Who is a non-resident Indian (NRI)?
Non-Resident Indian (NRI) means a “person resident outside India” who is a citizen of India or is a person of Indian origin"[as per FEMA regulations
Who is a Person of Indian Origin (PIO)?
A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if
(a) he/ she at any time held an Indian passport; OR
(b) he/ she or either of his/ her parents or any of his/ her grandparents was a citizen of India; OR
(c) spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen or (a) or (b) above
Who is an Overseas Citizen of India (OCI)?
Under OCI Scheme operational from 02nd Dec 2005, Government of India decided to grant overseas citizenship of India (OCI) commonly known as “dual citizenship”. The Government of India, on application, may register any person as an Overseas Citizen of India, if the person: • was a citizen of India on 26 January 1950 or at any time thereafter; or
• belonged to a territory that became part of India after 15 August 1947; or
• was eligible to become a citizen of India on 26 January 1950; or
• is a child or a grandchild or a great-grandchild of such a citizen; or
• is a minor child of such persons mentioned above; or
• is a minor child and whose both parents are citizens of India or one of the parents is a citizen of India; or
• is a spouse of foreign origin of a citizen of India or spouse of foreign origin of an Overseas Citizen of India Cardholder registered under section 7A of the Citizenship Act, 1955 and whose marriage has been registered and subsisted for a continuous period of not less than two years immediately preceding the presentation of the application
However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he/she will not be eligible for OCI.
What is an Overseas Corporate Body (OCB)?
‘Overseas Corporate Body’ means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non- Resident Indians directly or indirectly but irrevocably.
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 Non-resident External Account (NRE)?
The NRE account is an Indian Rupee denominated account. There are restrictions as to deposit / credit into NRE account. One can deposit only foreign currency in this account, which gets converted into INR at the time of deposit. Apart from foreign currency deposit, other permitted credits (as approved by RBI) are only accepted in the NRE account. Therefore, one may repatriate the money in this account (plus interest earned) any time. And the interest is not taxable.
What is a Non-resident Ordinary Account (NRO)?
An NRO account, on the other hand, is a savings or current account held in India for the NRIs to manage their income earned in India. Once you deposit the money to the NRO account, the foreign currency is automatically converted to INR. However, the interest you earn in this account is subject to Tax Deduction at Source (TDS).
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.
Can NRI make investments in India?
Yes, NRI can make the following investments in India:
a. Shares or convertible debenture of an Indian Company
b. Equity Derivatives
c. Currency derivatives (ETCD) to hedge currency risk arising out of their investments in India
d. Mutual Funds
e. ETFs and Government Securities
Can PIO (Person of Indian Origin) as well as OCI (Overseas Citizen of India) also invest in shares in India?
Yes, PIOs and OCIs do have a parity with NRIs in respect of all facilities available to the NRIs in the economic, financial and educational fields except in matters relating to the acquisition of agricultural/ plantation properties.
How can NRIs invest in Equity in India?
The procedure for equity investment in India differs for repatriable and non-repatriable modes. Investment on non repatriable mode is treated at par with domestic investment and therefore it can be done through a regular demat-cum-trading account with DBFS. However investment with repatriation can be routed through a PIS account with a designated bank. Trading and demat account to be opened with DBFS and the PIS account needs to be opened with any one of the designated bank like Doha Bank/ AXIS Bank/ IndusInd Bank/ Federal Bank/ IDBI Bank.
What is Portfolio Investment Scheme (PIS)?
Portfolio Investment Scheme (PIS) is a scheme of Reserve Bank of India under which - Non Resident Indian (NRIs) can purchase/sell shares/convertible debentures of Indian companies on Stock Exchanges under Portfolio Investment Scheme. For this purpose, the NRI/PIO has to apply to a designated branch of a bank, which deals in Portfolio Investment. All sale/purchase transactions are to be routed through the designated branch. PIS account is required only if the NRI wants to repatriate his investment proceeds.
What is a designated bank branch?
Reserve Bank of India has authorized few branches of each authorized dealer bank to conduct the business under portfolio investment scheme on behalf of NRIs. NRI can select only one authorized dealer bank for the purpose of investments under portfolio investment scheme and route the transactions through the branch designated by the authorized dealer bank. DBFS has tied up with Doha Bank, AXIS Bank, IndusInd Bank, Federal Bank and IDBI Bank for PIS services.
Is there any ceiling on the Investments under the Portfolio Investment Scheme?
NRIs are allowed to invest in shares of listed Indian companies in recognized Stock Exchanges under the PIS. a. NRIs can invest through designated ADs, on repatriation and nonrepatriation basis under PIS route up to 5 per cent of the paid- up capital / paid-up value of each series of debentures of listed Indian companies.
b. The aggregate paid-up value of shares / convertible debentures purchased by all NRIs cannot exceed 10 per cent of the paid-up capital of the company / paid-up value of each series of debentures of the company.
c. 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.
Is there any other restriction for NRIs to trade in Indian Capital market? Yes, they are:
a. Only delivery based transaction permitted. No Intraday or BTST transactions
b. Do not trade in Banned and Caution scrip and prohibited sectors (as notified by RBI)
These restrictions are applicable only in respect of transactions under PIS (Repatriable).
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.
Can I have more than one PIS account?
No, You can allocate only one designated bank to channel the transactions under the portfolio investment scheme account for NRE.
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.
Thus, shares bought through the primary or secondary market as ‘resident individual’ can be held only on a non-repatriation basis. Once your residential status changes to that of an NRI, these shares need to be credited to the NRO Demat Account, and thereafter they can be sold in the secondary market without PIS permission. The sale proceeds can be credited to the NRO Saving Account after the payment of capital gains tax.
Can NRIs transfer shares purchased under PIS to others under a private arrangement?
Shares purchased under PIS on stock exchange shall be sold on stock exchange only. Such Shares cannot be transferred by way of sale under private arrangement or by way of gift (except by NRIs to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India) to a person resident in India or outside India without prior approval of the Reserve Bank of India.
As an NRI, will dividend on shares be credited to NRE account?
The dividends will get credited to your NRE account you've linked to your DEMAT account. The dividend is credited by the RTA (Registrar and Transfer Agents). There may be cases where they may not be able to credit the dividend to your NRE account. In such cases, a cheque would be sent to your registered address.
How do I map my existing PIS account with DBFS which is currently mapped to another broker?
To map your PIS account you need to submit a Letter of Authority as per the format of the respective banks.
How can NRIs invest in India under Non-repatriation status?
NRIs are permitted to make investments in Indian firms/companies under non-repatriation status. When investor brings the money to India and does not want to take it back to the home country, he can make the investments using NRO account. Such investments are said to be done on non-repatriable basis.
With the recent amendment in FEMA regulation, NRI’s can now invest in Equity Market like resident individuals. Now PIS account is required only if they want to repatriate (take out the funds out of the country) the sale proceeds. The relaxation for Non-repatriable investment is applicable only for Equity (CM) segment and NOT available for FAO or currency segments.
Can a NRI trade in Futures & Options under Non-repatriation status?
Yes, a Non-resident Indian can trade in equity futures and options. NRIs can trade in the F&O segment of the exchange out of the rupee funds held in India on a non-repatriate basis. NRIs are required to get a Custodial Participant (CP) code to trade in F&O. Once you have the CP code, all the funds for trading F&O will sit with the custodian, similar to how all your funds for trading stocks sit with your bank.
Can I convert NRO-PIS Trading A/c to Normal Trading A/c (NRI Non-repatriable)
Yes you can. You may submit a request in the prescribed format along with supporting documents like bank proof and demat account proof under NRO status.
Are all NRIs Eligible to trade in Derivatives?
Yes. All NRI customers can trade in Derivatives subject to norms as prescribed under FEMA and mandated by RBI, SEBI and other regulatory bodies from time to time. NRIs can trade in the F&O segment of the exchange out of the rupee funds held in India on a non-repatriate basis. NRIs are required to get a Custodial Participant (CP) code to trade in F&O. Once you have the CP code, all the funds for trading F&O will sit with the custodian, similar to how all your funds for trading stocks sit with your bank.
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