Here’s investing in Mutual Funds could prove to be a good financial decision:
- An NRI is an Indian citizen who stays outside India.
- For purposes of carrying out employment or any business or vocation.
- Under circumstances indicating an intention to stay outside India for an uncertain duration.
- Any Indian citizen deputed outside India for a temporary period in connection with employment.
A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if:
1. He / She at any time held an Indian Passport OR 2. He / She or either of his parents or any of his / her grandparents was a citizen of India OR 3. Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above.
NRI can invest in the following products.
1. Equity trading on BSE and NSE
2. Derivatives trading on the NSE
3. IPO online
4. Portfolio Management
5. Investments in Mutual Funds
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 an NBFC to hold his shares and register to execute his buy / sell orders on the stock exchange(s).
Any NRI / PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.
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, Funds lying in NRO account cannot be taken outside the country or in other words, the Funds lying in NRO account are not repatriable.
Yes money can be freely transferred from NRE account to NRO account.
RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.
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 are permitted to make direct investments in shares / debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e . purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.
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.
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:
1. PIS account is applicable only for NRIs and not for resident Indians.
2. It is only for trading in Indian markets and not any other foreign markets.
3. It is applicable only for equity trades and not MF investments.
There are two types of PIS account:
1. NRE PIS account
2. NRO PIS account
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.
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.
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.
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.
There are two types of NON PIS account
1. NRE NON PIS account
2. NRO NON PIS account
1. Sale of shares which were acquired other than PIS.
2. Shares acquired through IPO’s.
3. Gifts from relatives or otherwise.
4. Shares bought as resident Indian.
5. Fresh acquisition through IPO’s.
6. Investment in Mutual Funds.
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).
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.
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.
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.
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.
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.
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.
NRI/PIO needs to open a demat account with an NBFC as explained above.
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.
Client submits a DRF form along with the physical share certificate to NBFC, 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.
As per regulatory guidelines, Tax (if applicable) has to be deducted at source for all the profits done in the equity market transactions. Before crediting sales proceeds it is the responsibility of the broker and the PIS cell to determine the appropriate Tax and deduct it at source.
|Short term capital gains||Long term capital gains|
|Equity oriented schemes||15%||Nil|
|Other than equity oriented schemes||30%||10%(for unlisted)& 20% (for listed)|
Any Other Income 30%
TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term on a First-In, First-Out (FIFO) basis.
For any TDS to be deducted and money to be remitted to bank account, there are three things which have to be verified.
1. Amount of gain = Selling price – Purchase price
2. Duration of holding i.e. long term or short term = Selling date – Purchase date
3. Source of fund for purchase i.e. NRE or NRO
Important: TDS is deducted only at the time of crediting sales proceeds.
Portfolio Management Services provides the benefits of diversification across assets, sectors, and funds. The experts in Portfolio Management combine best of breed investment of avenues as they aim to achieve optimal returns at managed levels of risk. It is transparent collective investments.
A Mutual Fund is nothing but a pool of fund aggregated from different investors and invested in equity and debt in different proportion as per the risk appetite of investors by a professionally managed Asset Management Company. Through Mutual Funds one can create wealth and also minimise the market risk factor by a technique called averaging which can be achieved through Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP).
You can invest in Mutual Funds through NON PIS account.
Equity investments are subject to market risks and there is no assurance or guarantee that the objective of the portfolio management service will be achieved. As with any investment in securities, the net asset value of the managed portfolios can go up or down depending on the factors and forces affecting capital markets. Past performance of the portfolios does not indicate the future performance.
International Equity division provides an opportunity for investors to scale up their investment horizon, by tapping into International Equity and Commodities markets.