Who is a Non-Resident Indian ?

Indian citizens who stay abroad for employment or carrying on business or vocation indicating an indefinite period of stay outside India & officials deputed by Central/State Governments, public sector undertakings on temporary assignments.

Who can open Bank Accounts ?

Non Resident Indians (NRIs) including persons of Indian origin and overseas corporate bodies (OCBs) are permitted to open Bank accounts without prior approval of Reserve Bank of India (RBI). However, RBI permission is necessary to open accounts for Pakistanis & Bangladesh nationals, even if they may be covered under persons of Indian origin.

Wh

at are Overseas Corporate Bodies (OCBs) ?

OCBs include companies, partnership firms, societies & other corporate bodies in which at least 60 % of the ownership is with NRIs of Indian nationality/origin.

Who is a Person of Indian Origin ?

A person holding Indian Passport at any time or either himself or either of his parents or grand parents was an Indian & a permanent resident of undivided India at any time is considered to be a person of Indian origin. A wife of a citizen of India or of a person of Indian origin is deemed to be of Indian origin even though she may be of Non-Indian parentage. A husband, not being an Indian national of Indian origin, who is married to a lady of Indian origin or individual, is also eligible to open NRI accounts.

What types of Bank Accounts can NRIs open ?

Indian nationals and persons of Indian origin residing abroad can open the following types of accounts with authorised Banks out of the funds remitted from abroad or out of Foreign Exchange brought in from abroad or out of the funds legitimately due to them in India :

· Non-Resident (External) Rupee Account [NRE]
· Foreign Currency (Non-Resident) Accounts [FCNR]
· Non-Resident Non-Repatriable Rupee Deposit Accounts [NRNR]
· Resident Foreign Currency Account [RFC] for returning Indians
· Ordinary Non-Resident Rupee Accounts [NRO]
· Special Schemes viz. NRI Bonds, India Development Bonds

What is an NRE Account ?

NRE Accounts are maintained in convertible rupees. The entire credit balance held in the account inclusive of interest earned can be repatriated & converted to any other foreign currency. The NRE accounts can be maintained either as a Savings Bank A/c or Current A/c or Term Deposit A/c or Recurring Deposit A/c., in the name of the NRI or in joint names, provided all the persons are NRIs or in the names of minor who is represented by natural guardians. However, NRE accounts cannot be opened by NRIs jointly with residents.

Who can operate an NRE Account ?

An NRE account can be operated by the following persons :

· by the account holder, in the case of single account;
· either or survivor (both can operate individually);
· former or survivor (only former can operate during his life time, the survivor only after the death of former);
· latter or survivor (only latter can operate the account during the life time, the survivor only after death of latter).
· jointly by two or more persons;
· by the mandate-holder through a letter of mandate signed by all the account holders who can be a resident also;
· by a power of attorney holder through a power of attorney [P.A.] who can be resident also. A resident PA holder or mandate holder has powers to operate the account for the purposes of making local payments only & is not allowed to repatriate funds under any circumstances.

What is investment through Primary markets and investment through Secondary markets?

Investment made in Initial Public Offerings of shares/debentures of new or existing companies is called primary markets investments. Here, no individual permission of RBI is required, since the Companies offering shares/debentures normally take the permission. Applications can be made out of funds drawn from NRE/NRO a/c on repatriation/non- repatriation basis as may be specified in the terms of the NRI issue.
Buying and Selling of shares/debentures of Indian Companies through recognized stock exchanges is called investments through Secondary markets.

How do I buy/sell stocks through the secondary market ?

You can buy/sell shares/debentures through a broker after obtaining necessary RBI permission. To obtain RBI permission, a Bank account in India needs to be opened with a designated bank. Through this bank Form RPI is forwarded to the RBI for seeking RBI permission for buying/selling shares/debentures from the SECONDARY MARKET on repatriable basis. This form is to be filled by the client in duplicate. RBI permission is a blanket permission granted by RBI which is valid for 5 years. Investments on non-repatriation basis can also be made from NRO accounts and also from funds remitted directly. For this purpose application should be made to RBI on Form NRI.

What is a designated bank/branch?

Reserve Bank of India (RBI) has authorised a few Banks and their select branches to conduct the business of Portfolio Management on behalf of NRIs. These branches are the main branches of major commercial Banks located close to the stock exchange/s. NRIs will have to route their applications through any of the designated bank branches who have authorisation from RBI. The designated branches of Banks are also RBI licensed foreign exchange dealers.

When I purchase shares how do I make the payment?

A Payment can be made by cheque in favor of the broker drawn in India through a NRE/NRO a/c. OR
You can advice your bankers abroad to issue a rupee cheque in Indian Currency in India in favor of the broker. OR
You can send a rupee draft. OR
You can give a Power of Attorney to person resident in India to operate your NRE/NRO account in India.

How do I sell stocks I have already bought through the Primary Market?

Form TS-4 is to filled by the NRI in duplicate for seeking RBI permission for selling shares obtained by the NRI through DIRECT INVESTMENT (NEW/PRIMARY NRI ISSUES).

What happens when I need to sell the stock bought through the secondary market?

After the RBI permission is obtained by filling form RPI, the sale order is put through any recognised member of the Stock Exchange. The share certificates with the relevant transfer deeds along with the RBI permission are handed over to the broker to effect delivery.

When do I receive the sale proceeds and how?

 Sales proceeds will be received by you within 7 to 15 days by cheque in your favour which can be deposited in your NRE/NRO account maintained in India.

What are the formalities involved in repatriation of the sale proceeds?

The designated Bank through whom the RBI permission is obtained does the repatriation of sale proceeds. The Bank immediately repatriates the sale proceeds if they are equal to the cost of or less than the cost of investment.
If the sale proceeds are more than the cost of investments, there is a profit. This profit can be repatriated as follows :
· If the profit is a long term gain, a flat tax of 20% is deducted from the profit and the balance is repatriated.
· If the profit is a short term gain, it is added to the other income of the investor in India and the funds can be repatriated after settling the tax liability in India by obtaining tax clearance certificates


Are there any limits to non-resident investments in the Indian Capital Markets?

For portfolio Investment by NRIs the earlier ceiling limiting total NRI/OCB equity holdings in an Indian company up to 5%, is now raised to 24%, whereas a single NRI/OCB can hold up to 1% of the equity of an Indian Company.


What are the taxes applicable on Non-resident Indian profits?

a) Short Term Capital Gains : arises when a non resident Indian investor sells his investment within one year of his acquiring the same. STCG will be added to the regular income & taxed as per the existing Income Tax laws applicable to residents.
b) Long Term Capital Gain : arises when a non resident Indian investor sells an investment which he has held for more than one year. In case of LTCG, a flat tax of 20% is applicable for individuals and corporates.


Are there any tax concessions for NRIs?

Yes, there are tax concessions for NRIs. In case the sale proceeds are reinvested within a period of 6 months, no capital gains would be charged provided that such investments are held for a period of 3 years.


How do I register the shares in my name? How much time does it take the Company for registration?

When you buy shares from the market, you receive a share certificate along with a duly signed transfer deed. Though you are the owner of the shares, in the Company’s books the shares will be in the name of original owner. In order to avail of corporate actions like dividend/bonus/rights which is declared by the Company, you have to register the shares in your name by sending the share certificate and transfer deed duly signed to the Company or its transfer agents as the case may be. Usually it takes 2 to 3 months to get the shares registered.


What happens if I need to sell the shares which have gone for registration?

Shares sent for registration can be sold only after you receive the shares duly registered.


Is it necessary to register the shares before selling?

It is not necessary to register the shares before selling. However if the shares are left blank and if, in the mean while the Company announces a book closure/record date the shares become untenable after the book closure/record date.


I already have a Bank account in India. Can I route my transactions through this bank?

You can have as many NRI/NRO accounts in India but you should have only ONE designated bank for sale/purchase of shares under the Direct/Portfolio Investment Schemes.
RBI guidelines permit non-resident investors to designate only one bank authorised by RBI to undertake purchase/sale of shares/debentures through the stock Exchange on his behalf.
The client has to give a declaration that he has not obtained RBI permission for sale/purchase of shares under the Direct/Portfolio Investment Schemes through any other Bank.


Are there no central depositories in India?

There is one central depository in India namely NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL). Depositories Act was passed by both the Houses of Parliament in 1996. Some companies have already started moving towards dematerialisation of their shares.

While every effort h as been made to ensure that the information contained is accurate, it is given without any responsibility on our part. We will endeavour to keep updating information in line with changes in regulations from time to time.