- Can a NRI open a PPF a/c in India?
NRI’s are not allowed to subscribe to PPF Account. However, if someone opens a PPF Account while he is a resident of India but subsequently becomes a NRI, he shall be allowed to continue investing in his account.
- Can NRI invest in shares, debentures in India?
Yes, NRI are permitted to purchase shares/ convertible debentures of an Indian company through stock exchanges, under the PIS route on repatriation basis only.
NRIs can also acquire shares and debentures of Indian company directly under the FDI as well as on non-repatriation basis.
- What is a Portfolio Investment Scheme (PIS)?
PIS is a scheme of RBI under which NRIs can purchase/ sell shares/ convertible debentures of Indian companies or units in investment vehicle on recognized stock exchanges under PIS. For this purpose, the NRI/PIO has to apply to a designated branch of a bank, which deals in PIS. All sale/ purchase transactions are to be routed through the designated branch.
- Can NRIs undertake PIS transactions through their existing NRE/NRO a/c?
NRI should have a separate bank account, i.e. NRE (PIS) savings a/c exclusively for PIS purposes. Transactions relating to their personal banking as well as on account of transactions relating to shares acquired other than under PIS including IPOs should be routed in a separate bank account not linked to PIS. Account/s can be jointly held.
- Can NRI/PIO invest in other securities?
Yes, NRI/PIO can also invest in following securities:
- dated Government securities (other than bearer securities) or treasury bills.
- Units of domestic mutual funds.
- Bonds issued by a public sector undertaking (PSU) in India.
- Shares in Public Sector Enterprises being disinvested by the Government of India.
How can NRIs invest in shares in India?
As per RBI guidelines, NRI who wishes to invest in shares in India through a stock exchange need to approach the designated branch of any Bank authorized by RBI to administer the PIS to open a NRE a/c under the scheme for routing investments.
Does an NRI need any RBI permission to open a demat account?
No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated ADs.
- Is there any ceiling on the investments under PIS?
NRIs are allowed to invest in shares of listed Indian companies in recognized stock exchanges under PIS:
- NRIs can invest on repatriation basis under PIS route up to 5 per cent of the paid- up capital / paid-up value of each series of convertible debentures/paid-up value of each series of convertible preference shares/paid-up value of each series of warrants of Indian companies.
- The aggregate paid-up value of shares / convertible debentures/convertible preference shares/warrants purchased by all NRIs cannot exceed 10 per cent of the paid-up capital of the company / paid-up value of each series of convertible debentures/convertible preference shares/warrants of the company.
- The aggregate ceiling of 10 per cent can be raised to 24 per cent, if the General Body of the Indian company passes a special resolution to that effect.
- How payments could be made by NRIs for shares purchased on stock exchange?
Payment for purchase of shares and/or debentures on repatriation basis has to be made by way of inward remittance of foreign exchange through normal banking channels or out of funds held in NRE/ FCNR(B) a/c maintained in India.
How NRIs/PIO can remit sale proceeds?
In case of NRI/PIO, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE / FCNR(B)/ NRO a/c,
Is there any tax obligation on sale of shares?
The sales proceeds are subject to Capital Gains tax. Long term capital gains are exempt from tax in cases where STT has been deducted. In such cases short-term capital gains are taxed at the rate of 15.45%. Such tax will be deducted at source by the designated Bank.
- Can an NRI trade in share without taking delivery of the shares?
It is mandatory for NRIs to take delivery of shares purchased and give delivery of shares sold. Short selling is not permitted under PIS.
A NRI wants to sale / transfer his shares to another NRI. Is he required to obtain any permission from RBI for the same?
A NRI is not required to obtain any permission from RBI to transfer by way of sale or gift shares / convertible debentures of Indian Company to another NRI. NRI purchaser however, will be required to comply with the necessary conditions for acquiring said shares / debentures.
Can NRIs transfer / sell their shares / debentures / bonds held on non-repatriation basis to residents freely?
A NRI can freely transfer shares or debentures held on non-repatriation basis to residents by way of gift. The sale proceeds, however, are to be credited only to an NRO a/c.
- Are any compliances required to be made with RBI in cases where NRI transfers shares to a resident Indian or vice-versa?
A Declaration is required to be submitted by the transferor / transferee, resident in India in Form FC – TRS, to its Bank in case of sale of shares. No declaration is required to be made in cases where NRI gifts shares to a resident Indian.
There are certain compliances which needs to be adhered to when a Resident gifts the shares to NRI.
- Mehta, a NRI intends to sell his shares / debentures to a resident by private arrangements. Is he permitted to do so?
Mr. Mehta may transfer shares of an Indian Company to a person resident in India without the prior permission of RBI subject to the adherence to the pricing guidelines, documentations and reporting requirements as may be specified by RBI from time to time.
Hardik, a resident wants to gift equity shares of a Indian Company to his daughter, who is a NRI. Is he permitted to do so?
Mr. Hardik is required to make an application to the RBI to gift equity shares to his daughter who is a NRI. He is required to submit following information:
- Name and address of himself and his daughter and the relationship that they share.
- Reasons for making the gift
- Certificate from the Indian Company concerned certifying that the proposed gifting is in accordance will the FDI regulations.
RBI may permit such a transfer only after evaluating the merits of the case.
- In case a resident Indian becomes a non-resident, will he be required to change the status of his holding from resident to non-resident?
Yes. NRI can continue to hold the securities, acquired by him as a resident Indian, even after he becomes a non-resident Indian, on a non-repatriable basis. He is required to intimate the Bankers about the change in his residential status.
- In case a non-resident Indian becomes a resident in India, will he be required to change the status of his holding from non-resident to resident?
Yes. It is the responsibility of the NRI to inform the change of status to the Banks, through which the investor had made the investments in PIS and the DP with whom he has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.
- Can shares / debentures be given away as gifts to relatives?
NRIs can gift shares / debentures to relatives as also to any person resident in India. Such gift can also be made in favour of another NRI.
Can NRIs invest in an Indian Company by giving a loan or deposits? What are the available alternatives?
No. As per provisions of FEMA, Indian Company is not permitted to avail loan from a NRI. NRIs can provide deposits to an Indian company or invest in the Non-convertible Debentures offered by the Company.
- Can NRI’s subscribe to public issues? What are the permissions/approvals required?
Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from Government of India/ RBI. Therefore, individual NRI need not obtain any permission.
Does an NRI require any permission to receive bonus/rights shares?
- NoWhat are the eligible capital instruments for FDI?
The eligible capital instruments for FDI are as under:
- Fully paid and partly paid capital equity shares
- Fully and Compulsorily and mandatorily convertible preference shares
- Fully and Compulsorily and mandatorily convertible debentures
Can NRI’s invest in Real Estate Investment Trusts?
NRI’s can invest in units of Real Estate Investment Trusts [REITs]. Apart from REITs, NRI can also invest in Infrastructure Investment Trusts[InvIts] and Alternative Investment Funds[AIFs].
How can NRI make the payment for the purchase of the units of REITs, InvIts and AIF?
The payment for the purchase of the units of the REITs, InvIts and AIF shall be made by an inward remittance through normal banking channel including by debit to an NRE or FCNR Account.
- Can NRI invest under National Pension System?
NRI can subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable in nature.