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Definition

Non- Resident Indian is termed as a "person resident outside India". Clause 2(W) of FWMA 1999 indicates that "A person resident outside India" means a person who is not resident in India. An NRI is a Person Resident outside India who is a citizen of India or a Person of Indian Origin. A Person resident outside India is a person who has gone out of India or who stays outside India, in either case- For or an on taking up employment outside India, or - For carrying on outside India a business or vocation, or - For any other purpose, in such circumstances as would indicate his intention to stay India for an uncertain period.

  • Are NRIs allowed to invest in India?
    Yes, NRIs can invest in all avenues open to resident Indian. Persons of Indian Origin restricted to investment in non-agricultural business in the country.
  • Are the NRIs allowed to invest in shares and stocks in India?
    a) Directly by subscribing to shares and debentures of Indian companies on a repatriable or non-repatriable basis, or
    b) Through the Portfolio Investment Scheme, or
    c) In government securities, certificates and units of UTI through remittances from their domestic accounts or remittances from abroad.
  • Can NRIs establish a company or run a business in India
    Yes
  • Are the NRIs allowed to sell the stocks and bonds they hold?
    NRIs can sell the stocks and shares they hold to resident individuals or though the stock exchange. Securities can also be gifted by NRIs.
  • Can NRIs allowed to sell the earnings form designated non-repartrible income?
    Income earned on NRI deposits and investments form 1994-95 can be repatriated, subject to certain limits.
  • What is the procedure to be followed for repartriating income from non-repatriable assets in India?
    An application to a designated branch of an authorized dealer in Form RBI has to be submitted along with a certificate from a Charted Accountant. The dealer would then credit the amount repatriable, after due deduction of tax, to the applicant's NRE/FCNR account.
  • Is there any limit in share trading for NRIs?
    The 24% scheme allows Indian companies, except those engaged in agricultural activities, to issue up to 24% of their shares and debentures to NRIs with repatriation benefits.
    Similarly, the 40% scheme allows for purchase of equity, preference shares and convertible debentures not exceeding 51% of the face value of each issue. Repatriation of upto 40% of the new issue is allowed. Under this scheme, NRIs can invest in new projects or in expansion and diversification projects of existing companies.
  • What repartriation benefits are available to NRIs if they invest in Priority Industries?
    NRIs are allowed 100% repatriation if they invest in Indian companies engaged in priority industries and those involved in export and trading activity. No prior approval of the RBI is required. But Form ISD is to be submitted along with other documents to the bank's regional office.
  • What basics should be kept in mind to invest for long term in equities?
    Knowing your time horizon of investment, risk and return expected on the investment and scrutinizing your overall financial position and long term goals before investing is the key to a wise investment.
  • What are the chosen routes through which NRIs can invest in India?
    Equities, Property and Mutual Funds are the three most sustaining ways for an NRI to invest.
  • Why are mutual funds considered to be the best way to enjoy the benefits of investing in Indian equities?
    Mutual funds are managed by professionals who know the nitty-gritty of it. Local broker can be unreliable.
  • Is approval for RBI required to invest in mutual fund scheme?
    For an NRI, no specific approval for investing or redeeming from mutual fund is required. Only OCBs (Overseas Corporate Bodies) and FIIs require approvals for it.
  • Can government securities/ UTI units be transferred or sold?
    Yes, provided the transfers/sales are arranged through an authorized dealer. Repurchase can be done directly by UTI.
  • Can proceeds of National Saving Certificate or government securities be repatriated?
    Sale/maturity of proceeds of such securities can be repatriated if the purchase was made out of funds remitted from abroad or out of NRE/FCNR accounts. In case of the purchase being made out of NRO accounts, it can only be credited to NRO accounts and cannot be remitted abroad.
  • What specific conditions need to be fulfilled for investing in mutual funds schemes on repatriable basis?
    In order to invest on a repatriable basis, you must have an NRI or FCNR bank account in India. The mutual fund should comply with the terms and conditions stipulated by SEBI, the amount representing investment should be received by inward remittance through normal banking channels or by debit to NRE Account/ FCNR account of the NRI. The dividend/interest of units may be remitted through normal banking channels or credited to NCR/FCNR account of the investor.
  • When can earnings on investments be repatriated?
    For investments made on a repatriation basis, the net income or capital gains after tax arising out of investment is eligible for repatriation subject to regularity guidelines at the time of the repatriation. In the case of investment is made on a non-repatriation basis, only the net income, i.e., dividend arising out of investment is eligible for repatriation.
  • Can loans be granted abroad against collateral of the shares/debentures of Indian companies?
    Yes. Authorized dealers have the power to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies only if the concerned shares/debentures were acquired on repatriation basis
  • For how long is the permission valid for buying shares/debentures and units of domestic mutual funds?
    Approval from the Reserve Bank is valid for a period of five years from the date of issue. This can be renewed by a request by means of a simple letter.
  • For Non-convertible debentures of Indian companies, can NRIs investments still be made?
    Yes, an NRI can make investment in non-convertible debentures but they need to require necessary permission (submit application) from Reserve Bank (Central Office) by the concerned Indian Company in form ISD.
  • Who monitors the maximum limits on FII, NRI or PIO investment in Indian companies on a daily basis?
    The Reserve Bank of India (RBI).
  • Does it require permission from the Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
    No, Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC.
  • Is permission of RBI required if an NRI intends to invest in new issues of Indian companies on non-repatriable basis?
    No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights/bonus issue provided the investee company has not undertaken agricultural/plantation activity and/or real estate business excluding real estate development i.e. development of property and construction of houses. RBI monitors the maximum limits on FII, NRI or PIO investment in Indian companies on a daily basis.
1. Equity Trading

Equity trading is the buying and selling of company stock shares. Shares in large publicly-traded companies are bought and sold through one of the major stock exchanges, such as National Stock Exchange, Bombay Stock Exchange which serve as managed auctions for stock trades. Stock shares in smaller public companies are bought and sold in over-the-counter (OTC) markets. All the Buying and Selling has to make through the Authorized Stock Broker only.

2. Mutual Funds

A Mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio.

The Foreign Exchange Management Act 2000 defines the Portfolio Investment Scheme, permitting non-resident Indians and foreign Individual investors to buy and sell shares of Indian companies, and units of domestic mutual funds at any of the Indian stock exchanges. Purchase of shares of any company from the secondary market is subject to a ceiling of 5% of the paid-up share capital and 5% of the paid-up value of each series of debentures

NRE (Non - Resident External) - Repatriable

Repatriable savings bank account means you can take back your investment money to your overseas in this case you need to open this account.

NRO (Non - Resident Ordinary) - Non - Repatrible

Non- Repatriable savings account means our investment will be remain in India in this case you need to open this account and you have to give Indian address proofs also.

PIS - Portfolio Investment Scheme

The PIS account shall be exclusively used for transaction under Portfolio Investment Scheme (PIS) involving shares purchased under this approval and for sale thereof. No other transactions whatsoever shall be routed though this account as per RBI guidelines. (This account is common for both category i.e. NRE& NRO)

Both purchase and sales contracts in original/electronic form shall be submitted to the bank within 24 hours of the execution of the contract to enable us to report the same to the Reserve Bank of India.

The NRI shall not pledge shares for giving load to a third party with obtaining prior permission from Reserve Bank of India.

The shares etc acquired by the NRI under this permission can be sold through stock exchanges in India without any lock in period. However NRI shall not engage in short selling and shall take delivery of the shares etc purchased and give delivery of the shares etc purchased give and delivery of the shares etc sold. Sale proceeds of such shares etc may be credited to NRE A/C and dividend or income earned thereof may be repatriated or credited to the NRE/FCNR/NRO account of the NRI subject to payment of applicable taxes.

Shares etc acquired shall not be transferred out of the name of beneficial ownership of NRI by way of gift (except by NRI's to their relatives as defined in section 6 of Companies Act 1956 or to a Charitable Trust duly registered under the laws in India) or sold under private arrangement with out prior approval of Reserve Bank of India.

Portfolio Investment Scheme (PIS)

NRIs are allowed to invest in shares of Indian companies, by RBI, under Portfolio Investment Scheme (PIS), in secondary market through a registered broker of a recognized Stock Exchange. RBI Circular No. 13 dated November 29, 2001 has prohibited OCBs to invest under PIS in India.

The guidelines of Reserve Bank of India in respect of ceiling on investments are as under:

  • Investment in shares of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of shares of the company concerned.
  • Investment in convertible debentures of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of convertible debentures in each series, issued by the company concerned.
  • Aggregate investments by NRIs will be subject to a ceiling of:
    • 10% of the total paid-up equity capital of the company concerned: and
    • 10% of the total paid-up value of each series of convertible debentures issued by the company concerned.
  • Some Indian companies shall however raise the ceiling of 10% to 24% or such ceilings a may be decided by the companies, by passing a special resolution in the General body of the company.
  • In case of investments on repatriation basis, the payment for purchase of shares / debentures should be by way of debit to the investor's NRE account.
  • In case of investments on non-repatriation basis, the payment for purchase of shares / debentures shall be by way of debit to the investor's NRO account also.
  • The net sale / maturity proceeds of shares / convertible debentures, after payment of taxes, shall be credited only to the investor's NRO account if the investment was made on non-repatriation basis and shall be remitted abroad / credited to the investor's NRE / NRO account if the investment was made on repatriation basis.

Note: Transactions covered under PIS: Only secondary market purchase and sales of shares of Indian companies by NRI's are within the of the PIS scheme.Securities purchased as a resident individual are not covered under this scheme.Derivative segment transactions or Mutual fund unit purchases are not within the ambit of the PIS scheme

Shares purchased through IPO's (Initial public offers) Sale of shares The PIS allows for sale of shares, bonds and debentures by NRIs to residents through private arrangements with the approval of the RBI. General authorization from the RBI is also available for transfer of shares, bonds and debentures by way of gifts to resident close relatives For sale or transfer of shares and debentures of Indian companies to other NRIs, no permission is required from RBI. The transferee NRI, however, would require permission for purchase of the shares.

Short-selling or selling the shares bought by NRI investors before delivery is prohibited. Repatriablity of PIS Proceeds of sale of stocks purchased under the PIS from NRE or FCNR accounts or from foreign remittances are repatriable. Investments made in the PIS from NRO accounts are not eligible for repatriation.

A combination of repatriable and non-repatriable investments under the PIS is permitted, though these would have to be operated through NRE and NRO accounts respectively. Exclusive NRE and NRO accounts have to be maintained for PIS, which can be held by joint account holders. The RBI issues a "watch list" which informs NRIs and FIIs of the companies that have reached their maximum ceiling on investments under PIS. A "caution list" sends an alert on the investment ceiling nearer to 2% of the upper limit.

NRI repatriation is allowed only by obtaining special permission of the RBI on the ground of adversify etc. and subject to conditions as specified in the permission.

NRIs are allowed to repqtriate the funds held in their NRO A/c for:

Education of their children, where they can spend up to USD 30000 per academic year. The medical expenses abroad of the account holder or his family members up to USD 100000.

Although, this individual limit has been enhanced to an overall limit of US$ 1 million, as effective from 13 January 2003 subject to further review by RBI. This can be considered aggregate of remittances of proceeds of immoveable property held for more than 10 years, proceeds of inherited property, remittance for education and medical purposes.

Tax oblications

Investors under the Portfolio Investment Scheme are liable to pay Capital Gains Tax on their investments which depends on the tenure of their stocks. Prevailing rates are deducted at source by the designated bank.

If an NRI holding a share more than 12 months means there is no tax that is long term investment or he holds for 3 months means that is short term investment that include tax

Equity Trading
Investment in Indian equity provides a promising investment opportunity in terms of attractive returns and an effective tool for portfolio diversification. Private Equity investing consists of buying equity. Ultimately, private equity investors seek to harvest investments in order to generate substantial returns. We suggest that such attractive investment opportunities in Indian Stock Markets equity sector and offer optimal investment opportunities to its NRI clients. All the buying and selling transactions have to be made an Authorised Stock Broker only like us.

Mutual Funds
A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don't have to figure out which stocks or bonds to buy). And we are dealing with all leading Mutual Funds.

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