Difference Between NRI Demat Account and Normal Demat Account

Difference Between NRI Demat Account and Normal Demat Account

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In Indian stock markets, both residents and non-resident Indians can trade securities. NRI Demat accounts are Demat accounts for non-resident Indians. Whereas customers who live in India can open a regular or normal Demat account. An NRI Demat account is required by the Foreign Exchange Management (FEMA) for non-resident Indians. The Foreign Exchange Management Act (FEMA) governs all foreign currency transactions in India. In this article, let’s understand the difference between NRI Demat account and a normal Demat account.

What is meant by an NRI Demat account?

NRIs can open their Demat account either with CSDL or with NSDL, the two principal depositories. Of course, in both these cases, the NRI will have to open the Demat account with the depository participant affiliated with the NSDL or the CDSL. Like in the case of Demat accounts for resident Indians, even NRIs need a bank account number and basic documentation pertaining to their identity and their proof of residence.

However, the NRI Demat account also calls for some additional formalities and document submissions. NRIs can open Demat accounts under the RBI Portfolio Investment Scheme (PINS) or even through the ordinary route (non-PINS). The Demat account can either be a repatriable Demat account, or it can be a non-repatriable Demat account.

What is this PINS all about? If you want to trade and invest in secondary market equities in India, then Portfolio Investment Scheme (PINS) Demat account is mandatory. Non-PINS accounts can be used to make investments in initial public offerings (IPOs) and for making investments in mutual funds. PINS is also needed for buying index ETFs in India.

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Table of Content

  1. What is meant by an NRI Demat account?
  2. Difference Between NRI Demat Account and Normal Demat Account
  3. Steps to open NRI Demat account

Difference Between NRI Demat Account and Normal Demat Account

Here is the difference between NRI Demat and normal Demat account in detail:

FeatureNormal Demat AccountNRI Demat Account
EligibilityAvailable for resident Indians onlyAvailable for both resident Indians and Non-Resident Indians (NRIs)
PurposeFor trading and holding securitiesFor trading and holding securities
TypesSingle holder or joint holderSingle holder or joint holder
LinkageLinked to resident bank accountLinked to NRE or NRO bank account
RepatriabilityNot applicableRepatriable or non-repatriable
CurrencyIndian Rupees (INR)Indian Rupees (INR) or foreign currency depending on the type
TaxationTaxed as per Indian tax lawsTaxed as per Indian tax laws for Indian holdings; tax implications in the home country for foreign holdings
Documentation requiredKYC documents requiredAdditional documents required for NRIs such as passport, visa, proof of NRI status, etc.
Investment restrictionsNo specific restrictionsSubject to regulations set by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) for NRIs
Nomination facilityAvailableAvailable
Conversion of existing accountsNot applicableResident Demat account can be converted to NRI Demat account upon status change

Steps to open NRI Demat account

The process to open a trading and Demat account is mostly similar to the process for an ordinary Indian. NRIs must also approach a depository participant affiliated with either NSDL or CDSL to open the Demat account. However, the formalities may be a little more stringent in the case of NRIs. Essentially, the NRIs have to submit themselves to additional documents required to open an NRI Demat account. This is the difference between NRI trading accounts vs normal accounts.

Here are some of the specific process details to open an NRI Demat account:

  1. While NRIs also have to submit basic details like the PAN, photographs, proof of address, etc, they must complete some additional formalities.
  2. NRIs must also submit copies of their passport and employment visas or work permits (as may be applicable in their case). The submission must also contain their visa details, including the visa number and the visa expiry date.
  3. NRIs are also required to mention whether they want to open a repatriable Demat account or a non-repatriable Demat account. In the former case, they must link it to an NRE account, while in the latter case, it must be linked to an NRO bank account.
  4. This classification is important because free repatriation of funds is not allowed with NRO bank accounts (it is limited to $1 million per year). However, free repatriation is possible in the case of an NRE Demat account that is linked to an NRE bank account.
  5. The important point is that the transfer of shares to an NRI Demat account can only take place via sale or purchase in the Indian markets, i.e., market transactions. Off-market transfers and gift transfers to NRI Demat accounts are not allowed as per RBI guidelines.

Participating in the Indian IPO, MF, and secondary market gives NRIs an opportunity to be part of one of the fastest-growing large markets in the world. The Indian economy is poised to touch $5 trillion in GDP in the next 6-7 years. For NRIs, India in general and Indian equities in particular is the big opportunity.

FAQs on NRI Demat Account and Normal Demat Account

NRI can open a Demat account online by requesting an account opening through the broker's website.

There are two types of Demat accounts available to NRIs: repatriable and non-repatriable. A basic PINS (Portfolio Investment Scheme) Account is also required to buy shares on the secondary market.

Yes, NRI can have 2 Demat accounts.

For the opening of an NRI Demat account, a copy of the passport, valid visa, identity proof (PAN card, driver's license, voter card, and overseas citizen of Indian card), and overseas address proof are required.

Among the primary benefits of NRI accounts is that individuals can trade stocks and invest in different schemes through them.