Skip to main content

How NRIs can invest in Indian Stock Markets

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

How NRIs can invest in Indian Stock Markets

The FDI policy, announced by the Department of Industrial Policy and Promotion (DIPP) and the provisions of Foreign Exchange Management Act (FEMA), 1999 governs foreign direct investment in India.

Under the FDI scheme, the PIOs, NRIs and the NRs can invest is India either by making new investments or through taking up already existing equity shares and compulsorily convertible preference shares (CCPs) or compulsorily convertible debentures (CCDs) of an Indian company via the two channels, namely the automatic route and the government route.

  • Under the automatic route, the NRI investor or the foreign company do not need to seek any prior approval from the Government of India for investing in India.
  • Prior approval is required from the FIPB under the government route.

However there are certain restrictions regarding investment in India, such as:

• Foreign investment in any form in a company or a partnership firm or a proprietor or an entity, whether engaged, not engaged or proposes to engage, is prohibited in the following operations:

1. Business of chit fund
2. Agricultural and/or plantation activities
3. Nidhi company
4. Real estate business or construction of farm houses
5. Trading in transferable development rights
6. Retail Trading
7. Atomic Energy
8. Gambling and betting, including casinos
9. Various kinds of lottery business, including government, private and online lotteries.
10. Activities and sectors inaccessible by private sectors
11. The manufacture of tobacco or tobacco substitutes, cigars or cigarettes, cheroots

 

• The partnership firms or proprietor concerns with investments in tune with the FEMA regulations prohibited to engage in print media sector.

• Foreign investment in trusts apart from investments by SEBI registered Foreign Venture Capital Investors (FVCI) in domestic VCFs is not allowed.

There are certain cases where transfer of equities from residents to NRIs through sale needs prior approval from the Reserve Bank of India:

  • Transactions that fall within the purview of SEBI Regulations, 1997
  • Activities of Indian companies whose capital instruments are translated
  • Transfer of equity shares of Indian companies involved in financial sector services, NBFCs, insurance sector and stock exchanges
  • Equity shares transferred as gift to a person residing abroad.

According to Foreign Exchange Management Act (FEMA), 1999, "an NRI is a person resident outside India who is either a citizen of India or a person of Indian origin (PIO)."

 

Who is a NRI

KYCs for NRI

1. A person who has resided in India for 182 days or more during a financial year and 365 days or more during the preceding four financial years can be said to be a resident of India.

1. Passport submission is compulsory. Relevant pages of passport bearing the name, age, photo and address need to be submitted.

2. NRIs can enjoy their non-resident status in India if they are present for 60 days but less than 182 days in a financial year, even if they stay in India for 365 days or more during the previous four financial years.

2. The address of the NRI residing abroad is compulsory. Either the permanent or the correspondence address must be overseas.

3. A person also qualifies as NRI if he is deputed abroad for over 6 months.

 

 

 

 

 

 

 

 

 

 

 

 

 

After US and Japan, India has the largest investor base. Shares in Indian Stock market are traded through National Stock exchange (NSE) and Bombay Stock Exchange (BSE) either online, over phone or with the help of an intermediary agent.

The eligibility criterions for the NRIs to invest in Indian Stock Markets are:

  • An NRI can invest in Indian Markets subject to the FDI policy, except for a resident of Pakistan.
  • An entity or a citizen of Bangladesh can invest in India with prior approval of FIPB and under FDI scheme.

Equity shares can be issued by Indian companies according to the pricing norms or valuation rules established by the FEMA regulations. The pricing of the shares need to be decided at the time of issuing. Investment by NRIs can be done in both repatriation as well as non repatriation basis.

 

Investment on non repatriation basis

Investment on repatriation basis

If an NRI wants to bring US $ into India and then decides to stay back, they can invest the money without engaging in much paper work especially in case of taxation.

If an NRI wants to take out the principal amount including the profits, they need an NRE account and withdraw after paying the required taxes.

 

 

 

 

 

 

 

 

NRIs can invest in Indian Stock market under the Portfolio Investment Scheme (PIS) of RBI. To ensure that some dos and don'ts to be followed while investing in Stock market:

 

Dos

Don'ts

1. NRI needs to open NRI/NRE (Non Resident External Rupee) account with RBI entitled Indian bank as the money will be deposited in those accounts.

1. Total investment cannot cross 10% of paid-up capital in Indian company.

2. An individual can open only one PIS account for stock transaction and needs to invest in local currency.

2. An NRI cannot do any trading in India without a stock broker.

3. One needs to open a demat account and a trading account with a brokerage firm authorised under SEBI or a SEBI registered mutual fund advisor.

3. NRIs cannot transact on non-delivery basis in India.

4. A stock bought can only be sold after two days. An NRI can nominate a power of attorney who can do the transaction in India on their behalf.

4. An NRI should not appoint a broker without assessing their reputation and balance sheet and check through BSE, SEBI or NSE whether he has defaulted earlier.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NRIs need to open NRI/NRE account to subscribe to Initial Public Offerings (IPOs), which does not come under PIS and thus shares purchased through IPOs can be sold without a PIS account.

Investment options for NRIs:

There are several possible channels in which NRIs can invest their money in India, such as:

  • Bank deposits
  • Secondary markets via Portfolio investment in equity shares or convertible debentures
  • Non-convertible debentures
  • New issues such as shares or convertible debentures
  • Mutual funds only if the investment is made either out of NRE/NRO/FCNR account or through 'inward remittance'.
  • Propriety concern in India
  • Bonds only if the investment is made either out of NRE/NRO/FCNR account or through 'inward remittance'.
  • Domestic NRO funds invested through deposits in Indian companies, including RBI registered NBFCs, on non repatriation basis up to duration of 3 years, subject to some formalities by the concerned companies.
  • Immovable property subject to the fact that the amount is not invested for purchasing plantation property, agricultural land or farm house and that the investments are made through existing NRE accounts or inward remittances.

Tax Liabilities of NRIs:
Tax is deducted at source for an NRI even though the tax liabilities are similar to that of an Indian resident.

 

Tax forms

Equity Shares

Short term capital gains tax

15%

Long term capital gains tax

Nil

Dividend distribution

Nil

 

 

 

 

 

Paid up capital limits for NRIs
There are 89 companies in which the NRIs are allowed to invest up to a limit of 24% of their paid up capital whereas there is only one company where NRIs are allowed to so. NRI investments have reached to 8% of their paid up capital in 5 companies and further purchases will need prior approval from Reserve Bank of India. On the other hand in 7 companied NRI investments have reached 10% already where no more purchases by NRIs are approved. Investment up to 30% and 40% of paid up capital are authorized in 19 and 14 companies respectively.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFundsInvest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Read more

Zero Coupon Bonds or discount bond or deep discount bond

A ZERO-COUPON bond (also called a discount bond or deep discount bond ) is a bond bought at a price lower than its face value with the face value repaid at the time of maturity.   There is no coupon or interim payments, hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures. Zero-coupon bonds may be long or short-term investments.   Long term zero coupon maturity dates typically start at 10 years. The bonds can be held until maturity or sold on secondary bond markets.
Read more

Mutual Fund MIPs can give better returns than Post Office MIS

Post Office MIS vs  Mutual Fund MIPs   Post office Monthly Income Scheme has for long been a favourite with investors who want regular monthly income from their investments. They offer risk free 8.5% returns and are especially preferred by conservative investors, like retirees who need regular monthly income from their investments. However, top performing mutual fund monthly income plans (MIPs) have beaten Post Office Monthly Income Scheme (MIS), in terms of annualized returns over the last 5 years, by investing a small part of the corpus in equities which can give higher returns than fixed income investments. The value proposition of the mutual fund aggressive MIPs is that, the interest from debt investment is supplemented by an additional boost to equity returns. Please see the chart below for five year annualized returns from Post office MIS and top performing mutual fund MIPs, monthly d...
Read more

Benefits Of Repo Rate & CRR Rate Cut On Consumers

  How Reduction In Repo Rate & CRR Affects Customers Finally  RBI announced slashing of repo rate by 25 basis points (bps ) and cash reserve ratio (CRR) by 25 bps which industry experts believe will fuel the economic growth to some extent. Although experts were expecting higher rate cut this year. This lowering of the rate cuts has taken place for the first time in nine months. Now let's see how reducing the repo rate (defined in economic term as the rate at which RBI lends money to the banks) relates to the following individuals and sectors: Banking:   Lowering of repo rate directly reduces borrowing costs of a bank. Banks in turn reduces interest rates on different types of loans such as home, auto, business etc. Similarly trimming down of CRR allows banks to unlock money for lending to the customers i.e. with 0.25 rate cut banks are estimated to lend more than INR. 17 Crores. Consumers:   Lower repo rate does not necessarily benefit existing loan borrowers but new loan se...
Read more

NRI Corner: The process of remittances abroad

The process of remittances abroad, and back, is cumbersome. Here’s how you can wade through without hassles Approach The Right Place Outward remittances or the process of sending money abroad is governed by many regulations. In India, outward remittances are made mainly through banks. At the outset, you need to remember that you just cannot trust any individual or a financial firm with the responsibility of sending your money. Experts recommend that you should always try to choose a bank with an international footprint, which will make your job easier. Choose Mode Of Transfer The next step is to choose the mode of transfer. One option is to get a Foreign Currency Demand Draft ( FCDD ). This draft will be denominated in foreign currency and should be drawn in favour of the recipient/ beneficiary. The beneficiary does not necessarily need to have an account with the same bank. The other option is to send money via wire transfer. Do not be puzzled if the bank official uses the word SWIFT ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now