Skip to main content

NRI Corner – Part III: How NRIs can invest in Stock markets in India

Some conditions that make it possible for NRIs to buy shares of companies here, and some procedures involved

A non-resident Indian (NRI) is a citizen or person of Indian origin (PIO) who resides outside India. Under the Foreign Exchange Management Act 1999 (FEMA), a person who is not a 'person resident in India', as defined under Section 2(V) of the Act is considered as a 'person resident outside India'.

A PIO could be a citizen of any country but should have held an Indian passport, his parents or grandparents should have been citizens of India by virtue of the Constitution of India or the Citizenship Act 1955, he should be the spouse of an Indian citizen, or should be a person referred to in sub clause (a) or (b).

Investments by PIO in domestic securities are treated in the same as investments by NRIs and require the same approvals, while being eligible for the same exemptions.

A NRI or PIO can open a demat account with any depository participant (DP). He needs to specify the type (NRI or resident) and the sub-type (repatriable or non-repatriable) in the account opening form collected from the DP. No permission is required from the Reserve Bank of India (RBI) to open a demat account. However, credits and debits from the demat account may require general or specific permissions as the case may be, from designated banks. No special permission is required by an NRI for dematerialization or rematerialization of securities.

Holding securities in the demat form only constitutes change in form and does not need any special permission. However, only those physical securities which are NR-repatriable and NR non-repatriable can be dematerialised in the corresponding depository accounts. The securities purchased under repatriable and non-repatriable category cannot be held in a single demat account. An NRI must open separate demat accounts for these securities.

According to Section 6(5) of FEMA, a NRI can continue to hold the securities which he had purchased as a resident Indian, even after he has become a NRI, on a non-repatriable basis. In case a NRI becomes a resident in India, he will be required to change the status of his holding. It is the responsibility of the NRI to convey the change of status to the designated bank branch, through which he had made the investments in the portfolio investment scheme, and to the DP with whom he has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to the resident account, and then the NRI demat account should be closed.

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

Further, NRIs can purchase securities by subscribing to public issues. The issuing company is required to issue shares to NRIs on the basis of specific or general permissions from the government or the RBI. Therefore, individual NRIs need not obtain any permission. NRIs do not require any permission to receive bonus or rights shares too.

They can purchase existing shares and debentures of domestic companies by private arrangement. The RBI permits NRIs to purchase shares and debentures of existing domestic companies on non-repatriation basis. An undertaking about non-repatriation is to be given.

NRIs can also obtain loans abroad against the collateral of shares or debentures of domestic companies. The authorised dealers have been permitted to grant loans and overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares or debentures held by them, provided the securities concerned were acquired on repatriation basis.
The purchase and sale of shares by NRIs requires permission from designated banks. Therefore, a DP may ask for a copy of the permission from the designated bank before executing a debit (sale) transaction. They may not enable standing instructions for automatic credit unless a copy of the permission from the designated bank for sale or purchase is given.

Popular posts from this blog

Save Tax With Mutual Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...

Buying a Used Car

Invest in Mutual Funds Online Download Mutual Fund Application Forms   Pre-owned car can make sense in these inflationary times. But buying one can be trickier than getting a new vehicle    If you are thinking of buying a car but are worried about the rising inflation and higher EMIs eating into your budget, you should consider buying a used car. For those learning to drive, the general advice is that they should hone their driving skills in a used car. However, buying a used car is not an easy task. Though a used car costs less, there are a lot of aspects to be considered while buying one. You should do your due diligence before buying such a car. For example, two cars of the same model would carry two different prices. The difference in price could be on account of the age of the car, how many people have driven, etc. First Fix Your Budget Since used cars are available in a wide variety of models and prices, the starting point would be to determine your budget befor...

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

Debt Mutual Funds Best Fixed Income Investments

Debt Mutual Funds - Invest Online     In the last one year, except for a select few sectoral funds and small cap funds, not many of the equity funds have given great returns. On the other hand, debt funds have done relatively well in terms of returns. So far in the new year too, the stock market has been extremely volatile, pushing investors to look for safer havens. In this context, debt funds are looking safer bets for those investors who do not have the appetite for higher level of volatility. Investors who look for a regular income stream, also look at fixed income products like debt funds, bank fixed deposits and post office monthly income schemes.  Among the fixed income products, debt funds score over others because of chances of higher return, has nearly similar level of risks and liquidity. According to Shah, people looking for regular income could opt for a systematic withdrawal plan (SWP) in debt funds , which, if done judi ciously could also save on taxes. Shah explaine...

Diversification is key to gain more

Even those who prefer debt for its safety are looking at more options    It is not often that you find more than a couple of asset classes producing good returns at the same time. Invariably, assets such as gold and equity don't perform in tandem, and hence it was easier to allocate to them in line with the risk profile of the investors. In the last couple of quarters, however, more than one asset has turned attractive - gold, debt and equity. In line with the trend, you even have monthly income plans with a combination of more than two assets.    In the past, those who stuck to debt were a different class of investors who didn't wish to take risk with their money. The changing lifecycles and the growing integration of investment markets across the globe have pushed even individual investors to embrace the concept of asset allocation. Hence, you have individuals who were using debt to park profits being prepared to take advantage of other assets.    For instance, when the...
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