No one is born an NRI. Persons who leave India and go abroad for better career or business prospects are termed NRIs as per the Indian law. Such a person normally leaves behind certain assets including shares and securities that he had invested in when he was a resident Indian.  Now, after becoming an NRI, how do you continue to trade in the market? What are the rules and regulations regarding this? And more importantly what happens to the shares that you already owned as a resident before becoming an NRI?  

First things first, your existing demat account that you held as a resident cannot be used anymore to buy and sell shares after you become an NRI. It also cannot be converted into the NRI status, nor can the shares be transferred to the new NRI PINS account. You will need to close the resident demat account and transfer the shares into an NRO demat account (Non PINS) that you will have to open fresh.

Also, for investing in stocks using funds from abroad, you will have to open a fresh NRI PINS demat account.

So, in short, two new demat accounts will be created. One is the NRO demat account (Non PINS) that will hold shares that you bought as a resident Indian and second the NRI PINS demat account that will hold shares that you buy as an NRI. Your resident demat account will be closed.

 You essentially will be having two kinds of shares: the shares that you had already acquired when you were a resident Indian and those that you acquire by using foreign exchange after becoming an NRI. Lets take the first case of shares that you had already acquired when you were a resident Indian. Just like you deposit money in your bank, you deposit shares in your demat account. Just like your bank account where you can open an NRO account, in this case too, you can open a NRO demat account.  You will have to transfer the shares from your resident demat account to your NRO demat account and then if desired, sell the shares. So essentially, you cannot transfer the shares held in the resident demat account to your PINS demat account. The only options are: 

1. To transfer those shares into a NRO account (Non PINS) and continue to hold those shares OR
2. To transfer those shares into a NRO account (Non PINS) and sell the shares 

Though the NRO demat account is non-repatriable per se, it doesn’t mean that you cannot remit the funds abroad. RBI now allows all NRIs to remit up to $1 million per year representing the sale of their financial assets and immovable property. There is no lock-in on financial assets.  However, there is a procedure to be followed for all remittances from the NRO account. The NRI has to submit an undertaking and a certificate from a chartered accountant certifying that taxes if due on the amount intended to be remitted have been paid. Unlike earlier, there is no requirement to obtain a tax clearance certificate. Once all the paper work is submitted, the funds can be freely remitted, of course with a ceiling of up to $ 1 million. Now let’s talk about the shares that you acquire by using your funds from abroad or the funds lying in your NRE account. This you can do under the Portfolio Investment Scheme. (PINS) 

PINS (Portfolio Investment Scheme) is a scheme of the Reserve Bank of India (RBI) under which the NRIs can buy and sell shares, on a recognized stock exchange in India by routing all such purchase/sale transactions through their account held with a designated bank branch also known as the authorized dealer. Your bank will help you out with the necessary paperwork.

The shares acquired under PINS are repatriable, which means you can transfer the funds abroad after selling the shares. 

 To summarize, open a non-PINS demat account for your existing shares (before you became an NRI) and open a PINS demat account for your new shares that you purchase after becoming an NRI. That’s all. 

Also note that NSDL has made it mandatory from April 1, 2006 for all demat account holders to submit a copy of their PAN card. Those NRI that do not have a PAN should apply and obtain one for themselves. The application form can be downloaded from http://tin.nsdl.com

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