What is a non repatriable demat account? An NRI investment guide

Introduction 

As times have evolved, Demat accounts have also transformed and made securities trading easy by replacing bulky paper-based systems with electronic records and investment options. Today everyone, including individuals of Indian origin (PIOs) and Non-Resident Indians (NRIs) can invest in the Indian securities market. They only need one, of the two Demat account type non repatriable or a repatriable Demat account to carry out their proceeds. 

In this article, we’ll try to understand the non repatriable Demat account meaning and explore its significance and function in detail.

What are non repatriable demat accounts?

Whenever Indians residing abroad like NRIs or PIOs wish to invest in the Indian real estate or stock market, they usually turn to specialised accounts like non repatriable Demat accounts. This account is tailored to keep their investments within the Indian financial system. 

The term “non-repatriable” in simple language means that funds and securities held in this account shouldn’t be transferred to the investor’s country of residence. Thus keeping the investments within India’s financial framework only. 

To invest and hold securities with a non-repatriable Demat account, investors need to link it with a non-resident ordinary (NRO) savings bank account. This setup allows the management of income earned within India, including the dividends and bonuses they receive on their investments.

This account also comes with its own restrictions set by the RBI on the transferable amount, equity held and tax deductions on profit earned. 

How is a non-repatriable difference from a repatriable Demat account? 

Generally, both Demat account type non repatriable and repatriable Demat accounts are tailor-made for NRIs and PIOs but both of them offer certain distant features.

Facts to remember about non-repatriable Demat account

• Non-repatriable Demat accounts must be linked with NRO savings accounts, as it is mandatory according to RBI regulations.
• It’s essential to maintain separate accounts for repatriable and non-repatriable investments to avoid confusion.
• NRIs are restricted from transferring proceeds from the sale of securities and investment gains from a non-repatriable Demat account.
• Only the principal amount and interest earned on investments from the NRO account can be transferred by NRIs.
• Non-repatriable Demat accounts, also referred to as NRO Demat accounts, are subject to a 30% Tax Deducted at Source (TDS) on the principal amount and investment returns.
• After paying taxes, RBI regulations allow sending only up to $1 million overseas every financial year. 

How to pick up the right non-repatriable Demat account?

Investing as an NRI in the Indian market can feel confusing. From finding the right non-repatriable Demat account to repatriating your profits.  Below are certain things to keep in mind while choosing a non-repatriable Demat account- 

1. Personal investment requirements 

It’s important to figure out what you want to achieve from your investments, how much risk you’re comfortable taking, and what types of securities you want to invest in. This will help you narrow down your options and choose the perfect non-repatriable Demat account. 

2. Research brokerage firms 

Go look for well-known brokerage firms that offer non-repatriable Demat accounts as a type for their NRI customers. Check their reputation through news websites and Google ratings, and track record through reviews of reputable investors. Also, make sure they’re licensed by the relevant authorities from the Indian market. 

3. Evaluate services provided

Evaluate the services each broker is offering and at what prices. Also, check if they have an easy-to-use online platform and what research tools and customer support they are providing. Choosing one that suits your needs will make the investment process fruitful. 

4. Compare brokerage fees 

Different brokers have different fee structures so it’s better to check this before picking an NRO Demat account.  Brokers charge for account opening fees, maintenance charges, and brokerage fees. Go for a broker that offers these services at a competitive rate.

5. Ease of use 

A simple and user-friendly trading platform is quite crucial, especially if you’re new to investing. Go for a broker with a clear interface and easy navigation to save you time and maintain peace in the investing process. 

6. Legal and tax implications 

All investments are taxed so make sure you understand the legal and tax aspects of using a non-repatriable Demat account and choose an account/brokerage firm that saves your taxes. Talk to a financial advisor to ensure you’re aware of any tax obligations.

Documents required for opening a non-repatriable Demat account

1. Passport Size Photographs: Provide recent passport-size photographs as part of your application.

2. PAN Card Copy: Submit a copy of your Permanent Account Number (PAN) card for identification purposes.

3. Identity Proof: Furnishing a copy of a valid identity proof document, such as an Aadhar card, voter ID, or driver’s licence is required. 

4. Passport and Visa Copy: You need to include copies of your passport and visa, to demonstrate you are a foreign settled Indian. 

5. PIO or OCI Card Copy: If applicable, provide a copy of your Person of Indian Origin (PIO) card or Overseas Citizenship of India (OCI) card.

6. Income Proof: Present documents verifying your income, such as salary slips, Form 16, or the latest Income Tax Returns (ITR) with estimates of your income.

7. NRO Bank Account Proof: Submit either a cancelled cheque leaf or the latest certified bank statement of your Non-Resident Ordinary (NRO) bank account.

8. FEMA Declaration Form: Fill out and sign the Foreign Exchange Management Act (FEMA) declaration form as part of the account opening process.

Conclusion 

To conclude, a non-repatriable Demat account acts as a specialised investment avenue for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), allowing them to invest in the Indian securities market while keeping their funds within the country. 

It is meant for people who do not want to repatriate their investment earnings and profits abroad. Instead, they wish to keep them in the Indian market only. One essential tip to remember while managing this type of account is to stay updated on the regulatory requirements of RBI to ensure compliance. To learn more, subscribe to StockGro. 

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