How are funds in NRI accounts settled after the sale of securities?
The funds for NRI PIS and NRI Non-PIS accounts are settled as follows:
Funds are settled to the bank account on T+1 and are available for trading from T+2 onward, since it involves RBI reporting and TDS computation by banks.
- On Monday (T-Day), stocks are sold from the demat account.
- Zerodha sends a sell contract note to the bank at the end of the day for reporting and settlement.
- The proceeds from the sale are credited to the PIS bank account on Tuesday (T+1).
- On the same day, the bank sends a report to Zerodha with the PIS balance.
- On Wednesday (T+2), the PIS balance is updated as margins in the Zerodha account before the market opens.
When stocks are sold, the funds are settled in the trading account, but only 60% of the proceeds will be made available for trading on the same day (T-day). The remaining funds will be available for trading the next day (T+1) after Zerodha blocks provisional TDS on capital gains. The provisional TDS is released at the end of the day on T+1, and the entire sale proceeds become available. To learn more about provisional TDS, see What is the “Provisional TDS amount blocked” entry in the ledger? If there is a profit, the actual TDS is deducted after releasing the blocked TDS amount. TDS will not be deducted if there is a loss when the shares are sold.
- On Monday (T-Day), stocks worth ₹20,000 were sold from the demat account.
- 60% of the sale proceeds, which is ₹12,000, is released on the same day.
Zerodha blocks ₹3,588 as provisional TDS (about 17.94%) at the end of the day.
- By the end of Tuesday (T+1), the provisional TDS of ₹3,588 is reversed, and the entire sale proceeds are available for withdrawal. However, they can only be used for trading from Wednesday (T+2) onwards.
Did you know? NRO account holders who trade in F&O have their trade settlement and margin reporting managed by Orbis, the custodian. To learn more about trading restrictions for NRIs, see What are the trading restrictions for NRIs?