Introduction

If you are a Non-Residential Indian (NRI) and want to invest in the Indian stock market, the Foreign Exchange Management Act (FEMA) made provisions to do so with an NRI demat account. You can invest in bonds, shares, and debentures through the NRI demat account.

If you want to know how an NRI demat works and how you can invest in the Indian stock market, then you are in the right place.

What is a Demat Account?

A demat account works like a digital locker that can be used to hold and trade your share certificates. As per SEBI regulations, you can no longer use share certificates in their physical form in India. A demat account (Dematerialised Account) is the only means to hold or trade shares in their electronic form. Once you get a demat account, you can trade in bonds, stocks, mutual funds, and ETFs.

NRI Demat Account

If you want to continue investing in India after you become an NRI, you will need to close your current resident demat account and register a new NRI demat account under the Portfolio Investment Scheme (PINS).

There are two kinds of NRI demat accounts, and both are jointly regulated by RBI, SEBI, and FEMA.

NRE demat accounts

A Non-Residential External (NRE) demat account can be used to invest your income from foreign sources. The income from this trade is repatriable, which means you can legally take this money back to your new home country.

NRO demat accounts

A Non-Residential Ordinary (NRO) demat account can be used to invest your money from Indian sources. The income from this trade is non-repatriable, which means you cannot convert this income into foreign currency. It also cannot be transferred to your overseas bank account and will be held in your NRO demat account or transferred to your NRO savings bank account.

However, per RBI guidelines, you can remit up to USD one million in a fiscal year (only for principal and interest earned) and need to pay TDS.

Benefits of an NRI Demat Account

The NRI demat account allows you, as an overseas citizen, to become a part of the Indian stock market growth story. Here are some of its benefits:

• Allows NRIs to invest in Indian stocks and mutual funds.

• Compliant to Indian investment laws (FEMA, SEBI, RBI).

• Full repatriation benefits through NRE accounts.

• Tax deductions at source (TDS) make it easier to follow the rules.

Is the Income Taxable?

Yes, your income from shares, dividends, and capital gains held in an NRI Demat account is taxable in India. TDS is deducted at current rates, and further tax filing may be required depending on your income bracket.

Difference Between Regular and NRI Demat

Documents Needed

If you hold an Indian passport, you need your passport and a valid visa from your current home country.

If you are a foreign passport holder, you need a valid passport and a copy of your PIO/OCI card or have India mentioned as your place of birth on your new foreign passport.

Along with that, you need the following documents:

• PAN Card copy

• Passport size photographs

• Copy of Passport

• Copy of OCI Card/PIO Card

• Copy of Overseas Address Proof

• Copy of Indian Address Proof

• 1 Cancelled cheque of the NRI (NRE/NRO) savings account

• Copy of PIS (Portfolio Investment Scheme) letter issued by the bank

Conclusion

An NRI Demat account is a great tool for overseas citizens to invest in India. It serves as a secure, electronic repository for stocks, streamlining the investment process and making holding and trading your assets safer and more convenient.

Learn 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