5 Mistakes NRIs Make When Investing In the Indian Stock Market
Online stock market trading is known to be a lucrative investment option. This makes NRIs also want to invest their money in the stock market. However, many NRIs still follow traditional advice from family and friends while investing.
They do not seek expert advice and are largely unaware of the rules applicable to the Indian stock market. It causes them to run into investment mistakes. This article will explore five key mistakes made by NRIs while investing in the Indian stock market.
5 Common Stock Investment Mistakes Made By NRIs
1. Delayed Investments
Many NRIs still feel that investing in stock markets requires a lot of documentation. As they stay out of India, they think that getting all the rules and compliance in place would be a tedious task.
So, they decide to invest only when they return to India. This leads to delays in tapping attractive stock investing opportunities. Investing at the right time is the key to good returns, but NRIs often lose out on it.
2. Not Maintaining Resident Accounts
As per RBI guidelines, post attaining NRI status, an NRI can no longer operate a resident account in India like a savings bank account. An NRI must convert their savings and online Demat account into Non-Resident Ordinary (NRO) accounts and NRO Demat accounts, respectively.
If they hold any mutual funds, AMC must be informed about the change in status for updating KYC particulars accordingly.
NRIs should conduct trading in India via a Portfolio Investment Scheme (PIS) account. Non-compliance could attract penal charges from the concerned authorities. NRIs in India can continue only old PPF accounts, provided it does not extend above 15 years. New PPF accounts cannot be opened.
3. Ignoring Tax Rules
Tax Deducted at Source (TDS) rates is different for Indian residents and NRIs. NRIs have to pay higher TDS compared to resident Indians. For instance, TDS between 20% and 30% is applicable for NRIs on capital gains from a property sale.
Many NRIs are unaware of this rule and end up paying heavy taxes. Also, they are unaware of DTAA (Double Tax Avoidance Agreement) that India shares with many countries, due to which NRIs often end up paying double tax.
4. Not Seeking Professional Advice
Many NRIs make the mistake of seeking investment advice from relatives and other well-wishers. They refrain from seeking professional advice from certified financial consultants, thus losing out on sound and prudent investment decisions. This also tends to impact their potential earnings from investments in India.
5. Focussing on Rupee Depreciation
The depreciation of the rupee over time seems to have a negative impact on NRI investing their foreign income in India. NRIs tend to overlook that a well-diversified global portfolio is a good investment bet.
India is among the fastest-growing economies in the world. As such, Indian equities have high demand globally. Online trading app has further simplified online stock market trading. To tap this growing investment opportunity, NRIs should avoid making the common stock investing mistakes stated above. This may help them earn decent returns on their stock investments.