NRI Demat Account and NRI Trading Account
To buy shares, invest in IPOs, subscribe to mutual funds, or trade in securities listed on Indian stock exchanges, an NRI must also open an NRI Demat Account and an NRI Trading Account.
Content:
In the previous chapter, we discussed NRI bank accounts and learned how NRE and NRO accounts form the foundation of NRI investing in India.
However, a bank account alone is not sufficient for investing in the Indian stock market. To buy shares, invest in IPOs, subscribe to mutual funds, or trade in securities listed on Indian stock exchanges, an NRI must also open an NRI Demat Account and an NRI Trading Account.
These accounts work together to facilitate seamless investing, trading, settlement, and custody of securities.
The type of NRI bank account, NRI Demat account and NRI trading to be opened depends on the financial instrument that an NRI wishes to invest. In this chapter, we will understand the process and requirements for each type of account.
A Demat Account (Dematerialized Account) is an account used to hold securities in electronic form. Just as a bank account stores money electronically, a Demat account stores investments electronically.
An NRI Demat Account can hold:
Without a Demat account, an NRI cannot hold listed securities purchased through Indian stock exchanges.
The type of Demat account depends on the underlying NRI bank account.
An NRE Demat Account, also known as NRI Repatriable Demat account, is linked to an NRE Bank Account.
Key Features
Best Suited For
An NRO Demat Account, also called NRI Non- Repatriable Demat Account, is linked to an NRO Bank Account.
Key Features
Best Suited For
An NRI Trading Account enables NRIs to buy and sell securities through stock exchanges such as NSE and BSE.
The trading account acts as a bridge between the investor and the stock market.
Whenever an NRI places a buy or sell order:
An NRE Trading Account is linked to an NRE Bank Account and an NRE Demat Account.
Key Features
Suitable For
An NRO Trading Account is linked to an NRO Bank Account and an NRO Demat Account.
Key Features
Suitable For
|
Particulars |
NRE Account Structure |
NRO Account Structure |
|---|---|---|
|
Source of Funds |
Foreign Income |
Indian or Foreign Income |
|
Repatriation |
Freely Repatriable |
Subject to RBI Limits |
|
Tax on Interest |
Exempt |
Taxable |
|
Suitable For |
Long-Term Investments |
Active Investing |
|
F&O Trading |
Not Permitted |
Permitted |
|
Rental Income Credit |
Not Allowed |
Allowed |
Opening an NRI Demat Account and NRI Trading Account requires submission of identity, address, banking, and regulatory documents. While the exact requirements may vary across brokers and banks, the following documents are commonly required.
|
Category |
Documents Required |
|---|---|
|
Identity Proof |
Passport, PAN Card, Passport-size Photograph |
|
NRI Status Proof |
Visa, Work Permit, Residence Permit, OCI/PIO Card (as applicable) |
|
Overseas Address Proof |
Driving Licence, Utility Bill, Bank Statement, Residence Permit, Rental Agreement, Foreign Passport carrying overseas address |
|
Banking Documents |
NRE/NRO Account Proof, Cancelled Cheque, Bank Statement |
|
Regulatory Declarations |
FATCA Declaration, Tax Identification Number (TIN), FEMA Declaration |
|
PIS Documents |
PIS Permission Letter (where applicable) |
|
Nomination Documents |
Identity proof of nominee (if nominee is added) |
|
Additional Documents |
Income Proof for F&O Trading, Immigration Records or other documents as required by the broker |
Note: Investors intending to trade in Futures & Options (F&O) or other derivative products may be required to submit income proof as part of the account activation process. Commonly accepted documents include Income Tax Returns (ITR), salary slips, bank statements, Form 16, or a net-worth certificate.
Documents may need to be self-attested and attested by any of the following:
Opening an NRI Demat Account and NRI Trading Account can be completed either online or offline through a broker.
While opening an NRI Demat Account and NRI Trading Account, investors may come across 2-in-1 and 3-in-1 account structures.
NRI 3-in-1 Account
A 3-in-1 Account combines:
Some institutions may also integrate a PIS account, which is sometimes referred to as a 4-in-1 Account.
Benefits:
Typically offered by bank-backed brokers such as ICICI Direct, HDFC Securities, Kotak Securities, and Axis Securities.
NRI 2-in-1 Account
A 2-in-1 Account combines:
The NRE or NRO bank account is maintained separately and linked to the trading account.
Benefits:
Typically offered by brokers such as Zerodha, ProStocks, and Motilal Oswal.
Many NRIs reside in different time zones and may not always be available to complete administrative tasks.
To facilitate operations, NRIs may appoint a resident Indian as a Power of Attorney (POA) holder.
A POA holder can perform specific activities such as:
However, the extent of authority depends on the terms of the POA document and applicable regulations.
NRIs should be aware of the various charges associated with maintaining and operating their trading and investment accounts. These charges may vary across brokers, banks, and depository participants.
|
Demat Account Charges |
Trading Account Charges |
Other Charges |
|---|---|---|
|
Account Opening Charges |
Brokerage Charges |
PIS Reporting Charges (where applicable) |
|
Annual Maintenance Charges (AMC) |
Transaction Charges |
Custody Charges |
|
Dematerialisation Charges |
Statutory Levies (STT, Stamp Duty, SEBI Charges, etc.) |
Account Modification Charges |
|
Rematerialisation Charges (if applicable) |
GST on Brokerage and Services |
Debit Transaction Charges |
|
Statement / Service Request Charges (if applicable) |
Call & Trade Charges (if applicable) |
POA Registration Charges (if applicable) |
Investors should compare costs across brokers before opening an account.
Before selecting a broker, consider:
Choosing the right broker can significantly improve the investing experience.
For a detailed comparison of leading NRI brokers, charges, account types, and services, refer to Top 10 NRI Full-service brokers and Top 10 NRI Discount brokers
An NRI Trading Account is a special trading account that allows Non-Resident Indians (NRIs), PIOs, and OCI cardholders to buy and sell eligible securities in the Indian stock market.
The account is opened with a SEBI-registered stockbroker and is linked to an NRI Demat Account and an NRE or NRO bank account. While the Trading Account is used to place buy and sell orders, the Demat Account holds the securities and the bank account facilitates fund transfers and settlement of transactions. Depending on the type of bank account linked, investments can be made on a repatriable or non-repatriable basis.
An NRI Demat Account is a special type of Demat Account that allows Non-Resident Indians (NRIs), PIOs, and OCI cardholders to hold Indian securities in electronic form.
Like a regular Demat Account, it is used to store shares, ETFs, bonds, mutual funds, REITs, InvITs, and other securities electronically. However, an NRI Demat Account must be linked to an NRE or NRO bank account depending on whether the investments are made on a repatriable or non-repatriable basis. NRIs are also required to submit additional KYC and regulatory documents compared to resident Indian investors.
Yes. NRIs can open an NRI Demat Account in India.
An NRI Demat Account allows investors to hold shares, ETFs, mutual funds, bonds, and other securities in electronic form. The account is linked to an NRE or NRO bank account depending on whether the investments are made on a repatriable or non-repatriable basis.
An NRI can open a trading account online or offline through a broker or bank offering NRI investment services.
The process generally involves opening an NRE or NRO bank account, submitting the account opening application, providing KYC and NRI-related documents, completing verification requirements, and linking the bank, Demat, and Trading Accounts. Once approved, the investor can access the trading platform and begin investing in eligible securities in India.
Yes. NRIs can open and operate a Demat Account in India after completing the required account opening formalities.
To operate a Demat Account, an NRI must first open an NRE or NRO bank account and link it to the Demat and Trading Account. Most brokers and banks offer online account opening and trading facilities, enabling NRIs to manage their investments and monitor their portfolios from anywhere in the world. The required KYC, identity, address, and banking documents must be submitted during the account opening process.
An NRI can maintain only one PIS account with a designated bank at any point in time.
As per RBI regulations, the Portfolio Investment Scheme (PIS) approval is issued through a designated bank and is linked to the NRI's banking relationship. Depending on the repatriation requirement, the PIS approval may be linked to an NRE account (repatriable) or an NRO account (non-repatriable). NRIs cannot maintain multiple PIS accounts across different banks simultaneously and must route all eligible PIS transactions through the designated bank account.