Non-Repatriable Demat Account: Meaning, Key Factors, Implications

Non-Repatriable Demat Account: Meaning, Key Factors, Implications

One of the financial options that some Indians seeking to go overseas want to engage in is purchasing real estate, such as a primary property, a vacation home, or an office. In addition, they are drawn to Indian equities and the stock market in general. For non-resident Indians or those of Indian ancestry, the process of investing in Indian markets is not difficult. They need a Demat account to own and invest in financial instruments, just like Indian citizens do. They can open repatriable and non-repatriable Demat accounts to trade and invest here.

This article focuses on the Non-Repatriable Demat Account meaning, example, significant facts, and distinctions of non repatriable Demat accounts in comparison to repatriable Demat accounts.

Non-Repatriable Demat Account Meaning

Non-repatriable refers to the inability to transfer financial assets from one nation to another and back to the country of residency. Holding shares, bonds, and other financial instruments in their dematerialised form is possible with a Demat account. Non-Resident Indians utilise a Non-Repatriable Demat account, from which it is prohibited to transfer money to their home nation. It is prohibited to convert an investment made through a non-repatriable Demat account into foreign currency. A connected Non-resident Ordinary (NRO) savings bank account is also necessary. This account is used to manage the money that NRIs make in India. 

This account receives the bonuses and profits related to the investments. The NRIs cannot transfer the gains from investments and revenues from the sale of securities using this sort of Demat account. Only the principle and interest accrued after TDS deductions may be transferred. Once the relevant taxes are paid, RBI permits remission of up to $1 million each fiscal year. An NRI is not permitted to own more than 5% of the paid-up capital in an Indian firm, per RBI regulations. 

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Table of Content

  1. Non-Repatriable Demat Account Meaning
  2. Example of Non-Repatriable Demat Account
  3. Documents Required to Open a Non-Repatriable Demat Account
  4. What Distinguishes Repatriable Accounts from Non-Repatriable Ones?
  5. Implications of Non-Repatriable Demat Accounts
  6. Facts About Non-Repatriable Demat Account

Example of Non-Repatriable Demat Account

Indian resident Rahul just retired. He also made the decision to go to the USA because his kid was there. As a result of his relocation, he acquired the status of Non-resident Indian. Nevertheless, he has an Indian non-repatriable Demat account with investments totalling Rs. 40 million. He considered selling his stake in India as he made himself home there. 

His stake was sold for a net profit of Rs. 20 million. He now wants to transfer the funds to his American bank account. He is unable to transfer 24 million rupees there. But after-tax deductions, the principal amount can be transferred. As per RBI guidelines, an NRI must create two different Demat accounts for investments that may be sent home and those that cannot.

Documents Required to Open a Non-Repatriable Demat Account

As an investor, you have to know the list of documents you must provide for opening a non-NRI repatriable demat account. Let's take a quick look at some of these documents. 

  1. A copy of your PAN card 
  2. Passport size photographs 
  3. A copy of your passport and a visa for the country where you are currently resident. 
  4. A duplicate copy of your PIO (Person of Indian Origin) card or OCI (Overseas Citizenship of India) card 
  5. A duplicate copy of your identity Proof
  6. A copy of your evidence of foreign and Indian addresses 
  7. A copy of your most recent Income Tax Returns (ITR) with income computation, Form 16 or salary slips, or any document proving your income 
  8. An NRO bank account's most recent certified bank statement or a cancelled cheque leaf 

What Distinguishes Repatriable Accounts from Non-Repatriable Ones?

Repatriable Demat accounts, as opposed to non-repatriable Demat accounts, enable NRIs to send money abroad. A connected Non-resident External (NRE) savings account is necessary for a repatriable Demat account. A non-resident external account is used for foreign currency deposits and permits the repatriation of cash as needed.

When making a repatriable investment in initial public offerings (IPOs) or other financial assets, an NRI investor may use a repatriable Demat account and bank account. People can utilise a non-repatriable Demat account and bank account to invest on a non-repatriable basis. Any non-resident Indian who wishes to make an investment in India must have an NRE or NRO account.

Implications of Non-Repatriable Demat Accounts

The implications of non repatriable Demat accounts are as follows.

  • An NRO bank account may only be connected to an NRI Demat account.
  • NRIs are required to create two separate Demat accounts for investments that are both repatriable and non-repatriable.
  • An NRO Demat account is another name for a non-repatriable Demat account.
  • The wholesale profits of securities are not transferrable. Both the principle and any interest are fully refundable. 
  • NRIs are not permitted to transfer investment gains or profits from the sale of securities.
  • The principal amount and interest from investments made by NRI can be transferred from the NRO account.

Facts About Non-Repatriable Demat Account

Here is a list of the most important facts concerning non repatriable Demat accounts. 

  • It is mandatory to link a non-repatriable Demat account to a non-resident ordinary (NRO) bank account. 
  • Tax Deducted at Source (TDS) is applied to the principal amount and investment returns in non-repatriable Demat accounts at a rate of thirty per cent. 
  • After the payment of the necessary taxes, the transfer of the sale proceeds of investments in a non-repatriable Demat account shall be limited to a maximum of $1 million per financial year.

 

Conclusion

A non-repatriable Demat account is one used to keep NRI securities on a non-repatriable basis, sum up. Even NRIs can trade and invest in the Indian financial sector using this account. Although there are limitations on money transfers. For these accounts, RBI standards are rigorously followed. In addition, the NRI is bound by the Foreign Exchange Management Act's rules. Despite being heavily regulated, it enables NRI to participate in the Indian stock market and benefit from the market's diversity. Additionally, the user-friendly BlinkX trading app, which provides online support and advice, may be explored if you are new to trading and need help comprehending technical patterns.

Non-Repatriable Demat Account FAQs

Charges and fees for an NRI Demat account are comparable to those for a resident account. Some major fees are as follows: Opening NRI Demat account cost, Monthly maintenance fees. Fees for debit transactions and Taxes.

Yes, an NRI is permitted to open as many Demat accounts as desired, including NRE and NRO Demat accounts.

It is true that NRIs located in the US can register a Demat account and make investments in the Indian stock market. However, due to the challenging FACTA compliance requirements, NRIs from the USA and Canada have few investment possibilities.

The RBI/Indian Government has given the business either particulate or broad authorisation to issue shares. Therefore, an NRI is exempt from needing authorization. 

You are normally entitled to obtain bonus shares in Indian firms as an NRI (Non-Resident Indian) without any special permission.