Moment guide · FY 2026-27

I am closing or converting my Demat account before leaving India

What happens to my Demat account and SIPs when I become an NRI?

When you become an NRI, your resident Demat account must be converted to an NRO PIS account within 6 months, SIPs should be paused, and a separate NRE PIS account handles fresh repatriable purchases funded from abroad. Selling your holdings before departure is the simplest route, with capital gains taxed in India on the sale.

The #1 trap

Keeping a resident Demat account running after becoming an NRI — FEMA requires conversion to an NRO PIS account within 6 months, and SIPs must be paused because a resident mutual fund folio held by an NRI creates compliance issues. Selling everything before departure is often simpler than maintaining two PIS accounts and the annual repatriation paperwork.

Ishita, who moved to Germany and kept her Indian investments

Ishita moved to Berlin in August 2025, becoming a non-resident. She held a resident Demat account with shares worth ₹12,00,000 and three mutual fund SIPs. Under FEMA, her resident Demat account had to be converted to an NRO-based PIS (Portfolio Investment Scheme) account within 6 months of becoming an NRI, and she completed the conversion in December 2025 through her broker and bank. Her existing shares are held non-repatriably in the NRO PIS account, and any dividends or sale proceeds are credited to her NRO account, where they can be repatriated within the USD 1 million annual limit. She paused her three SIPs, because a resident mutual fund folio cannot continue for an NRI, and she redeemed her existing mutual fund units in the conversion process, paying capital gains tax in India on the redemption. For fresh investments, she opened an NRE PIS account funded from her German salary, and only purchases through that account are repatriable when sold. Her colleague who left without converting kept his resident Demat account running for nine months, which was a FEMA violation that surfaced when his broker flagged the account, forcing a backdated conversion and a penalty risk. Ishita's brother, who wanted no compliance burden, simply sold his entire portfolio before leaving India, paying long-term gains at 12.5% with the ₹1.25 lakh exemption, and repatriated the proceeds as an NRI. Ishita keeps the PIS account statements and the conversion letters for the records. A quick call with us dials in the final figure. Ishita also confirms that the PIS conversion applies to both the Demat account and the linked bank account: the NRO PIS account receives the sale proceeds and dividends, and the NRE PIS account is funded separately from abroad. If she buys shares through the NRO PIS with NRO funds, those holdings are non-repatriable, and the repatriation of their sale proceeds is limited to the USD 1 million annual cap. The mutual fund folios she redeemed at conversion were taxed as capital gains with the ₹1.25 lakh exemption under section 112A for the equity portion, and the redemption proceeds were credited to the NRO account. If she continues to hold any Indian shares after conversion, the dividends are credited to the NRO account with TDS at the NRI rate, and she reports them in her return. A quick call with us dials in the final figure.