NRI can invest in the Indian stock market by purchasing shares through the PIS on a repatriation and non-repatriation basis. In addition, the RBI’s PIS plan allows NRIs to purchase shares or convertible debentures from the stock exchange using a bank account at a nominated branch. The PIS plan is not necessary for NROs, according to the latest guidelines, because they will be recognized as investments by residents.
Can An Nri Hold A Demat Account?
Yes, NRIs can open a Demat account in India to trade in stocks. However, if an NRI wants to open a Demat account, they must adhere to FEMA regulations (Foreign Exchange Management Act). Both repatriable and non-repatriable Demat accounts are available to NRIs.
According to RBI, an NRI can only own up to 5% of a company’s paid-up capital in India.
- Using NRE Demat, you can invest in IPOs on a repatriable basis.
- The NRO Demat account is required to invest on a non-repatriable basis.
Assume, however, that an individual had a Demat account before obtaining NRI status. In such a case, they can convert it to an NRO account and trade after they leave the country, or they can start a new account. The existing brokerage company will also transfer the previously owned shares to the new NRO holding account.
Types of NRI Demat Account
NRI Demat Accounts are held by NRIs, PIOs, and OCIs. This account can also be used to invest in ETFs, mutual funds, and convertible debentures.
There Are Two Types Of NRI Demat Accounts:
- NRE Demat Account
To manage income earned abroad, an NRE bank account is required for an NRE Demat account. So, the money is entirely repatriable, which means it can be moved abroad.
- NRO Demat Account
An NRO bank account is required for an NRO Demat account. To manage funds earned in India, an NRO account is opened. It is permissible to move up to $1 million of funds abroad in a fiscal year, according to RBI guidelines. After TDS is deducted, the interest earned on this account is remittable.
Overall, NRIs must open two distinct Demat accounts for repatriable and non-repatriable investments, according to RBI regulations.
NRI Demat Account Opening Process
An NRI can open a Demat and trading account with stockbrokers, or a bank that is registered with NSDL and CDSL.
To begin, the NRI has to choose between a “repatriable Demat account” and a “non-repatriable Demat account” based on their preference. They have the option of opening a Demat account online or offline.
The Following Are The Steps To Open A Demat Account –
- Download and complete the Demat account registration form.
- The subsequent step is to attach all of the necessary paperwork. The Indian embassy or any other competent authority must self-attest and notarize the documents.
- Submit the completed form to the participant of the individual’s choice.
NRIs need to have the following items before opening a Demat and trading account:
- The applicant’s PAN card
- The applicant’s NRI bank account (NRE or NRO)
- The NRI applicant’s PIS letter of approval issued directly by the Reserve Bank of India
Is It Necessary for Me to Obtain RBI Approval Before Opening A Demat Account?
A PIS authorization letter from the RBI is required for an NRI to invest and trade in the stock market in India on a repatriation basis. The PIS letter allows NRIs to buy and sell stocks on the Indian stock exchange. The NRE bank account is used for all of these transactions. In addition, the bank where you have your NRI account will assist you in obtaining this permission.
If you plan to invest on a non-repatriation basis, on the other hand, you won’t need an RBI PIS permission. You’ll only need an NRO account linked to a Demat and trading account in this situation.