Thanks for the quick response.
About the brokers, I heard sometime back from Webull that they are not allowing Indian residents on their platform now. Correct me if they have changed it recently.
And with Interactive Brokers, they are not allowing options trading for US stocks. Are they? Tradestation which is a subsidiary of Interactive Brokers allow option trading in US but they are charging a very hefty commissions.
About enquiring with CA, please keep us posted if you get any official confirmation from any CA if you happen to enquire with them. Or if you file your ITR with income from overseas options trading with not much hassle.
Best regards,
Madhu
EDIT: I enquired this just now, and no. They do not support accounts for Indian residents. Sorry for suggesting Webull.
Yes, I heard this about Interactive brokers from one of my friends. I am not sure what is the reason, as they support India and also they have mentioned that in cash account, they do allow options trading on their website.
Also, I have one friend who is using Tradestation for day trading options. And yes, their commissions are very expensive. I wouldnt suggest you to get Tradestation. I would recommend TD Ameritrade.
Will do brother. I have to enquire this sometime anyway.
Just confirming from them, I had called Interactive brokers to enquire if they allow option trading for Indian residents. They said it is not allowed, and their website also says the same.
Please do not forget to update your findings here.
Best regards
Madhu
Yeah. I enquired about this too. Apparently, they do not allow options.
Sure! Will keep posted here.
Hello any updates on the findings? Thanks
Trading derivatives is not speculation as per my understanding of the IT act. Is it your personal opinion that derivative trading is gambling?
Its not an opinion its a fact. Its more like professional gambling if you’re good at it.
I do not agree with it completely even if many retailers resort to gambling in the hope of making a fortune. Think if you have a reasonable target of 1 or 1.5% monthly profit, it is not only achievable but safe too. Gambling is perhaps something like hero or zero players. In that sense even equity trading is gambling. My friend bought kwality icecream shares for about 10 lakhs and it is not even 10% of that. He is still not selling in the hope that it will rise one day. Of course it may rise but the point is sitting on the loss for many years. And even if ending in profit it is pure gambling.
Hello, did you find the answer? Im in the same boat and want to be clear if using USA earned income (when an NRI) can be used to trade covered calls and long positions from india… (after becoming indian tax resident) ?
Let me share my findings here:-
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If you are a resident of India and have had no earned income as an NRI (That is still outside India).Then you are out of luck. Thanks for playing. You are screwed by these 2:
- LRS (Can’t send money for margin trading)
- As per the most recent RBI’s notification No. FEMA.399/RB-2020. Link. Any resident Indian can not post or collect margin without prior approval from RBI (except for a few cases). The terms margin and derivatives are clearly defined by RBI in this notification. So even if you are able to open a cash account in the US, that allows Level 1 and Level 2 option trading strategies, don’t be fooled. It is not a grey area in my opinion. It is quite black and white.
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If you are a resident of India but have earned income as an NRI even then RBI’s notification No. FEMA.399/RB-2020 still applies because it applies to all the residents of India. Furthermore, you definitely can not be approved for a margin account by any of the brokerages like IKBR, First Trade etc. Here is a response from First Trade:-
“Apex’s policy change is made in accordance with Reserve Bank of India’s updated Liberalised Remittance Scheme, which includes a prohibition that essentially disallows “remittance from India for margins or margin calls to overseas exchanges/overseas counterparty.”
Since this policy has been implemented at the clearing corporation’s level, brokerages can’t circumvent that even if they wanted to.
Coming to forming an LLC now. Under this notification here, I am of the opinion that a resident Individual can form an LLC overseas. Now the remaining questions are:-
- Can this LLC trade in derivatives with funds that were earned by an NRI (not using LRS)?
- RBI notification FEMA.399/RB-2020, says prior approval from RBI is required before dealing with derivative contracts. How to seek that approval?
I have asked both of these questions in an RTI to RBI. I have no clue how long an RTI takes or even if I will get some meaningful response. But regardless, I will post the updates here.
Disclaimer:- I am no legal expert by any stretch of imagination. Don’t listen to a random stranger on the internet. Do your own research.
My Personal Feelings – I think it is very unfair to tell people how they can and can not spend their money, which they have paid proper taxes on. If some one wants to make bad decisions then they should be allowed to do so. That is freedom. Not looking to argue. Let’s agree to disagree. Feel free to comment on anything above though.