Introduction
Anyone interested in investing in the Indian stock market requires a demat account. A demat account is used for holding shares and securities in a dematerialised or electronic format. Regardless of whether you are a resident or a Non-Resident Indian (NRI), you cannot invest in the Indian stock market without a demat account.
To make the most of the lucrative investment opportunities presented by the Indian stock market, a demat account is the first step in your investment journey. In this article, you will be introduced to what an NRI demat account is and its applicable charges.
Kickstart Investments – Open NRI Demat Account
NRI Demat Account
NRIs are allowed to trade on the Indian stock market using their demat account through the Portfolio Investment Scheme (PIS). PIS is an initiative put forth by the Reserve Bank of India (RBI) that allows NRIs to invest on a repatriable or a non-repatriable basis. The basis for repatriation depends on the NRI bank account you decide to open (NRO or NRE account). Once this account is in place, you must open a PIS account with an RBI-designated bank.
After your PIS account and bank account are in place, you are required to submit additional documents to open an NRI demat account.
Brokerage Charges for an NRI Demat Account
The fee charged by a broker for executing any transaction on the stock market, such as buying or selling securities, is known as brokerage. This is collected from the client by the broker. Here are the charges:
Equity
The brokerage fee for equity delivery normally falls somewhere between 0.25% and 0.75% per trade (however, this usually varies from broker to broker).
Futures & Options (F&O)
Certain brokers permit NRIs to participate in derivatives, with fees typically based on a single lot.
Intraday Trading
According to the guidelines provided by the RBI, NRIs are not allowed to engage in intraday trading or deal in currency derivatives.
Account Maintenance Charges for an NRI Demat Account
An annual fee is charged by brokers or depository participants to maintain an NRI demat account and for the services provided known as the Account Maintenance Charge (AMC). In general, the AMC for NRI demat accounts can vary from ₹500 to ₹2,000, depending on the broker and the services provided. Some brokers may charge a one-time account setup fee as well.
Apart from demat brokerage and account maintenance charges, other charges you must be aware of are the charges for opening a demat account, sales charges, and regulatory and statutory charges.
Additional Charges
In addition to broking and asset management companies, NRIs should also take into consideration:
Repatriation
The rules for repatriation state that investments and returns are completely repatriable if they are managed using an NRE-linked Demat. Only a limited amount of repatriation is permitted for accounts that are linked to NROs.
Transaction charges
A nominal cost that is charged for each debit transaction that occurs in the Demat Account.
Goods and Services Tax (GST)
Broking and other fees are subject to the GST at the applicable rates.
Conclusion
As an NRI, if you want to foray into the Indian stock market, you will need a demat account. However, the opening and operating of a demat account for an NRI is quite different from that of a resident Indian. Before diving in, it’s important to consider the fees and charges associated with using an NRI demat account because it can eat into your returns. So, maximise your investment gains by choosing the right broker to optimise your investing strategy.
Know More - Resident to NRI Demat Account Conversion | NRI Taxation | NRE, NRO & NRI Trading Accounts | NRI Investing Guide | NRI Demat Account vs Residential Demat Account | NRI Income Tax | NRI Multiple Accounts | Mutual Fund Taxation for NRIs