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NRI FAQs

Who is an NRI?

An NRI is an Indian citizen who stays outside India. For purposes of carrying out employment or any business or vocation, under circumstances indicating an intention to stay outside India for an uncertain duration and Any Indian citizen deputed outside India for a temporary period in connection with employment.

Who is a PIO?

A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if:

He/She at any time held an Indian Passport OR

He/She or either of his parents or any of his/her grandparents was a citizen of India OR

Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above

What are the products offered to NRI?

NRI can invest in the following products-:

He/She at any time held an Indian Passport OR

He/She or either of his parents or any of his/her grandparents was a citizen of India OR

Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above

What steps an NRI needs to take to start investing in the Indian Stock Market?

An NRI should open a new bank account (NRE/NRO or both) with designated bank which is approved by RBI (Reserve Bank of India) for this purpose.

He should apply for a general approval for investment in Indian Stock Market through his designated bank branch.

He should open a Demat Account with an NBFC to hold his shares and register to execute his buy/sell orders on the stock exchange(s).

What type of saving bank account(s) can be opened by an NRI or PIO in India?

Any NRI/PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.

What is a NRE account?

A NRE bank account is an external saving bank account opened for Non resident Indians. This is why it is known as Non-Resident External account. Since it is an external account, any monies lying in NRE account can be taken outside the country or in other words, the monies lying in NRE account are fully repatriable. This money can be converted into any foreign currency at the behest of the account holder and can be remitted outside the country.

What is a NRO account?

A NRO bank account is an ordinary saving bank account opened for Non resident Indians. This is why it is known as Non-Resident Ordinary account. Since it is an ordinary account i.e. as good as a normal saving bank account, monies lying in NRO account cannot be taken outside the country or in other words, the monies lying in NRO account are not repatriable.

Can money be transferred from NRE account to NRO account?

Yes money can be freely transferred from NRE account to NRO account.

Can money be transferred from NRO account to NRE account?

No, money cannot be transferred from NRO account to NRE account.

What is the status of NRO/NRE accounts on the return of the account holder to India?

RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.

In case a resident Indian becomes a non-resident, will he/she be required to change the status of his/her holding from Resident to Non-Resident?

As per section 6(5) of FEMA, NRI can continue to hold the securities, which he/she had purchased as a resident Indian, even after he/she has become a non-resident Indian, but has to transfer the shares to his NRO (Non Resident Ordinary) account

Can NRIs invest in shares, debentures and units of Mutual Funds in India?

NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.

What is PIS?

Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the 'Non Resident Indians (NRIs)' and 'Person of Indian Origin (PIOs)' can purchase and sell shares and convertible debentures of Indian Companies on a recognized stock exchange in India by routing all such purchase/sale transactions through their account held with a Designated Bank Branch. Any NRI or a PIO wanting to trade/make fresh investments in the Indian Equity Secondary Market needs and must have one PIS account with only one designated bank in India.

PIS account is applicable only for NRIs and not for resident Indians.

It is only for trading in Indian markets and not any other foreign markets.

It is applicable only for equity trades and not MF investments.

Why is PIS required?

For all the Indian companies or companies listed on Indian stock exchanges, there are certain limits which have to be monitored under FEMA regulations. For any company the foreign investment into that company cannot cross certain limit. This limit is different from company to company and sector to sector. Also individually any NRI or a PIO cannot invest more than 5% in any Indian company.

What is meant by investment through direct subscription route?

As per the regulations NRIs are allowed to invest up to a certain percentage of the total paid up capital of the company by directly subscribing to the equity/convertible debentures of the company either though a public offering made by the company or through private placements on one to one basis. Regulations provide for different ceilings on such investments based on the industry to which the company belongs and also the nature of investments (repatriation / non-repatriation basis).

Do NRIs need approvals from RBI for selling securities acquired through IPO's/Private Placement?

No. NRIs can sell such shares/debentures on the Exchange without any approval. However, while seeking the credit of sale proceeds to NRE/NRO account, the bank should be provided with the details regarding date of allotment and cost of acquisition to calculate the taxes, if any.

Where can an NRI/PIO open a demat account?

NRI/PIO needs to open a demat account with an NBFC as explained above.

Can investments made under different schemes be held under a single demat a/c?

No. Securities received against investments under 'Foreign Direct Investment scheme (FDI)', 'Portfolio Investment scheme (PIS)' and 'Scheme for Investment' on non – repatriation basis have to be credited into separate demat accounts. Investment under PIS could be on repatriation or non – repatriation basis. Investment under FDI scheme is on repatriation.

What is the procedure of Dematerialization?

Client submits a DRF form along with the physical share certificate to NBFC, who in turn forwards it to the Registrar & Transfer agent for confirmation from the company. After the confirmation is received the client a/c is credited.

What is TDS?

As per regulatory guidelines, Tax (if applicable) has to be deducted at source for all the profits done in the equity market transactions. Before crediting sales proceeds it is the responsibility of the broker and the PIS cell to determine the appropriate Tax and deduct it at source.

What are the types of rates applicable?

TDS rate is different as per the tenure of the investment. It can be classified as-:

Long-term capital gain – If the period of holding is more than 1 year i.e. the difference between the date of purchase and sell is more than 1 year, then the TDS rate applicable is 0 %. Before 1st Oct 2004 this rate was 10% now it is tax-free

Short-term capital gain - If the period of holding is less than 1 year i.e. the difference between the date of purchase and sell is less than 1 year, then the TDS rate applicable is 10%. Before 1st Oct 2004 this rate was 30%.

How is TDS computed?

TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term on a First-In, First-Out (FIFO) basis.

How the TDS deducted and money is transferred to the bank account?

For any TDS to be deducted and money to be remitted to bank account, there are three things which have to verified-:

Amount of gain = Selling price – Purchase price

Duration of holding i.e. long term or short term = Selling date – Purchase date

Source of fund for purchase i.e. NRE or NRO

Important: TDS is deducted only at the time of crediting sales proceeds.

What is PMS?

Portfolio Management Services provides the benefits of diversification across assets, sectors, and funds. The experts in Portfolio Management combine best of breed investment of avenues as they aim to achieve optimal returns at managed levels of risk. It is transparent collective investments.

How much is the risk involved while investing in Equity Investments?

Equity investments are subject to market risks and there is no assurance or guarantee that the objective of the portfolio management service will be achieved. As with any investment in securities, the net asset value of the managed portfolios can go up or down depending on the factors and forces affecting capital markets. Past performance of the portfolios does not indicate the future performance.