Being one of the major economies, India is considered a significant destination for those who are thinking of investing in stock markets. These investment opportunities often attract foreign portfolio investors (FPIs) and Non-Resident Indians (NRIs).
However, as per the regulation, the Non-Resident Indians need a Demat account if they wish to invest in stock exchange markets in India. So, read on to know more about the Demat account for NRI and Demat account charges for NRIs.
What is a Demat Account for NRI?
Indian stock markets allow all Indian citizens to trade in securities, which include Indian residents or Non-Indian Residents (NRIs).
However, NRIs need a different kind of Demat account to invest in the stock market, which is known as the Demat account for NRIs. These accounts require NRIs to follow additional rules and formalities.
Benefits of a Demat Account For NRI
The following are some of the benefits that you stand to gain by opening a Demat account for NRI:
- These accounts allow NRIs to invest in Indian stock exchanges from any part of the world
- The account make it quicker for the NRIs to invest in stocks as the transaction is reflected in your account immediately
- Demat account for NRIs do not have any documentation charges
- NRIs can buy and sell shares through their account quickly and without any hassle
- This account allows NRI investors to invest in stocks, mutual funds, ETFs, etc.
Types of Demat Accounts for NRI
There are two different types of Demat accounts for NRIs:
- NRE Demat Account
An NRE (Non-Resident External) Demat account allows NRI investors to invest in Indian stock markets. As it is associated with an NRE bank account, the money in this account is repatriable, i.e., it can be sent abroad.
- NRO Demat Account
An NRO (Non-Resident Ordinary) Demat account is another type of Demat account for NRIs that is associated with an NRO bank account. This account is also known as a non-repatriable account as it is used to manage the funds earned in India.
How to Open a Demat Account for NRI
To open a Demat Account, you will need to follow these simple steps:
- Step 1: Choose a Depository Participant (DP) registered with the Securities and Exchange Board of India (SEBI)
- Step 2: Fill out the NRI Demat account opening form provided by your DP
- Step 3: Submit the filled-out form along with the copies of required documents
- Step 4: Sign an agreement with your DP containing the responsibilities and rights of the investor and the DP
- Step 5: You will be provided a Demat account number after completing all the steps mentioned above
Do note that the process to open a Demat Account for NRIs will vary based on the DP you choose. Some may even offer fully-digital services, wherein you may be allowed to conduct verification checks online as well.
Explore such options before deciding on a DP as it could make the process a lot easier. Moreover, it could make it easier to access such services as an NRI, especially if you are overseas.
NRI Demat Account Charges
Here are the details of the Demat account charges that you will have to pay after opening a Demat account for NRIs:
Account Opening Charges
When you open a Demat account, you need to pay a one-time account opening fee to your DP. However, sometimes DPs provide a waiver on account opening charges as promotional offers.
Annual Maintenance Charges
To manage and maintain your account, depository participants (DPs) also charge Annual Maintenance Charges (AMC). As its name suggests, it is charged once in a year.
Note that this fee is much lower than the account opening fee. If you fail to pay this fee, your Demat account will become inactive for the next year.
Debit Transaction Charges
A debit transaction charge is levied by the Depository Participant (DP) when you sell your stock holdings. Sometimes, DPs charge only a flat fee on every transaction that you make. Others charge a percentage of the value of the total transaction.
Some DPs also charge additional fees, which include:
- Pledged fees
- Fees for updating your information
- Fees for portfolio modification
In conclusion, if you are an NRI and want to invest in the Indian stock market, you can do so by opening a Demat account for NRI. With such an account, you can invest in stocks of companies listed in India’s stock market from any part of the world.
Not just that, but a Demat account for NRI also enables them to transact and trade more quickly. However, note that you will have to pay certain fees and charges to open and keep your Demat account active.
Hence, it is advisable to assess details about different charges before you open a Demat account for NRI with a DP.
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