India, in recent years, has become one of the favorable investment destinations globally because of its fast-growing economy. NRIs now have started taking an added interest in investing in Indian markets, But for that, even NRIs require a Demat account. This allows them to trade in Equity Stocks, Bonds, IPOs, Mutual Funds, and more.
Who is a Non-Residential Indian (NRI)?
As defined in the Foreign Exchange Management (FEMA) Act, NRI is a person residing outside of India who is either a citizen of India or a person of Indian Origin (PIO)
If we go by the taxation rules, an NRI is a person who is not covered by the following conditions.
- They are in India for more than a period of 182 days during that financial year.
- They are in India for about 60 days or more in the previous year and 365 days or more during four years immediately proceeding the last year.
How to open a Demat account for NRIs?
NRIs can access NRI Demat accounts through NRE and NRO accounts. NRE accounts are analogous to basic savings accounts.
An NRI can open a Demat account and a trading account with the depository participant, a stock market broker, or even a bank registered with a depository such as NSDL & CDSL.
First, the NRI will have to select the account type they want to open as ‘repatriable Demat account’ or ‘non-repatriable Demat account’. The account can be opened either online or offline.
The Offline Process
- To open the account offline, The NRI needs to be in India. Then they can easily visit the nearest branch of their broker and fill out an account opening form.
- They will also have to submit their official KYC documents along with the form.
- After the due verification along with the originals, the broker will open the account.
- If their broker has a branch abroad, they can submit their completed account opening form and the documents to their nearest branch.
The Online Process
- The NRI will have to place a request to open an account on their broker’s website.
- Post that, a representative will get in touch with them along with an account opening form.
- The NRIs will have to get the documents attested from their Local bank or through the Indian Embassy in the country of their residence.
- The Broker or DPs representative will get the documents and form picked up through a courier, then the request will be processed in India, and the Demat account will be opened.
Types of NRI Demat Account
NRI Demat account is owned by NRI, PIO (Person of Indian Origin), and OCI(Overseas Citizen Of India) cardholders. The basics are similar to a domestic/resident Demat account, where the account opening process, transactions, and charges are identical.
There are two types of NRI Demat Accounts.
1> NRE Demat Account
NRE Demat account requires an NRE bank account. The individual opening this account has to manage funds earned abroad and thus making it fully repatriable, i.e. money can be easily transferred abroad. This account is also known as the repatriable Demat account. The entire amount from the sale of assets can be transferred abroad without hassle.
2> NRO Demat Account
For this, an NRO bank account is required. An individual would open an NRO account to manage funds earned in India, thus making it repatriable. This account is also known as Non- repatriable Demat account. In this account, the entire amount can not be transferred abroad. The principal amount of the investment is repatriable after due taxation. RBI only allows a transfer of up to $1 million in a single Financial Year. The interest earned is repatriable after TDS deductions.
Benefits of Demat account for NRIs
There are certain benefits to the NRI Demat accounts:
- Through the Demat, an NRI can invest in Indian Stock markets from around the globe, and the transactions are reflected instantaneously in their Demat account.
- This considerably reduces the physical documentation process.
- The transactions happen swiftly and efficiently.
- They carry a minimum risk of forgery, loss of documents, etc.
- Allows investors to invest in various instruments such as shares, bonds, debentures etc.
The Indian markets are ripe for NRIs to leverage the fast growth into solid returns. Indian markets have welcomed NRIs to invest via the simple process of opening a Demat. NRIs can easily open a Demat account based on their requirements of the type of account.
Q. Can NRI open a joint NRI Demat account?
Yes, NRIs can open a joint Demat account to trade efficiently in the equity segment, but the PIS account, demat account and even the trading account will be in the first account holder’s name. The second account holder should also be an NRI. They should also have submitted their required documents along with FEMA and FATCA declarations. They can only trade in securities once the KYC is done.
Q. How many Demat accounts NRI can open?
NRIs can hold multiple Demat accounts based on their requirements, one for repatriable income and another for non-repatriable as and when required.
Q. Can NRI open a normal Demat account?
NRIs can only open the NRI Demat account based on their requirements as repatriable or non-repatriable.
Q.Is intraday trading allowed for NRI?
NRIs are not allowed to do intraday trading or even trade in the commodity (MCX) and currency derivative segments (CDS)