Hi Nupur,
Q- Can an NRI whose savings account has been converted to NRO account due to his residential status keep running the same demat account?
Ans:
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.
When you were leaving India, you were required to intimate your bankers about the change in your residential status. It is advisable to intimate your bankers at the earliest. Your bank accounts would then be redesignated as non-resident ordinary (NRO) accounts. You can also open a new non-resident external (NRE) account wherein you could remit funds from abroad. The advantages of an NRE account include exemption from tax on interest earned and repatriation benefits for both principal and interest.
As regards your existing demat account, you will need to open a new NRO demat account and transfer your existing shares to that account. You could thereafter sell/hold existing shares or invest directly in new ones.
As an NRI, you would be able to invest in shares of Indian companies and units of domestic mutual funds through the stock exchanges under the portfolio investment scheme. You will need to make an application to a designated branch of an authorized dealer and all the transactions will be routed through that branch. The transactions for shares should be carried out through a registered broker on a recognized stock exchange. Speculative transactions are not allowed and you would need to take delivery of shares.
Remedy:
Portfolio Investment Scheme (PINS) is a scheme of the Reserve Bank of India (RBI) under which the 'Non Resident Indians (NRI's)' and 'Person of Indian Origin (PIOs)' can purchase and sell shares and convertible debentures of Indian Companies on a recognised stock exchange in India by routing all such purchase/ sale transactions through their account held with a designated Bank Branch. The designated Bank maintains a record of all investments done under PINS (PINS portfolio).
Any investment other than under PINS typically includes:
1-Subscripttion to Primary market offerings (IPOs)
2-Investments made when resident in India.
3-Investments in Mutual funds
4-Investments in derivatives
5-Gifts and Inheritance
You may have to open demat accounts of a specific combination if you already hold physical shares in that combination. Physical shares can be converted into electronic form in your demat account by submitting the certificates along with a demat request form. You should also open the required combination under the correct type of demat account:
PINS NRE - For shares acquired earlier under PINS on repatriation basis
PINS NRO - For shares acquired earlier under PINS on non-repatriation basis
Non-PINS NRE - For shares acquired earlier other than under PINS on repatriation basis
Non-PINS NRO - For shares acquired earlier other than under PINS on non-repatriation basis and also when 'Resident' in India
Thanks
CAclubindia
