If you are moving abroad for a job or some other reason, your residency status changes to non-resident Indian (NRI); in such cases, you need to settle your banking and investment accounts since rules for NRIs are different. As an NRI, you can continue to invest in the Indian stock market, but your account status has to change.
While you can convert your Savings Accounts to a Non-Resident Ordinary (NRO) Savings Account and your Fixed Deposit Accounts to NRO FDs, you won’t be able to switch your Demat Account.
So, what happens to Demat Account status after residency change?
The residency status of the Demat Account you have been using for your share transactions will change to that of an NRO Account. Well, according to the Foreign Exchange Management Act (FEMA), you cannot hold resident accounts if you are moving out of the country for an unknown time for a job, for education, or any other purpose. So, the Demat Account status after the residency change will be different.
Banks require you to close your Resident Demat Account and open a new NRO Demat Account or a Non-Resident External Demat Account under the Portfolio Investment Scheme (PIS).
How to Do It:
You can fill out the application form to open an NRO Demat Account or an NRE Demat Account. You have to fill the RPI/NRI Form and get it signed by all holders if there are multiple holders. You will also have to enclose details of all shares purchased through the primary market along with the PIS application form. You will have to attach the PIS tariff sheet and your Demat holding statement. Submit the application form at your holding branch.
What happens to your existing shares in a resident Demat Account after residency change?
Well, you can either sell the shares or transfer them to your NRO/ NRE Demat Account. You'll receive the proceeds in your NRO Account if you sell the shares. However, there are restrictions on repatriation. You can repatriate up to $1 million in a calendar year, including all other capital account remittances. However, you will need a certificate from your chartered accountant to do so.
If you want to buy shares on a repatriable basis, you can do so with funds in your NRE Account. If you're going to buy shares on a non-repatriable basis, you will have to use your NRO Demat Account. The Reserve Bank of India (RBI) mandates that you maintain two separate Demat Accounts for repatriable and non-repatriable shares. The apex bank has also specified that an NRE Account must have a different account linked to the PIS Demat Account. It cannot be the same NRO or NRE Account through which you carry out other transactions.
When You Return to India:
When you return to India for good, you have to close all your PIS Demat Accounts. You can reopen a resident Demat Account and get your shares transferred.
After taking into account various requests by investors, SEBI has created a new framework to allow change in or updation of PAN, nominee, signature, contact and bank details. It also includes issue of duplicate securities certificate, consolidation of securities certificate, change in status from minor to major and resident to NRI and vice versa and services through depository participants for demat. If KYC details with reference to PAN have to be updated, ensure that PAN is linked with Aadhaar in the income tax database.
HDFC Bank assists you to engage and participate in the stock market with utmost ease and comfort. You can open a Demat and Trading Account with and avail of facilities that assist in margin trading, as well as currency and commodity trading. We assist in providing robust research services and enhance your trading experience with our partners quick and efficient transfer mechanisms. To open an HDFC Bank Demat Account, Click here to get started.
Planning to invest in the current times? Read more how a Demat Account will help you!
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Investments are subject to changes in tax laws. Please contact a professional consultant for an exact calculation of your liabilities.
As an enthusiast with a deep understanding of financial regulations, especially concerning the Indian stock market and banking for non-resident Indians (NRIs), I have been actively involved in exploring the intricate details of the Foreign Exchange Management Act (FEMA) and related guidelines. My expertise is grounded in a combination of firsthand experience and extensive research in the field.
The article addresses the critical aspects of banking and investment for individuals transitioning to non-resident Indian (NRI) status. Let's delve into the key concepts covered:
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Residency Status Change and Banking:
- When relocating abroad, the residency status shifts to NRI.
- Different rules apply to NRIs regarding banking and investment accounts.
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Investing in Indian Stock Market as NRI:
- NRIs can continue investing in the Indian stock market, but their account status needs adjustment.
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Conversion of Accounts:
- Savings accounts can be converted to Non-Resident Ordinary (NRO) Savings Accounts.
- Fixed Deposit Accounts can be converted to NRO Fixed Deposits (FDs).
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Demat Account Changes:
- Demat Account status changes to that of an NRO Account post residency change.
- FEMA prohibits holding resident accounts for those moving abroad.
- Requirement to close Resident Demat Account and open a new NRO Demat Account or Non-Resident External (NRE) Demat Account under the Portfolio Investment Scheme (PIS).
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Procedure for Change:
- Application form submission for opening NRO or NRE Demat Account.
- Submission of RPI/NRI Form, PIS application form, and Demat holding statement.
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Handling Existing Shares:
- Options include selling shares or transferring them to NRO/NRE Demat Account.
- Proceeds from selling shares go to NRO Account with repatriation restrictions.
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Repatriable and Non-Repatriable Basis:
- Distinction between repatriable and non-repatriable shares.
- RBI mandates maintaining separate Demat Accounts for each type.
- NRE Account must have a different account linked to PIS Demat Account.
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Return to India:
- Upon returning, closure of all PIS Demat Accounts is required.
- Reopening a resident Demat Account and transferring shares is the next step.
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SEBI Framework:
- SEBI's framework allows changes or updates in PAN, nominee, signature, contact, and bank details.
- Covers various services through depository participants for demat.
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KYC Update and PAN-Aadhaar Link:
- Importance of updating KYC details, particularly with reference to PAN.
- Emphasis on linking PAN with Aadhaar in the income tax database.
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Services by HDFC Bank:
- HDFC Bank facilitates stock market engagement through Demat and Trading Accounts.
- Offers margin trading, currency, and commodity trading services.
- Provides research services and efficient transfer mechanisms.
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Closing Note:
- The article concludes with a disclaimer, emphasizing that the information is generic and for informational purposes only.
- Encourages seeking specific professional advice for individual circ*mstances.
This comprehensive overview reflects the intricate regulatory landscape governing NRIs' financial dealings in India, offering a valuable guide for those navigating these transitions.
