Still trading on a resident demat account after moving abroad

FEMA ties the kind of investment account you may hold to your residential status. Once you became non-resident, the resident demat stopped being the right vehicle. A non-resident must invest through an NRI demat and trading account linked to NRO or NRE banking.

Brokers do not detect a status change automatically. The app keeps working, but trading on the resident account is the FEMA gap. It also means gains have been reported and taxed as a resident's, which is not how an NRI's equity gains are handled. Both the account and the tax trail need bringing into line.

A practical obstacle sits in front of all of this: you cannot convert an account you cannot get into, and the Indian SIM that receives every login code is often long dead.

The useful thing to know is that the industry already anticipated this. Where a demat account carries NRI status, the depository sends the login OTP to the registered email address rather than the mobile, and several brokers do the same for their non-resident clients. So the first move is not to fight the SIM, it is to make sure the email on the account is one you still open, and to check whether your status is actually flagged as non-resident, because that flag is often what switches the delivery.

Two different rules sit behind this, and they are easy to conflate. On broker trading platforms, two-factor authentication was tightened by an exchange circular in June 2022, to be in place by 30 September that year, and reiterated in June 2025 with a daily end-of-day logout, so you will clear 2FA every single day rather than once. On the depository's own portal it arrived later, in June 2024, and there the second factor is an OTP to the registered mobile and email, with no authenticator option at all.

Some brokers do offer a time-based code from an authenticator app, which is generated on your phone rather than sent to it. Others do not. It is worth asking for, but it is a feature of your particular broker, not a right you can insist on.

Where you already have no access at all, recovery runs through the broker and, for the demat side, the depository participant. That is a conversation with them, not something a guide can solve.

Your current shares, bought with rupee funds while resident, move into an NRO-linked NRI demat on a non-repatriable basis. For fresh investing you want to take abroad, you use an NRE-linked account. Two routes handle NRI investing: the older Portfolio Investment Scheme (PIS) (bank tracks every secondary-market trade to RBI) and the newer non-PIS route (simpler, no per-trade reporting). Which suits you depends on whether you want repatriable or non-repatriable investing.

We coordinate broker and bank so nothing stalls between them.

Delivery-based equity goes through the NRI route; for repatriable delivery investing that is the NRE PIS account. Intraday and futures and options are open to NRIs but run differently: through an NRO non-PIS account, on a non-repatriable basis, with proceeds staying within the USD 1 million-a-year route. NRE PIS is delivery-only. The two routes are not interchangeable.

The set-up is simpler than it used to be. Until mid-2025 NRI derivatives needed a custodian and a CP-code; that requirement was removed in July 2025, with PAN now serving as the unique identifier. If active derivatives or intraday trading matters to you, the NRO non-PIS route just needs setting up deliberately. The resident account was the wrong vehicle, not the trades themselves.

Karthik moved to Singapore in 2020 and kept trading through his resident demat, delivery equity, occasional intraday, a few F&O positions. His broker still showed him as resident; TDS was never deducted, and gains were self-reported as a resident's.

Setting it right runs on two tracks. Account-side: CA opens an NRI demat, moves existing shares to an NRO-linked demat on a non-repatriable footing, sets up an NRE PIS route for repatriable delivery investing, and puts F&O and intraday on the NRO non-PIS account, no custodian needed since July 2025. Tax-side: CA reconciles how past gains were reported, fixes the basis going forward, and makes sure the broker's reporting and his return agree. The account gap and the tax trail get closed together.

The first real choice is the route. PIS (Portfolio Investment Scheme) is the older one: tied to NRE, the bank reports every secondary-market trade to the RBI, proceeds stay freely repatriable. The non-PIS route is the newer, lighter one: linked to NRO, no PIS permission letter, no per-trade RBI reporting.

For most NRIs non-PIS is the simpler default, fewer forms, faster settlement, and it now carries intraday and derivatives. PIS is the specific choice when you want investing money to stay freely repatriable.

Start from the money: investing foreign earnings you want to take back freely means NRE-PIS. Rupee funds staying in India, or active F&O, means NRO non-PIS. Many NRIs run both.

Becoming an NRI does not force you to redeem mutual funds. Existing units stay invested at NAV while you update the paperwork around them.

The update runs through your KYC. Refresh your KYC and FATCA / CRS details with the KYC registration agency (KRA) to show non-resident status and overseas address; then submit a bank-mandate change so each fund house swaps the old resident account for your NRE or NRO account. Update once at KRA level and the address flows to every folio; the bank change is done per AMC in one mandate covering all folios.

For units bought while resident, redemption proceeds credit to NRO when you eventually sell. Doing the status change now means folios carry on uninterrupted. You keep the holdings and put the right status and account behind them.

Old SIPs do not stop automatically, but they need two things fixed. First, update KYC to show non-resident status so fresh SIP purchases sit on the right footing. Second, the mandate: a SIP is an auto-debit pointed at a specific account. When your resident account is redesignated to NRO or closed, the mandate becomes invalid and the SIP bounces. To keep it running, re-point the mandate to your NRE or NRO account. Most fund houses cancel the old mandate and set up a fresh one.

One country-specific catch: FATCA reporting means several fund houses do not accept fresh investment from NRIs resident in the United States or Canada. If that is you, some SIPs may need rehoming to a fund house that accepts US / Canada NRIs. Check each fund house's policy before assuming a SIP can simply restart.

The route for F&O and intraday from overseas is the NRO non-PIS account, non-repatriable, proceeds within USD 1M/year. NRE PIS is delivery-only and does not support these trades.

What changed in July 2025 is the set-up, not the permission. The old requirement for a custodian and a Custodial Participant (CP) code was removed; PAN is now the single identifier. No custodian, no extra layer. The NRO non-PIS arrangement is now close to a resident's trading account to set up.

Trading from Dubai, London or Singapore comes down to one step: have the NRO non-PIS account and trade through it. The conversion closes the old resident-account gap; with the custodian requirement gone, the correct route is as light to open as it has ever been.

FEMA decides the permitted investment account by residential status, not by what the app still lets you do. Once your status changed, the resident demat stopped being a permitted account. Continuing to hold and trade on it is a FEMA contravention.

The holdings must move to an NRI demat; which one depends on the money behind them:

The fix is moving each holding onto the account FEMA permits, then closing the resident demat, which stops the breach continuing.

The route follows the source of the money. PIS (NRE) is the repatriable track for foreign earnings invested in secondary-market equity. Non-PIS (NRO) is the non-repatriable track for rupee funds, lighter to run, no per-trade RBI reporting.

One point trips people up. Shares not bought on the open market, gifted shares, IPO allotments, ESOPs, inherited shares : belong on the non-PIS (NRO) side. PIS is built for secondary-market equity bought with repatriable foreign money; these arrived another way, so they are non-repatriable. IPO subscriptions do not need PIS permission at all.

Many NRIs run both: NRE/PIS for repatriable investing, NRO non-PIS for everything else.

Converting does not force you to sell. Holdings move from the resident demat to the NRI demat by an off-market transfer : a re-tagging of the same shares because your status changed, not a trade on the exchange. No change of beneficial owner means no capital gains event; tax enters only when you actually sell.

You keep every share. You are changing the account and the status on the file, not cashing anything out.

Two things change when the NRI demat is live: what you may trade, and how tax comes off on a sale.

Delivery-based equity is fully open on either route. Intraday and F&O are not allowed on the NRE/PIS route : that track is delivery-only; these run on NRO non-PIS.

The bigger shift is TDS at source. As an NRI the broker deducts TDS on each share sale before the money reaches you (Section 195/393). For listed equity:

These rates apply since Budget 2024 (23 July 2024). TDS is deducted on the gain; any excess is refunded or DTAA relief claimed on your Indian return.