Introduction to Demat Accounts and Their Different Types
It is necessary to understand what a Demat account is and what it comprises before selecting the appropriate sort of Demat account. A Demat account, also known as a Dematerialised account, is a type of account that keeps track of how many shares and securities an investor has. The Securities and Exchange Board of India (SEBI) requires that all share transactions be done through a Demat account. The account holder manages his or her Demat account through a Depository participant. There are certain modest fees associated with a Demat account, such as a Demat opening fee, an Annual Maintenance Charge (AMC), a custodian fee, and a transaction fee.
Demat accounts are divided into three categories. Demat accounts are available to both Indian residents and non-resident Indians (NRIs). Investors can select an appropriate Demat account based on their residential status.
Regular Demat Account
Regular Demat accounts are only offered to investors who live in India. The Regular Demat account is designed for individuals who trade stocks on their own. Regular Demat accounts enable investors to make rapid stock transactions. Investors can transfer their shares for free from their Regular Demat account to other institutions. The Regular Demat account stores all shared records in the form of electronic copies. All banks and discount brokers provide regular Demat accounts. Discount brokers provide a free Regular Demat account with no AMC.
What is a Repatriable Demat Account?
NRIs can choose between two types of Demat accounts: repatriable and non-repatriable. NRIs who choose to open a Repatriable Demat account must follow the Foreign Exchange Management Act’s rules. NRIs can use their Repatriable Demat account to send money back home. Repatriable Demat account holders, on the other hand, are required to link their NRE (Non-Resident External) Account with their Demat account, unlike Regular Demat account holders. All banks and discount brokers provide repatriable Demat accounts. The monies’ repatriation is contingent on both nations’ laws, as well as the fact that neither country’s governments intend to impede the funds’ transfer for that specific person.
Non-Repatriable Demat Account
The second Demat account option available to NRIs is the Non-Repatriable Demat account. The Non-Repatriable Demat account does not allow NRIs to move funds outside of India. For effective operation, investors with a Non-Repatriable Demat account must link their NRO (Non-Resident Ordinary) savings account with the Demat account. Investors holding Regular Demat accounts can shift to the Non-Repatriable Demat account type after leaving India without losing their shares, or they can start a new account entirely.
An ordinary Demat account with the sub-status ‘NRI Repatriable’ is an NRI repatriable Demat account. For NRIs to invest their overseas earnings in the Indian stock market, they must have a repatriable account.
The term “NRI Repatriable Account” refers to a bank account that can be used by
NRIs have two sorts of bank accounts: NRE (Non-Resident External) and NRO (Non-Resident Internal) (Non-Resident Ordinary). To manage your foreign earnings, you can open an NRE account. This account’s funds are fully repatriable, meaning they can be transferred anywhere in the world.
The following are the key features of an NRI repatriable Demat account:
-An NRE bank account must be connected to an NRI repatriable Demat account.
-This account is also known as a repatriable Demat account or an NRE Demat account.
-All earnings from the sale of securities and investment profits can be transferred to another country.
-NRIs must open 2 distinct Demat accounts for non-repatriable and repatriable investments.
Most Commonly Asked Questions
1. What is the distinction between a non-repatriable and a repatriable demat account?
NRI demat accounts linked to NRO bank accounts are known as non-repatriable demat accounts. It is prohibited to transfer funds from this account to a foreign country. The dividend and interest earned are fully repatriable under RBI guidelines, but the deposit is not. An NRI can make a one-million-dollar profit per year.
2. When a resident becomes an NRI, what happens to their demat account?
After you become an NRI, you have the following options:
-Convert your resident demat account to an NRO account. All of your assets will be transferred to the new account as a result of this action. These shares can be sold without being repatriated.
-You could send them to an Indian relative and close the resident demat account.
-You can keep them in your resident India account on a non-repatriable basis.
-Please contact your stockbroker for more details.
3. How may an NRI sell shares in their home country’s demat account?
NRIs can sell their existing shares held in a resident demat account on a non-repatriable basis. Here are some possibilities for dealing with these shares:
-Open an NRO bank account, demat account, and trading account. The holdings in your resident demat account will be transferred to the new account. You have the choice of keeping or selling them in the new account. This sale’s funds will not be refunded.
-Transfer the shares to your family in India.
-You can maintain the shares in your existing demat account if you don’t plan to sell them anytime soon.
-Contact your existing broker’s NRI unit for assistance with the changeover.
-Choose another broker who will allow you to transfer your shares offline if your current broker does not provide an NRI account.
4. Is it required to have a PIS account to open an NRO Demat account?
An NRO Demat account is linked to a Non-PIS NRO Bank Account. You do not need PIS approval to open an NRO Demat Account. An NRO Demat Account’s principle is non-repatriable. The interest and dividends are reimbursable. An NRO Demat Account is linked to an NRO Bank Account (Non-PIS). Transactions in an NRO Bank Account are not reported to the RBI.
5. Is it possible to open a joint trading account in India for an NRI?
No, an NRI cannot open a joint trading account in India. Only one individual should open a trading account, and that person should be accountable for all transaction monitoring. Both a Demat and a bank account can be opened concurrently by an NRI. Some banks enable joint account holders to open PIS bank accounts, while others prohibit NRIs from doing so.