EN
A non-repatriable Demat account is a special type of Demat account for Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs). It is used to hold and invest in Indian securities using income earned in India through a linked Non-Resident Ordinary (NRO) account.
Unlike repatriable accounts, funds invested through a non-repatriable Demat account cannot be freely transferred abroad. These accounts are governed by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA).
Key Takeaways
- A non-repatriable Demat account is linked to an NRO bank account
- It is used for investing India-sourced income in Indian securities
- Overseas transfer of funds is restricted under FEMA rules
- NRIs, PIOs, and OCIs are eligible to open the account
- The account can hold shares, mutual funds, bonds, and ETFs
- Separate Demat accounts are required for repatriable and non-repatriable investments
What Is a Non-Repatriable Demat Account?
A non-repatriable Demat account is an NRI Demat account used to hold investments made from income earned in India. The account is connected to an NRO account, where investment proceeds, dividends, and other earnings are credited.
Under FEMA regulations, these funds cannot be freely repatriated (i.e., transferred or sent back to an individual’s home country from India) outside India. However, RBI rules allow NRIs to repatriate up to USD 1 million per financial year from NRO accounts, subject to taxes and documentation requirements.
What Does Non-Repatriable Mean?
Non-repatriable means the invested funds and returns are generally meant to remain within India. Any transfer of money abroad is restricted and must comply with RBI and FEMA regulations.
This structure is commonly used for Indian income such as:
- Rental income
- Pension income
- Dividend income
- Interest income
- Property sale proceeds
How Does a Non-Repatriable Demat Account Work?
The investment process typically works as follows:
- Funds are transferred from the linked NRO account.
- Securities are credited electronically to the Demat account.
- Dividends are credited by RTA, and sale proceeds by the broker are deposited into the NRO account post Tax deduction.
- Repatriation, if required, must comply with FEMA and RBI regulations.
Who Can Open a Non-Repatriable Demat Account?
The following individuals can open this account:
- Non-Resident Indians (NRIs)
- Persons of Indian Origin (PIOs)
- Overseas Citizens of India (OCIs)
The account must be opened through a Depository Participant (DP) registered with either National Securities Depository Limited or Central Depository Services Limited.
Features of a Non-Repatriable Demat Account
1. Linked to an NRO Account
The Demat account is linked to an NRO savings account. All investment-related transactions are routed through this account.
2. Used for Indian Investments
Investors can hold multiple Indian securities, including:
- Equity shares
- Mutual funds
- Bonds
- Government securities
- Exchange-Traded Funds (ETFs)
3. Separate Account Requirement
NRIs must maintain separate Demat accounts for repatriable and non-repatriable investments. Mixing the two categories is not permitted under FEMA rules.
4. Restricted Overseas Transfer
Funds invested through this account generally remain in India unless repatriation is specifically allowed under RBI regulations.
Documents Required to Open a Non-Repatriable Demat Account
- PAN
- Passport (Arrival page, front page, Back page)
- Visa/Residence permit
- Overseas address proof – Passport, Driving License, Utility bill (Electricity bill / gas bill/ water bill – Not more than 3 months old), Original bank statement along with BVL (Bank Verification Letter)
- Indian address proof – Passport, Voter’s ID, Utility bill (Not more than 3 months old), Driving license, original bank statement along with BVL (Bank Verification Letter), Valid Leave and license agreement/ Purchase agreement
- Saving Bank proof
- PIS approval letter (wherever applicable)
- OCI or PIO card copy (where applicable)
Taxation on Non-Repatriable Investments
Income earned from investments in a non-repatriable Demat account may attract:
- Capital gains tax
- Dividend taxation
NRIs may also claim benefits under Double Taxation Avoidance Agreements (DTAAs), depending on their country of residence and applicable tax treaty provisions.
Benefits of a Non-Repatriable Demat Account
1. Suitable for India-Sourced Income
It enables NRIs to invest income earned within India without converting it into foreign currency.
2. Access to Indian Markets
The account allows participation in India’s equity and debt markets while remaining compliant with FEMA regulations.
3. Secure Electronic Holding
Like a regular Demat account, it provides electronic storage of securities and reduces risks related to physical certificates.
4. Easier Management of Domestic Investments
It helps NRIs separately manage investments made using Indian income, making compliance and tracking more organised.
Read more about:
Can a Resident Demat Account Be Converted?
Yes, when a resident Indian becomes an NRI, the existing resident Demat account must be redesignated as an NRI-NRO account under FEMA regulations.
Difference Between Repatriable and Non-Repatriable Demat Accounts
| Feature | Repatriable Demat Account | Non-Repatriable Demat Account |
| Linked bank account | NRE account | NRO account |
| Fund transfer abroad | Freely allowed | Restricted to USD 1million per year |
| Source of funds | Foreign income | Indian income |
| Investment purpose | Overseas fund movement | Domestic income investment |
| Repatriation rules | Easier | Subject to FEMA conditions |
Conclusion
A non-repatriable Demat account allows NRIs to invest India-sourced income in Indian financial markets while complying with RBI and FEMA rules. Linked to an NRO account, it supports investments in equities, mutual funds, bonds, and other securities, although overseas fund transfers remain restricted compared to repatriable accounts.
