Non-Repatriable Demat Account

A non-repatriable demat account is a dematerialised account used by Non-Resident Indians (NRIs) to invest in Indian securities, using funds sourced within India. The defining feature of this account is its limitation on repatriation—the transfer of funds abroad. It is an essential structure for NRIs who earn income in India through rent, dividends, pensions, or other local revenue and wish to invest this income in Indian capital markets.

The account is directly linked to an NRO (Non-Resident Ordinary) bank account and is regulated by guidelines issued by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). In this guide, we provide a comprehensive explanation of its features, operations, charges, regulatory obligations, and differences from repatriable accounts.

A non-repatriable demat account is a type of dematerialised investment account that enables NRIs to invest in India using funds that are not eligible for remittance outside the country. These funds typically come from Indian income sources such as rent from property, pension, dividends, or business earnings.

This account allows the NRI to purchase and hold financial securities in electronic form, including stocks, mutual funds, non-convertible debentures (NCDs), and IPO allocations. However, any gains or principal from such investments cannot be freely transferred abroad, making it suitable for those who plan to use the funds within India.

Eligibility Criteria:

The following criteria must be met for opening a non-repatriable demat account:

• Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) as defined under the Foreign Exchange Management Act (FEMA).
  

• Applicants must maintain an NRO bank account in India.
  

• Must possess a Permanent Account Number (PAN) issued by the Indian Income Tax Department.
  

• KYC documentation must include a valid passport, visa/residency proof, and overseas address verification.
  

Joint accounts may be opened only with another NRI, and not with a resident Indian. A nominee can be added, including a resident Indian.

A non-repatriable demat account operates in sync with several linked components:

1. NRO Account Linkage: The demat account must be linked to a valid NRO account, which holds the applicant's Indian income.

2. Trading Account Setup: The NRI must also open a trading account with a SEBI-registered broker to facilitate buying and selling of securities.

3. Depository Participation: Securities are held with a Depository Participant (DP) registered with NSDL or CDSL.

4. Investment Source: Only funds from within India (i.e., Indian-sourced income) are permitted for investment through this account.

5. No Repatriation: Earnings from investments—capital gains, dividends, bonuses—are credited to the NRO account and cannot be freely remitted abroad.

In specific cases, NRIs may be permitted to remit up to USD 1 Million per financial year after obtaining proper certification and clearance from a Chartered Accountant (Form 15CA/CB).

This type of demat account comes with several operational and compliance-linked characteristics:

• NRO Bank Account Dependent: Transactions are funded exclusively via NRO balances.
  

• No Repatriation by Default: The funds and returns are not eligible for foreign remittance except under specific RBI provisions.
  

• Simplified Regulatory Process: No requirement for RBI Portfolio Investment Scheme (PIS) approval for many instruments like mutual funds or NCDs.
  

• Diverse Investment Scope: Enables participation in equities, IPOs, debt instruments, and mutual funds.
  

• SEBI Oversight: Investments through this account must comply with SEBI rules and disclosure mandates.
  

• Tax Compliance: All earnings are subject to Tax Deducted at Source (TDS) as per the Indian Income Tax Act.

The following are the steps involved when opening a demat account:

1. Open an NRO bank account with an authorised Indian bank.

2. Select a SEBI-registered stockbroker or investment platform.

3. Fill out account opening forms for demat and trading accounts.

4. Submit required KYC documentation:

• PAN Card
• Passport and visa/residency permit
• Overseas address proof
• Recent photographs
• NRO bank account proof
  

5. In-person verification or video KYC may be required.

6. Account activation within 7–10 working days after successful compliance checks.

Different service providers may have varied fee structures. Typical charges include:

Note: Charges may differ based on service provider policies and nature of trades.

Below is a comparison of key features for repatriable vs non-repatriable demat accounts:

Selecting the appropriate account type depends on your residency status, investment goals, and whether you wish to repatriate funds overseas.

RBI’s Master Directions provide the regulatory basis for non-repatriable accounts:

• No PIS route is needed for mutual funds, IPOs, and NCDs under the non-repatriable category.
  

• For listed equities purchased on a non-repatriation basis, sale proceeds stay in India.
  

• NRIs may remit up to USD 1 Million per financial year from their NRO account post-tax, subject to:
  

  • Form 15CA (declaration)
    

  • Form 15CB (chartered accountant’s certificate)
    

Formula for Repatriable Limit:
Maximum Remittance = USD 1,000,000 – (TDS + Other Deductions)

This account is ideal for NRIs in the following scenarios:

• Rental Income Management: For NRIs earning rental income from property in India.
  

• Reinvesting Domestic Dividends: When existing Indian assets yield earnings.
  

• Business Income Holding: Where profits from Indian operations are to be retained and invested.
  

• Retired NRIs: Who receive Indian pensions and want to invest locally.
  

• Low-Risk Allocation: Ideal for fixed income investments in India like NCDs.
  

Upon becoming an NRI, individuals are legally required to close or convert their resident demat account into an NRO demat account.

Failure to do so could lead to compliance issues under FEMA. The process involves:

1. Informing the existing Depository Participant.

2. Closing the resident demat account.

3. Opening a new non-repatriable demat account linked to an NRO bank account.

4. Transferring eligible securities.

While useful, non-repatriable demat accounts come with a few constraints:

• No unrestricted fund transfer abroad.
  

• Limited liquidity for global wealth planning.
  

• Taxation and filing obligations in India.
  

• RBI's repatriation window of USD 1 Million/year applies only with documentation.

A non-repatriable demat account offers NRIs a way to manage their Indian income and reinvest it in compliant, regulated avenues. While it does not offer the flexibility of moving funds abroad, it supports diverse domestic investment options for NRIs who maintain financial ties with India. Being aware of the taxation rules, limitations on repatriation, and documentation required ensures a smooth investment journey within India.

This content is for educational purposes 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.

• RBI Master Direction on NRIs
  

• NSDL FAQs for NRIs
  

• SEBI Guidelines for NRI Investments
  

• Income Tax Department of India