NRI Demat Account is an account by NRI, PIO (Person of Indian Origin) & OCI (Overseas Citizen of India) cardholder. It is very similar to a resident demat account where the account opening process, transactions, charges are the same. A demat account is mandatory for investing in the stock market in India. Furthermore, one can also invest in mutual funds, ETFs, convertible debentures through this demat account.
The following are the two types of NRI Demat Account.
NRE Demat Account
For an NRE demat account, an NRE bank account is associated with it. An individual who opens an NRE account is to manage funds earned abroad. Therefore, the money is fully repatriable, i.e. the money can be transferred abroad. Also, an NRE Demat Account is known as Repatriable Demat Account. The reason is, all the proceeds from the sale of securities can be transferred abroad.
NRO Demat Account
For an NRO demat account, an NRO bank account is associated with it. An NRI opens an NRO account to manage funds earned in India. Also, an NRO Demat Account is known as a Non-repatriable Demat account. The reason is, not all money can be transferred abroad. The principal amount of investments are repatriable after paying taxes. As per RBI rules, it allows a transfer of up to $1 million of funds abroad in a financial year. The interest earned on this account is repatriable after TDS is deducted.
Overall, as per RBI regulations, An NRI has to open two separate demat accounts for repatriable and non-repatriable investments.
