Demat Trading
Can NRI open demat account in India?
If you are a non-resident Indian (NRI) looking to invest in the Indian stock market, opening an NRI Demat Account is the first step. A Demat Account allows you to hold securities electronically, making it easier to buy, sell, and manage your investments.
However, unlike resident Indians, NRIs must follow certain regulations set by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA). The process involves selecting the right bank or brokerage firm, submitting specific documents, and choosing between non-resident external (NRE) and non-resident ordinary (NRO) accounts.
Choosing between NRE and NRO accounts
When opening an NRI Demat account, you must decide whether to link it to an NRE or NRO account. For this, you need to know what each account is suitable for:
NRE Demat Account
- Funded by foreign earnings.
- Repatriable (funds can be transferred abroad).
- Requires a PIS approval for equity trading.
- Suitable for you if you are looking to repatriate your investment proceeds.
NRO Demat Account
- Funded by Indian earnings (e.g., rent, pension, etc.).
- Non-repatriable (only up to $1 million per year with RBI approval).
- Does not require a PIS letter of approval.
- Suitable for NRIs who want to reinvest funds within India.
Benefits of having an NRI Demat Account in India
1. Ease of investment
An NRI Demat Account allows you to seamlessly invest in Indian equities, mutual funds, bonds, and other securities. It simplifies the process of buying, selling, and holding securities in electronic form.
2. Hassle-free management
As an NRI, you can hold and manage your investments in a single Demat Account, eliminating the need for physical share certificates. This ensures safe and secure storage of securities, reducing the risk of loss, theft, or damage.
3. Access to Indian opportunities
India's growing economy and stock market present lucrative investment opportunities for NRIs. An NRI Demat account enables you to capitalise on these opportunities and diversify your investment portfolio.
4. Repatriation of funds
As an NRI, you can repatriate the proceeds from your investments (subject to RBI guidelines) to your overseas accounts. The account facilitates smooth transactions and compliance with foreign exchange regulations.
5. Tax benefits
As an NRI, you can benefit from tax advantages under the Double Taxation Avoidance Agreement (DTAA) if India has a treaty with your country of residence. Long-term capital gains (LTCG) on equities are taxed at a lower rate, making it a tax-efficient investment option.
6. No physical presence
Being an NRI, you can operate your Demat account remotely, without the need to be physically present in India. All transactions, including buying, selling, and transferring securities, will be done online. You can monitor your investments in real time through online portals or mobile apps provided by the depository participant (DP).
7. NRE/NRO accounts
Your NRI Demat account can be linked to an NRE or NRO account for seamless fund transfers and transactions. This integration makes the process of funding investments and receiving dividends or sale proceeds easier.
8. Access to IPO and Mutual Funds
You can participate in Initial Public Offerings (IPOs) and invest in mutual funds through your NRI Demat Account.
9. Nomination facility
As an NRI, you can nominate a beneficiary for your Demat account, ensuring a smooth transfer of assets in case of unforeseen circumstances.
10. Low maintenance
NRI Demat accounts typically have low maintenance fees, making them a cost-effective way to manage investments in India.
Eligibility criteria for opening an NRI Demat Account
- NRI status: You must be an NRI, a person of Indian origin (PIO), or an overseas citizen of India (OCI) as per FEMA guidelines. Your residency status should be updated with the Income Tax Department.
- Valid bank account: An NRE or NRO bank account with an authorised Indian bank is required to link with your NRI Demat account. This account will be used for all investment transactions.
- Regulatory compliance: NRIs must comply with RBI guidelines and obtain Portfolio Investment Scheme (PIS) approval if investing in equities. PIS approval is not required for Mutual Funds or IPO investments.
- Age: The applicant must be 18 years or older to open an independent Demat account. Minors can open an account with a guardian as the primary holder.
Documents required for opening an NRI Demat Account
Passport: A self-attested copy of your valid passport (including the visa page).
a. In case of Indian passport - Valid passport, Place of birth as India, Valid Visa – Work/Student/employment/resident permit etc.
b. In case of foreign passport - Valid passport and any of the following:
- Place of Birth as India in foreign passport
- Copy of PIO / OCI Card as applicable in case of PIO/OCI
PAN Card: Permanent Account Number (PAN) is mandatory for taxation purposes.
Address proof: Both Indian and overseas address proofs (utility bills, bank statements, or rental agreements) are mandatory.
Valid Overseas address proof (Officially valid document)
- Passport copy – With attested pages showing clients photo, name, address, and validity
- Driving license – With attested pages showing clients photo, name, address, and validity
- Copy of Bank statement - Not more than 2 months old from the date of application – of Overseas or India based bank
- Copy of Utility Bill - Electricity/ gas/phone/ water – not more than 2 months old from the date of application
- Copy of Foreign Government issued Identity Card.
NRE/NRO bank account details: Cancelled cheque and bank statement (recent) must be provided.
PIS approval letter: If you plan to trade in equities, you need an RBI PIS approval letter.
FATCA declaration: The Foreign Account Tax Compliance Act (FATCA) form for tax compliance should be kept ready.
A step-by-step guide to opening an NRI Demat Account
Step 1: Selecting the right bank or brokerage firm
Look for service providers that offer:
- Ease of online transactions
- Competitive brokerage fees
- Robust customer support for NRIs
- Integration with NRE/NRO accounts
Step 2: Filling out the application form
Once you have selected the bank or broker, you must fill out the Demat Account application form. Ensure that all details, including bank details, PIS approval, and residential status, are accurate.
With the right planning and a reputed service provider like Axis Bank, you can seamlessly start investing in India's growing financial market. Axis Bank offers a comprehensive NRI Investment Account, providing you with a secure and convenient way to manage your investments from anywhere in the world.
Step 3: Submission of documents
After completing the application, submit the required KYC documents along with the application form. If you are abroad, ensure your documents are notarised by an authorised entity.
Step 4: Verification and activation process
Once your documents are submitted, the bank or brokerage firm will verify your identity and compliance with SEBI and RBI regulations, conduct an in-person verification (IPV) if required and then activate your NRI Demat Account within 7-10 working days.
Conclusion
An NRI Demat Account is a very useful tool if you want to invest in India’s growing financial markets. It helps NRIs manage investments, such as stocks, mutual funds, and bonds, simply and efficiently. With an NRI Demat Account, you can easily buy, sell, and hold your investments in an electronic format, without the need for physical paperwork. This makes the process much safer and more convenient. Whether they want to grow their wealth, diversify their portfolio, or plan for the future, an NRI Demat account is an excellent option for NRIs looking to invest in India.
FAQs
Can NRIs invest in all Indian stocks through their Demat account?
No, NRIs cannot invest in all stocks. The RBI restricts foreign investments in certain stocks based on sectoral caps. You can check the RBI's list of restricted securities before making investments.
What are the tax implications for NRIs investing through a Demat account?
NRIs are subject to capital gains tax on investments. Short-term capital gains (STCG) are taxed at 15%, while long-term capital gains (LTCG) above ₹1 lakh attract 10% tax without indexation benefits. Additionally, dividend distribution tax (DDT) and tax deducted at source (TDS) may apply.
Can an NRI hold multiple Demat Accounts in India?
Yes, an NRI can hold multiple Demat Accounts but each must be linked to a different bank account (NRE or NRO). However, they cannot hold a joint Demat account with a resident Indian, except in special cases.
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