Who qualifies as a Non-Resident Indian (NRI)?
An NRI is a person residing outside India but who is a citizen of India or is a person of Indian origin. Under the Foreign Exchange Management Act (FEMA), generally, a person is residing outside India if the person is in India for less than 182 days during the course of the preceding financial year and also includes any person who stays abroad:
* for employment, or
* for carrying on any business or vocation, or
* for any other purpose indicating an intention of stay outside India for an uncertain period
* for education*
* provided the student has stayed overseas for more than 182 days in the preceding financial year.
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.
Equity trading on BSE and NSE
Derivatives trading on NSE and BSE
Investments in Mutual Funds
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 Madhuvan Securities Ltd to hold his shares and register with Madhuvan Securities Ltd 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.
NRIs 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 GOI/RBI. Therefore, individual NRI need not obtain any permission.
Does an NRI require any permission to receive bonus/rights shares?
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. Notes:
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.
What are the types of PIS account?
There are two types of PIS account:
NRE PIS account
NRO PIS account
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.
How many PIS account can a NRI open?
NRI/PIO can open only one PIS account with any designated banks (Preferred bank – UTI Bank) in a prescribed format for PIS account, upon which the bank can issue a PIS approval letter to the investor.
Can I invest in all products through PIS account?
No. Any investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route.
What is a NON PIS Account?
It is a normal savings bank account which can be opened with any bank in India. Non-PIS is an account for which the transactions are not reported to RBI. This account takes care of selling all those shares which are not allowed under PIS. Shares acquired under IPO or received as gift or bought as resident Indian can be sold under Non-PIS account.
What are the types of NON PIS Account?
There are two types of NON PIS account
NRE NON PIS account
NRO NON PIS account
What type of transactions is allowed under NON PIS account?
Sale of shares which were acquired other than PIS.
Shares acquired through IPO’s
Gifts from relatives or otherwise
Shares bought as resident Indian
Fresh acquisition through IPO’s.
Investment in Mutual Funds
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 investments made through IPO’s or Private placements come under PIS?
No. Investments made by NRIs though subscription to Initial Public Offerings (IPO’s) or Private placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBI's regulations with regard to Foreign Direct Investments.
Do NRIs need any permission of RBI to subscribe for IPO’s or Private placements of equity shares/convertible debentures of existing or new companies?
No. NRIs do not require any permission to invest though Initial Public Offerings (IPO’s) or Private placements. In such cases, the Issuing Company should comply with all necessary regulations for issuing securities to a person resident outside India.
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.
Can an NRI have investments under PIS on repatriation and non-repatriation basis?
Yes. Investment can be made on repatriation as well as non-repatriation basis. However, an NRI will have to open NRE account as well as NRO account with designated bank branch as the sale proceeds of non-repatriation investment can only be credited to NRO account.
Under what circumstances can investments made under PIS are repatriated?
The repatriation of the sale proceeds, net of taxes, are allowed if the original purchase was made on repatriation basis and such investments were made out of funds from NRE/FCNR account or by means of remittance from abroad.
What are the provisions for corporate benefits for investment on repatriation and non-repatriation basis?
Corporate benefits may be in the form of dividend, interest, rights, bonus, etc. Any corporate benefit resulting out of investment in securities on non-repatriation basis will not carry the right of repatriation. Similarly any corporate benefit resulting out of investment in securities on repatriation basis will carry the right of repatriation. This is subject to change depending on prevailing RBI regulations.
Where can an NRI/PIO open a demat account?
NRI/PIO needs to open a demat account with Madhuvan Securities Ltd.
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 Madhuvan Securities Ltd, 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.
How do I Invest in Futures and Options?
NRIs can invest in exchange traded Derivative Contracts approved by SEBI from time to time out of INR funds held in India on non-repatriable basis (NRO) subject to the limits prescribed by SEBI.
What is the limit for the purchases of Equity shares/convertible debentures in each company?
The purchase of Equity shares/convertible debentures in each company with repatriation and non repatriation benefits shall not exceed 5% (or as prescribed by Reserve Bank of India from time to time) of the paid up capital of the company, subject to an overall ceiling of 10% (or as prescribed by Reserve Bank of India from time to time). All consequences of failure in such compliance, including any losses arising out of reversal of transactions shall be to the customer’s account.
What is the maximum amount an NRI can invest in Indian mutual funds?
There's no maximum limit laid down by the government for NRI's to invest in Indian mutual funds
Can I invest in mutual funds jointly with my wife?
If you're an NRI here's how you can invest:
b) Either or survivor
c) On first or survivor basis
Will NRI's need to take RBI permission before investing in mutual funds?
No. As an individual you do not need to take RBI permission for investing in mutual funds. You can invest through repatriable or non repatriable basis.
Can an NRI invest in any mutual fund scheme?
There are several mutual fund schemes on offer. However, note that all schemes are registered in India and hence the jurisdiction is limited to India only. None of the funds are registered under the United States Securities Act 1993. Hence these funds are not for you if you're a resident of the United States.
Will NRI's have to pay service charges/fees for investing in mutual funds through Times of Money?
No. There are no charges at all for investing through TimesofMoney. Its absolutely free! But you need to take into account the various loads charged by mutual fund companies.
What is POA? Why do I need to submit it? funds?
POA or Power of Attorney is one of the ways NRI's can invest in mutual funds in India. Through the POA you nominate Madhuvan to subscribe or redeem units of mutual fund schemes on your behalf. Besides you also grant us the authority to make additional purchases as well as redemption as and when you request.
How safe is it for NRI's to sign the POA form?
Investing through Power of Attorney (POA) is one of the methods NRI's can adopt for investing in mutual funds and is completely safe.
Can I simply fax the Power of Attorney (PoA) form to activate my mutual fund account to you?
No. You will have to courier the duly filled Power of Attorney (PoA) form to us. We will have your account activated on receipt of the form and mail you a confirmation.
As an NRI in the USA will I be able to invest online in Indian mutual funds?
Non resident Indians residing in the United States are not permitted by law to invest online in Indian mutual funds.
Do in need to take RBI approval (PIS) for trading in mutual funds in India?
No such approval is needed from any regulatory body in India for investing in Indian mutual funds.
Will the redemption/dividend amount be credited to the same account from which I made a mutual fund purchase?
Yes. The redemption/dividend amount will be credited to the same account