How NRIs Can Open and Manage a Demat Account

For Non-Resident Indians (NRIs), managing investments in the Indian stock market requires a dedicated structure due to their residential status outside India. A Demat account specifically designed for NRIs allows them to hold, trade, and manage Indian securities in a streamlined, paperless manner while staying compliant with applicable regulations.

 

This guide outlines how NRIs can open and operate a Demat account in India, along with the regulatory requirements they need to follow.

Opening an NRI demat account is the first step to investing in the Indian stock market, if you live overseas. Opening a secure trading account to hold and manage your investments is a good decision for you to maintain your finances. 

This type of account allows NRIs to transfer both the principal and capital gains from investments back to their country of residence. It is typically used when the NRI wishes to repatriate earnings abroad.

The following are some of the key features of a repatriable demat account:

• Must be linked to a Non-Resident External (NRE) bank account.
  

• Permits transfer of sale proceeds and dividends outside India.
  

• Requires adherence to FEMA (Foreign Exchange Management Act) rules on repatriation.
  

• Suitable for NRIs planning to move funds internationally.

   

Repatriation from NRO-linked Demat accounts is subject to RBI limits, currently capped at USD 1 million per financial year, and requires a Chartered Accountant’s certificate confirming tax compliance. This ensures that funds transferred abroad meet regulatory and tax obligations.

This account is meant for NRIs who intend to invest in Indian markets without transferring the funds abroad.

The following are some of the key features of a non-repatriable demat account:

• Must be linked to a Non-Resident Ordinary (NRO) bank account.
  

• Earnings from investments can be used or retained within India.
  

• Repatriation of funds is allowed only up to a specified limit, subject to applicable RBI regulations.
  

• Suitable for NRIs who wish to keep their funds within India or use them for local expenses.
  

NRI investment activities in India are governed by the guidelines under the Foreign Exchange Management Act (FEMA). These regulations ensure that foreign investments in Indian securities are properly monitored and controlled.

 

NRIs must obtain PIS (Portfolio Investment Scheme) permission for trading in listed equity shares on recognised Indian stock exchanges. However, investments in mutual funds, bonds, and non-convertible debentures (NCDs) do not require PIS approval.

 

Key regulatory requirements include:

• Compliance with FEMA norms for all fund transfers and investments.
  

• PIS approval for trading in listed equity shares on recognised Indian stock exchanges.
  

• Use of separate bank accounts for NRE and NRO-linked Demat accounts to avoid fund mixing.
  

• Reporting of investments to authorised banks and the RBI through the designated DP and broker.

To open a Demat account as an NRI, follow these key steps in sequence:

 

Step 1: Choose a Depository Participant (DP)

NRIs must select a SEBI-registered DP that offers NRI account services. Many DPs support online as well as offline account opening processes.

Step 2: Open NRE or NRO Bank Account

Depending on the repatriation requirement, the NRI must open either an NRE or NRO savings account with an RBI-authorised bank.

Step 3: Obtain PIS Permission

Approach the authorised dealer bank to get the PIS permission letter. This is required for equity trading on Indian stock exchanges.

Step 4: Submit Application with Documents

You must fill the Demat account opening form and submit it along with required documents to the DP. Physical or digital verification may be required based on the mode chosen.

 

Note: Some Depository Participants (DPs) may require in-person verification (IPV) or notarised documents attested by the Indian Embassy or authorised notary, depending on jurisdiction and DP policies. This can affect the account opening timeline.

The list of documents may vary slightly based on the DP, but typically includes:

• Copy of valid passport
  

• Copy of valid visa or work/residence permit
  

• Overseas address proof (e.g., utility bill, bank statement)
  

• Indian address proof (if available)
  

• PAN card
  

• Recent passport-sized photographs
  

• FEMA declaration
  

• PIS permission letter

   

Some DPs may request in-person verification (IPV) or a notarised set of documents attested by the Indian Embassy or authorised notary.

Once the account is set up, NRIs can trade in Indian securities via their DP and linked bank account. Here are key points to keep in mind:

Trading and Transactions

• All equity transactions must go through the PIS route
  

• Mutual funds, bonds, and NCDs do not require PIS permission
  

• Proceeds from sales are credited to the linked NRE/NRO account
  

Investment Limits

• Investments must comply with RBI-prescribed limits on ownership in Indian companies
  

• Intraday trading is not permitted for NRIs
  

Tax Implications

• Capital gains tax applies on securities transactions
  

• Tax deducted at source (TDS) may be applicable
  

• NRIs must file returns in India if they earn taxable income through investments

   

Note: NRIs are subject to capital gains tax on securities transactions, and tax is deducted at source (TDS) as per Indian tax laws. NRIs earning taxable income from investments must file income tax returns in India to claim refunds or comply with tax regulations.

Most DPs now offer online portals and mobile apps to access and manage the NRI Demat account. Account holders can:

• View holdings
  

• Place buy/sell orders
  

• Track transaction history
  

• Download account statements
  
  

Offline support is also available through email or physical forms for certain actions like closure or nominee changes.

Opening a Demat account for NRIs in India involves following specific procedures aligned with regulatory norms. With the right documentation and banking setup, NRIs can effectively manage Indian securities from abroad. The process is streamlined by most Depository Participants to support remote access and online operation.

This content is for educational purpose only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.