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

Non-Resident Indians (NRIs) can invest in the Indian stock market by opening a dedicated NRI demat account, which enables them to hold and manage securities in electronic form from anywhere in the world. This account is linked to either an NRE or NRO bank account, depending on whether the funds are repatriable or non-repatriable.

An NRI demat account ensures secure and regulated access to the Indian stock market, helping investors manage and monitor their portfolios conveniently while staying compliant with SEBI and RBI guidelines.

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.

A non-repatriable demat account is designed for NRIs who wish to invest in Indian markets while keeping their funds within India, without transferring them abroad. It allows investors to hold Indian securities while managing income and transactions locally.

Key Features:

• Linked Bank Account: Must be connected to a Non-Resident Ordinary (NRO) account.
  

• Fund Retention: Earnings from dividends, interest, or capital gains are credited to the NRO account and remain within India.
  

• Repatriation Rules: Funds cannot be freely transferred abroad, except within limits permitted by the Reserve Bank of India (RBI).
  

• Investment Scope: Enables investment in shares, mutual funds, and other permitted securities through Indian exchanges.
  

• Purpose: Suitable for NRIs seeking to manage Indian income sources or maintain local financial commitments.

This account type allows NRIs to invest in Indian markets while keeping funds local, providing flexibility for domestic financial planning without full repatriation.

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 are required to invest through the RBI-regulated NRI Investment (formerly PIS) route for trading in listed Indian equities. Some banks may still refer to this as a PIS account. 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.

NRIs can open a joint demat account in India, subject to specific conditions outlined by SEBI and the depositories (NSDL or CDSL). The rules ensure transparency and proper classification of ownership for regulatory compliance.

Key Points to Note:

• Joint Account Holders: A demat account can have up to three holders, but the primary holder must be an NRI.
  

• Eligibility of Joint Holders: A resident Indian can be a joint holder only in an NRO-linked (non-repatriable) demat account. NRE-linked (repatriable) demat accounts can have joint holders only if all holders are NRIs.
  

• Type of Account: The joint demat account must be of the same category — either Repatriable (linked to an NRE account) or Non-Repatriable (linked to an NRO account).
  

• Operational Authority: All transactions, including buying or selling securities, can only be initiated by the primary account holder.
  

• Documentation: Each joint holder must submit KYC documents, proof of identity, and address as required by SEBI guidelines.

Opening a joint demat account allows NRIs to manage investments collaboratively with family members or trusted individuals, while adhering to all SEBI and RBI regulations.

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.

To open and maintain a Demat account as a Non-Resident Indian (NRI), specific procedures and compliance measures are required. These include managing trades, adhering to investment limits, and understanding tax obligations. The exact requirements may vary depending on the Depository Participant (DP).

Trading and Transactions

• All equity transactions must be routed through the Portfolio Investment Scheme (PIS) as per RBI regulations.
  

• Investments in mutual funds, bonds, and non-convertible debentures (NCDs) do not require PIS approval.
  

• Sale proceeds and dividends are credited directly to the linked NRE or NRO bank account.
  

• NRIs must ensure that all transactions comply with FEMA and SEBI guidelines.

Investment Limits

• NRI investments must adhere to RBI’s prescribed shareholding limits in Indian companies.
  

• Intraday trading or speculative transactions are not permitted under NRI investment rules.
  

• Investments can be made in listed shares, mutual funds, and eligible debt instruments as per current RBI and SEBI norms.

Tax Implications

• Capital gains tax applies to profits earned from the sale of securities.
  

• Tax Deducted at Source (TDS) is applicable on gains and dividend income as per Indian tax laws.
  

• NRIs are required to file income tax returns in India if they earn taxable income through investments.
  

• Double Taxation Avoidance Agreements (DTAA) may offer relief, depending on the investor’s country of residence.

Online and Offline Access

Most Depository Participants provide online portals and mobile applications to help NRIs manage their demat accounts efficiently.

Online Access Includes:

• Viewing holdings and transaction history
  

• Placing buy or sell orders
  

• Downloading account statements

Offline Access Includes:

• Support through email or physical forms for requests such as account modification, nominee updates, or closure.

Ensuring all necessary compliance steps are followed and documents remain updated helps streamline NRI demat account management and maintain adherence to SEBI and RBI regulations.

Opening a Demat account for NRIs in India involves following specific procedures aligned with regulatory norms. With appropriate documentation and banking arrangements, NRIs can open and operate demat accounts in compliance with applicable regulations. The process is streamlined by most Depository Participants to support remote access and online operation.

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.