI allows, what you can and can't trade, the limits, TDS under the Income-tax Act, 2025, and the mistakes that freeze accounts. The rules are as of October 2026.
Repatriable or non-repatriable: which route are you on?
Every share an NRI holds sits on one of two routes under RBI's Master Direction on Foreign Investment in India (updated 15 June 2026). The route decides where the money can come from, and whether it can leave India.
| Repatriable (Annex 3) | Non-repatriable (Annex 4) | |
|---|---|---|
| Bank route | Through a "designated authorised dealer branch", the PIS bank | Annex 4 adds no designated-branch condition |
| Money in | Inward remittance from abroad, or a repatriable account (NRE) | NRE, FCNR(B) or NRO funds, or a remittance |
| Sale proceeds | To the designated rupee account, and can be remitted abroad net of tax | "Credited only to the NRO account"; principal and gains "cannot be repatriated abroad" |
| Ownership limit per company | Each individual below 10%; all non-resident individuals together up to 24% | No limit stated for listed capital instruments |
| Typical account | NRE bank account, NRE (PIS) trading and demat | NRO bank account, NRO trading and demat |
NSE confirms that you can hold both: "clients can have two separate trading accounts based on NRE & NRO." Many NRIs do, because money earned abroad and money earned in India follow different rules. The NRE vs NRO guide explains the bank-account side.
The ownership limits were raised this year. Annex 3 now says an individual's holding "shall be less than ten percent" of a company, and all individuals resident outside India together "shall not exceed twenty four percent". Older pages, including NSE's own NRI FAQ, still show the earlier 5% and 10% limits. If an individual's purchase breaches the limit, para 7.3.3 of the Master Direction requires the shares to be sold within five trading days after settlement. In practice this only touches someone buying a large stake in a small company.
How do you open the accounts?
- Bank account. An NRE account for foreign money, an NRO account for Indian income. If you just moved abroad, your old savings account must be redesignated as NRO first. The becoming an NRI checklist has the order of steps.
- PIS permission for the repatriable route. NSE says you can "select only one authorized dealer bank" for PIS and route all trades through its designated branch.
- Trading and demat account with a broker that serves NRIs. NSE lists the documents: passport, visa or OCI card, PAN, overseas address proof, photograph, bank and demat proofs, and the PIS letter. KYC documents can be attested by an Indian embassy, a notary or your local banker, and the forms must be signed by you, not a power of attorney holder.
- F&O, if you want it: a custodial participant (CP) code, explained below.
If you already hold shares from your resident days, you don't sell them. NSE's FAQ says under FEMA section 6(5) an NRI "can continue to hold the securities" bought as a resident, on a non-repatriable basis, and RBI's Master Direction (para 1.3) says the same. You move them to an NRO demat account.
What can NRIs trade, and what is off-limits?
| Product | Allowed? | Rule |
|---|---|---|
| Listed shares, delivery | Yes | Repatriable or non-repatriable, as above |
| Intraday in the cash segment | No | NSE: an NRI "has to take delivery of shares purchased and give delivery of shares sold" |
| Short selling | No | NSE: "Short Selling is not permitted." |
| Equity futures and options | Yes | Out of rupee funds on a non-repatriation basis, with a CP code |
| Currency derivatives | No | Only a "person resident in India" under FEMA can trade them |
| ETFs | Yes | Repatriable and non-repatriable |
| IPOs, rights, bonus | Yes | NSE: an individual NRI need not obtain any permission |
Two more NSE rules catch people. Shares bought under PIS on the exchange can be sold only on the exchange, not transferred privately, except as a gift to a relative or a registered charity. And when RBI puts a company on its caution or ban list, because foreign holding is near the cap, PIS purchases of it stop.
ETFs are covered in more detail in ETFs for NRIs, and mutual funds, which don't need PIS, in mutual fund investment for NRIs.
Can NRIs trade F&O?
Yes, with conditions. NSE's FAQ says NRIs may trade the futures and options segment "out of Rupee funds held in India on non repatriation basis, subject to the limits prescribed by SEBI". So the money comes from rupee funds held non-repatriably, such as an NRO balance, and the profits stay on that side.
You need a custodial participant (CP) code. You apply through a clearing member, the clearing corporation allots the code, and your broker must enter it on every order. You can have only one clearing member at a time. Position limits for NRIs are the same client-level limits SEBI sets for everyone.
F&O profits and losses are not taxed like the share gains in the next section. Their treatment depends on how you trade, so this is one area where a chartered accountant who handles NRI returns earns the fee.
How are NRI capital gains on Indian shares taxed?
The tax rate is the same as for residents. The difference is that TDS is deducted on the gain before you get the money. The Income Tax Department's TDS table for tax year 2026-27 lists these rates for payments to a non-resident under section 393(2), Table S. No. 17 (old section 195):
| Gain | Section | TDS rate |
|---|---|---|
| Short-term gain on listed shares (held 12 months or less) | Section 196 (old 111A) | 20% |
| Long-term gain on listed shares, above ₹1,25,000 | Section 198 (old 112A) | 12.5% |
| Dividends | Table S. No. 17(h) | 20% |
Surcharge, where it applies, and 4% health and education cess are added on top. If your tax treaty gives a lower rate, ask the bank or broker what it needs to apply it. Otherwise you claim the difference back in your return. NSE notes that the designated bank needs the date of allotment and cost of acquisition to calculate the tax, so keep your contract notes. NRI clients also have to send them to the PIS bank, which reports the trades to RBI.
The holding period that separates short-term from long-term is 12 months for listed securities, under the definition of short-term capital asset in the Income-tax Act, 2025.
Illustrative example
An NRI in the US sends money to an NRE account and buys listed shares for ₹10,00,000 (about $10,520 at the FBIL reference rate of ₹95.0194 per dollar on 16 October 2026). Surcharge is ignored, cess is 4%, and there are no other gains in the year.
| Sold after 8 months for ₹12 lakh | Sold after 2 years for ₹14 lakh | |
|---|---|---|
| Gain | ₹2,00,000 (short term) | ₹4,00,000 (long term) |
| Taxable | ₹2,00,000 at 20% | ₹2,75,000 at 12.5%, after the ₹1,25,000 exemption |
| Tax with cess | ₹41,600 | ₹35,750 |
| Net proceeds | ₹11,58,400 (about $12,190) | ₹13,64,250 (about $14,360) |
The dollar figures use the same rate at both ends to keep the example simple. In real life the rupee moves, and your return in dollars can be quite different from your return in rupees. For repatriable holdings, the net proceeds can then be sent abroad. The paperwork is in repatriating money from India.
Your country of residence may tax the same gain. Whether you get a credit for the Indian tax depends on the treaty and your full situation there. US residents can start with the US-India DTAA guide.
Do NRIs need to file a return for share gains?
Often yes, because TDS is a flat deduction and your real tax can be lower. Examples are a long-term gain under the ₹1.25 lakh exemption, losses to set off, or a treaty rate. Filing ITR-2 is how you get the excess back.
There is an exception. The Income Tax Department says section 216 of the 2025 Act keeps the old relief under which an NRI with only specified investment income or long-term capital gains, with tax deducted at source, need not file. If TDS was higher than your real tax, you would still file to claim the refund. The guide to TDS on NRI income explains how a lower-TDS certificate works when the deduction is far above what you owe.
Checklist: investing in Indian stocks as an NRI
| Step | Done? |
|---|---|
| Old resident savings account converted to NRO; NRE account opened | |
| Resident-era shares moved to an NRO demat account | |
| PIS permission from one designated bank, if you want repatriable investments | |
| Separate NRE and NRO trading accounts, if you use both kinds of money | |
| CP code through a clearing member, if you trade F&O | |
| Treaty documents your bank or broker asks for, if you claim a lower rate | |
| Contract notes kept and sent to the PIS bank |
Common mistakes
- Trading from a resident account after moving abroad. Resident-era holdings become non-repatriable, and new trades must go through NRI accounts.
- Expecting intraday or short selling to work. They aren't allowed for NRIs in the cash segment, whatever the trading app shows.
- Planning to fund F&O with NRE money and send the profits abroad. NSE's rule is rupee funds held on a non-repatriation basis, and the profits stay on that side.
- Mixing NRE and NRO money in one account. Once money lands in NRO, getting it out needs the US$1 million a year route and its paperwork.
- Ignoring TDS until the refund season. A flat 20% or 12.5% may be more than you owe, and only a return gets it back.
- Quoting the old 5% and 10% limits. RBI's current Master Direction has below 10% per individual and 24% in aggregate.
