NRIs – how to trade in Shares and MFs from an NRE account?

POSTED BY Jugger Naut ON June 23, 2012 11:56 pm COMMENTS (10)

Hi,

I’ve recently shifted to the UK.

What I wanted to do –
1. Open an NRE account and a PINS account
2. Open a demat and trading account linked to the NRE(because I dont want TDS in India)
3. Open a FundsIndia account to hold MFs in one place – linked to same NRE(again because I dont want TDS in India).

The reason for having both linked to the same NRE account, is to park money temporarily in liquid funds, and have flexibility to quickly re-deem and buy equities when they are at “reasonable” prices.

My problems:
1. Different banks are wording things differently regarding the TDS they practice. For e.g. ICICI mentions clearly that they withhold TDS temporarily on the full sale amount on equities, but correct their withholding at End Of Day. But they dont mention whether you can invest in MFs through them.
2. HDFC Securities doesnt offer MFs to NRIs. Their TDS on equities is not very clear to me.
3. Funds India seems to favour linking NRO account, for some reason. That is a disaster, as on redemption the bank would promptly tax me at 20% of sale proceeds and not on the actual profit.
4. Some sites suggest that MF companies ask for documents showing source of money, while investing or redeeming.

So I welcome suggestions from fellow investors and NRIs on how I should tackle this.

PS: I’ve researched a lot on the UK-India tax angle, my tax liability and the mode of payment/refund claim. Probably I will publish it for everybody’s benefit if needed.

Regards,
J Naut

10 replies on this article “NRIs – how to trade in Shares and MFs from an NRE account?”

  1. Jig says:

    Dear,
    Regarding kotak i can say, i am satisfied. I am investing in equity and dont trading so for me placing the orders,shifting the funds and retriving the funds is very very convenient. addtionally i found the MF investment being very easy with No charges ( currently i can say ).
    Overall, i can see my direct equity and MF portfolio at the same platform which is also a part of my NRE account so no need to look elsewhere.( for me)

    Charges side i am not much bother as you may have face the problem how difficult is to do transaction while living out of india. In fundsindia you have to fill form and need to send them for each new SIP/ edit SIP/ close SIP which is not required in KOTAK.

    I have invested in liquid and also did redemtion once to check. they charges TDS on your profit part only. I dont redeem any MF so far so dont know about redemption charges.

    Thank

  2. Jugger Naut says:

    UPDATE!!!

    Hello Everybody,

    Thank you for your suggestions.
    I have found some things that I would like to share –
    1. Apparently, I can maintain an NRE account and link it to FundsIndia.
    They have assured that TDS will be only on gains, if I ensure submission of bank statements showing source of funds.
    2. MF investment does not rely on the Portfolio Investment Scheme account. So I can open a demat account where I please.

    Now the only problem remaining is to find a good bank and Demat/Trading provider.

    ICICI charges Rs 6500 opening fees and Rs 2500 annual PINS fees, plus demat and trading annual maintt. This feels very dishonest as the actual PINS fee is only Rs 1000.
    Plus their brokerage is high – 1.25%.

    HDFC Sec seems to be good, their brokerage is 0.75% and AMC is also lower.
    I just need to check their TDS practice for equities.

    I dont want to touch the other Trading portals – they have hidden charges and the user interfaces are very poor.

    To Jig: How is the user interface on Kotak? If you have ever used IndiaInfoLine, Angel or Sharekhan, then is Kotak better than them?

    To BanyanFA: Yes the time difference is a problem. But if you are a long-term investor, you can absorb that small loss and put market-rate orders.

  3. BanyanFA says:

    Hi Jugger,
    I was exactly in your situation. Unfortunately, irrespective of NRE / NRO, you would be subject to TDS if you sell your Equity MFs / Shares within 1 year. You will be subject to TDS if you sell your Liquid Funds at any time.

    The only benefit NRE would give you is :
    1. Your funds are repatriable and
    2. The interest on idle funds in NRE would be tax free.

    Try your luck with direct Equities – the moment day light saving kicks off and India becomes +5:30 hours ahead of UK, then you would realise that by the time you are ready to place your orders, the markets would be about to get closed. This is one of the most important reasons why I have always advised my NRI clients (specially in US & UK owing to time difference).

    If you have any UK specific questions, please feel free to ask as I specialise in these matters as well.

    Regards
    BanyanFA

  4. debanjan2008@gmail.com says:

    Dear J Naut,

    Why dont you check fundsupermart.com and open an account with them. According to my knowledge, they are soon launching NRE account for the convinient of NRIs and moreover they have got a tie up with all the banks, so you can enjoy hassle free investing and at the same time since they are offering NRE services you dont have to worry about tax.

    Benefits of fundsupermart.com is that they offers research reports to investors and helps them to transact through their client investment specialists who guides the investors if they ever need any help.

    Would ask you to try it the services once.

  5. Jig says:

    Hello Dear,
    I am replying you as i am using the all things you have mentioned in the same manner you want it to use.
    But i have kotak Trinity account. As per your requirement, you are more concern about convenience and Kotak 3 in 1 in perfectly fit in that scenario. Even you wont require to open account with fundsindia. With zero charges you will have kotak Mf investment platform.
    RIGHT NOW i am accessing my NRE Saving A/c, Security & MF at one place. and believe me transaction between bank & security is excellent smooth.

    Also note that , you have to keep in mind for liquid fund also , registrar is taking more than 2 days thought they written T +1 Days.

    About taxation Ashal is right, As i invest and redeem once in liquid fund which taxed on my return part arround 30%.

    Question to Ashal:

    Can you please provide procedure ( online/offline) to claim TDS deducted?
    What are the documents required?

    Hope this helpful.

    Regards.
    Jig

  6. Jugger Naut says:

    Ashal,

    I want to park in liquid funds, to hold money till certain shares are at “reasonable” prices.
    At that moment(in 2-3 days), I can redeem liquid funds and use that amount to purchase the shares.

    Clearly, if that amount lies with the ITD for a year, its not earning me anything.

    In life, there’s no escaping ‘death’ and ‘taxes’. But you want to use your ‘quality time’ and ‘money’ properly while you have it. 🙂

    1. Dear Jugger, Please check the below link –

      http://www.hdfcfund.com/KC/ContentDisplay.aspx?ReportID=5CEFCAD6-63C3-47AE-B448-5209341FB627

      Please read specifically the TDS part in the link where it’s clearly given that TDS ‘ll be applicable only on the actual Cap. Gains & not the full amount of consideration.

      Thanks

      Ashal

  7. Dear J Naut, why are you so much in problem with TDS? You have the option to get the refund by filing the ITR.

    Thanks

    Ashal

    1. Jugger Naut says:

      Ashal,
      What I understand from banks’ websites is , on NRO if i purchase Rs 100 worth liquid fund and redeem them for Rs 110, then the TDS is calculated on the redemption amount.

      So the TDS would be Rs 22, although I owe only Rs 2 in tax. Now to claim refund of extra Rs 20, I have to wait till the following April and file tax returns.

      I’m ok with paying Rs 2 TDS, but I need the rest Rs 108 immediately to invest in other avenues. I’m definitely not OK paying Rs 22.

      1. Dear Juggar, can you share this bank’s site link or the info?

        Thanks

        Ashal

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