The Indian share market is considered as a window of opportunity to earn profits by resident Indians and non-residential Indians (NRIs) alike. Moreover, the Reserve Bank of India (RBI) has granted NRIs the right to invest in stocks of registered Indian companies in recognised stock exchanges under PINS (Portfolio Investment Scheme).

With various financial developments, we are set to witness substantial growth in the Indian stock market, nearly three times more by 2022! So if you’re an NRI looking to invest in shares, bonds, and Initial Public Offers (IPOs), then you should open demat account online to reap the benefits.

A demat account is essential for NRIs to hold stocks, bonds, securities, debentures, and mutual funds in a safe and electronic format. Having a demat account online implies that there is no requirement for physical documents and you can operate it from anywhere in the world. A depository company (your bank with which you have your demat account) maintains it.

Let’s take a look at some facts about a demat account that every NRI should know about.

Close Existing Demat Account

The RBI has imposed a restriction on NRIs when it comes to investing in the stock market. According to the RBI norms, an NRI cannot buy or purchase equities from the market in their existing demat account. An NRI will have to first close his/her existing demat account which they opened before acquiring the NRI status.

Your old demat account would hold shares that you bought when you were a resident and you would have to transfer them to an NRO (Non-Resident Ordinary) demat account. An NRO account helps NRIs manage their income earned in India such as dividends, rent, or pension from overseas.

On the other hand, an NRE (Non-Resident External) account is a bank account wherein the NRI can deposit income earned from outside sources which can be converted from any foreign currency to INR. An NRI can purchase stocks raised through IPOs (Initial Public Offers) utilising funds in the NRE account.

Open A PINS Account

Purchasing stocks from the stock market requires an NRI to open a Portfolio Investment Scheme (PINS) account with a depository company. As per RBI standards, it is necessary to keep two different PINS accounts for repatriable and non-repatriable shares. With the PINS scheme, an NRI can purchase stocks by using money from their NRE account, and the funds will automatically be credited to the NRE account for repatriation.

However, if the NRI wants to purchase shares on a non-repatriable basis, then the funds will be credited to the NRO account. Also, if you reacquire your permanent Indian resident status, then you must close your PINS account. Based on your requirements, you can start an NRE PINS or an NRO PINS account or both of them. However, please keep in mind that you can open these PINS accounts with only one depository bank.

Documents Required For PINS Account

  • Go to a depository bank with the following documents to start a PINS account.
  • Latest passport size photographs
  • Address proof in India
  • Address proof abroad
  • Copy of PAN card
  • FEM (Foreign Exchange Management) declaration
  • Copy of passport and visa
  • Invalidated cheque leaf of NRE/NRO bank account

The document list may vary from bank to bank. If you are overseas at the time of opening your NRI demat account, then all the documents must be attested by the Indian embassy. In case you are present in India, then carry the originals and copies which are attested by the bank.

Things To Keep In Mind While Investing In The Stock Market

An NRI investor is not allowed to hold more than 10% of a registered Indian company, which is 20% in the case of public banks.

Intra-day trading and Buy Today Sell Tomorrow (BTST) is not allowed.

No settlement of investment made against purchases can be arranged. An NRI investor must perform bill-to-bill payments.

An Indian power-of-attorney resident cannot operate the NRI demat account in the absence of the NRI.

The power-of-attorney can also not make payments outside India on behalf of the NRI.

When it comes to tax deductions, the regulations are the same for NRIs as residential Indians. However, there is a difference in TDS (tax deducted at source) rules for NRIs. Tax on short-term gains is taxable at 15% while long-term gains on equity investments are zero. To invest in Indian share markets, an NRI trader must have a trading account, a bank account, and an online demat account.

To generate extraordinary wealth from the Indian share market, you must remain focused on the different aspects of your NRI demat account. Now, all you need is the right demat account and additional documents which an Indian investor also needs to start trading.