NRI investing in Indian stocks: the RBI routes, the accounts and the tax, as rules

If you have just moved abroad, tell your bank and broker: RBI says an existing resident account should be designated as an NRO account. This guide covers listed shares bought on the exchange. Mutual funds, IPOs, F&O and property have their own rules.

Payment comes from an inward remittance through banking channels or a repatriable account designated for these investments, and sale proceeds net of tax can be remitted abroad or credited to that account. Banks commonly call this designated arrangement a portfolio investment or PIS account.

Non-repatriation basis (Annex 4). An NRI or OCI may buy capital instruments of any company, on or off the exchange, without a limit, and the investment is treated as domestic, at par with residents. The money can come from NRE, FCNR(B) or NRO accounts, but the sale proceeds go only to the investor's NRO account, and the amount invested and its gains cannot be repatriated under this route. The same annex bars investments in Nidhi companies and in companies in agriculture, plantations, real estate business, farm houses or transferable development rights.

• Short term (held 12 months or less): 20% under section 196 of the Income-tax Act, 2025 (section 111A of the 1961 Act).
• Long term (held more than 12 months): 12.5% on gains above ₹1.25 lakh in the tax year under section 198 (section 112A).
• Surcharge where income crosses the thresholds, capped at 15% on these gains, and 4% cess.

Three differences from a resident matter in practice:

1. Tax deducted at source. Tax on a non-resident's capital gains is deducted when the sale is settled, under section 393(2) (section 195 of the 1961 Act), at the rates in force. A resident's share sales carry no such deduction.
2. No basic exemption against these gains. A resident with low income can set the unused basic exemption against short and long term equity gains; sections 196(2) and 198(3) give that only to residents. A non-resident pays the special rate from the first rupee above the ₹1.25 lakh long term exemption.
3. Tax treaties. India's double taxation agreements, under section 159 (section 90 of the 1961 Act), can give a lower rate or a credit in your country of residence, if you hold a tax residency certificate. Check the treaty with your own country.

Losses work the same way as for residents: a short term loss can be set against short or long term gains, a long term loss only against long term gains, and both carry forward for eight tax years if the return is filed on time. Because tax is deducted at source on each gain, filing a return is how an NRI sets losses against gains and claims back any excess deduction. The capital gains tax guide works through the rules in rupees.

The module on the rupee and FII flows explains what moves the exchange rate, and the note a record low rupee redistributes shows who gains and who loses when it falls.

RupeeCase rules run in the investor's own broker and demat account, so the RBI route, the bank accounts and the tax deducted at source are set by that account. Whether a given NRI account can connect depends on the broker. Large Midcap runs a momentum rule on the Nifty LargeMidCap 250, 40 holdings rebalanced every 2 weeks: model CAGR 37.83%, deepest fall −19.31%, as of 27 Apr 2026. Every rebalance sale in an NRI account is a taxable sale under the rules above.