By Deepa Venkatraghvan
For a decade now, the Indian equity markets have been on a roll. The BSE Sens*x , which was around 3500 points in 2001 is today at 19000 levels; a growth of 18% per annum on a compounded basis. And that, in spite of going through one of the major global financial crises.
As a Non Resident Indian (NRI) seeking to create wealth, the Indian equity market is something that simple cannot be ignored. And the first step toward that goal is to open your NRI bank and demat accounts. This simple guide should help you.
Close existing demat accounts opened before acquiring NRI status
Your existing demat account, which holds shares that you purchased while you were a resident Indian, will have to be closed and you would need to transfer the shares to an NRO demat account. You can continue to hold these shares in the NRO demat account or sell them. If you sell them, the proceeds are credited to the NRO savings account and there are restrictions on repatriation. That is, you can repatriate up to USD 1 million per calendar year (including all other capital account remittances) but you would need a certificate from your chartered accountant certifying the source of funds.
You cannot purchase any more shares from the secondary market in this account because of certain restrictions of the RBI. Explains Sandeep Shanbhag, Director of Wonderland Investments and an expert in all matters of NRIs, "An NRI has certain restrictions when it comes to investing in Indian equities. For instance, an NRI cannot invest more than 5% in the paid up capital of an Indian company. In order to keep track of these restrictions, the RBI requires you to make these changes in the demat accounts that you opened before becoming an NRI."
You can however, purchase shares from the primary market through this NRO demat account. That is, you can buy shares issued through Initial Public Offers (IPOs), that too on repatriable basis, using funds in your NRE bank account.
Open PINS account to buy shares from secondary market as an NRI
If you want to buy shares from the secondary market as an NRI, you would need to open a Portfolio Investment Scheme (PINS) Account with a bank. In this scheme, you can buy shares with funds in your NRE account and sale proceeds can be credited to NRE account for repatriation. If you choose to buy the shares on non-repatriable basis, then, the proceeds will be credited to the NRO account. You must maintain two separate demat accounts for repatriable and non-repatriable shares. Recently, the RBI also specified that an NRI must have a separate account linked to the PINS demat account. It cannot be the NRO or NRE account through which other routine transactions are conducted.
Remember that you can open a PINS Account with one bank only and you can maintain only one repatriable account and one non-repatriable account under PINS at any point of time. Once you become a resident again, you must close the PINS account.
All you wanted to know about NRI demat accounts
CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
06 July 2011
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