How Are NRE and NRO Demat Accounts Taxed? | Motilal Oswal

How are NRE and NRO Demat Accounts Taxed

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Today, to open a demat account, you do not require much effort or paperwork. You can simply do the same online. Indians living outside the country are also entitled to have Demat accounts although the taxation policies governing them aren’t necessarily the same.

  • Who Classifies as an NRI?

Non-Resident Indians (or NRIs) can be defined as Indian citizens who live in India for less than one hundred- and eighty-two days during a given financial year. Their reasons for living abroad may range from employment to education. NRIs are those individuals who remain outside the country for varied purposes and don’t necessarily have a clear time frame for when they plan on returning to India.

  • What are NRE and NRO Demat Accounts?

NRIs are required to inform their banks prior to leaving the country such that their existing savings and fixed deposits bank accounts be converted into non-resident ordinary accounts and so that they reflect their change in residential status.

Similarly, resident Demat accounts are required to be replaced by new non-resident Demat accounts (NR Demat), and securities are transferred to the same. Should NRIs choose to sell the securities in this NR Demat account, they are entitled to transfer the sales proceeds to their non-resident ordinary (or NRO) account.

  • Taxation Processes in Place for NRE and NRO Demat Accounts:

Taxations are applicable to both residential and non-residential Demat account holders if they derive an income from investments in their Demat account in the form of dividends or capital gains secured as a result of selling or transferring shares.

Taxability applicable to NRO Demat accounts is no different from that of NRE Demat accounts.

That being said, income derived from an interest in an NRE account is exempt from being taxed in India provided the account holder is of course an NRI.

Demat account opening
has never been simpler and can allow for easy trading and investing. By creating an account, you can experience the world of stock markets. It is important to do due diligence prior to making any buy, sell or hold decisions pertaining to securities  you might have your eye on. This preliminary research can reduce the potential of your incurring any risks and / or losses and can potentially allow you to accrue greater returns. Understanding prevailing taxation norms pertaining to income generated via Demat accounts - including NRE and NRO accounts is crucial as it can prevent any confusion from arising in the future.

Related Articles: What is the Difference Between NRI Demat Account and Resident Demat Account | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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