NRI Investment FAQs

The best way to participate in the growth of the Indian economy for a NRI is to participate in the Indian equity market. Such participation can be by way of buying stocks through Portfolio Management Services (PMS) and units of mutual funds in India with the help of seasoned financial advisors.

Investment in the stock market is fully allowed and a routine means used by several NRI across the world.

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NRI/ OCI can contribute to capital of a firm or proprietary concern in India on non-repatriation basis subject to certain restrictions.

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NRI / OCI cannot invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business (i.e. dealing in land & immovable property with a view to earning profit or income therefrom) or engaged in Print Media.

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NRI/OCI can contribute to capital of a firm or proprietary concern in India by way of inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ NRO a/c maintained in accordance with FEMA regulations.

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No. Only NRI/OCI can make investment in firm or proprietary concern in India. However, a person resident outside India other than NRIs/ OCI may make an application and seek prior approval of RBI for making such investment in firm or proprietary concern in India.

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A firm or proprietary concern in India may make payment to or for credit of a NRI or OCI, the capital contributed by such person in that firm or proprietary concern or income accruing to such person by way of profit on such contribution in his/her NRO a/c only, irrespective of the type of account from which capital was paid.

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No. The amount invested for contribution to the capital of a firm or a proprietary concern and the capital appreciation thereon shall not be allowed to be repatriated abroad.

RBI has given general permission to NRIs to repatriate upto USD 1 million  per FY out of balances held in their NRO a/c. Accordingly, such amount may be repatriated under USD 1 million scheme. However, considering that such position may be litigative, it is recommended to obtain prior RBI approval.

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Yes, NRI/OCI is permitted to contribute to the capital of a LLP on repatriation and non-repatriation basis subject to certain conditions/restrictions.

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  • NRI/OCI, including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs may contribute to the capital of a LLP without any limit on non-repatriation basis.
  • A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. However, the following persons shall not be eligible to invest in LLPs:
  • A citizen/ entity of Pakistan and Bangladesh or
  • FPI or
  • FVCI

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  • FDI is permitted under the automatic route in LLPs operating in sectors/ activities where 100% FDI is     allowed, through the automatic route and there are no FDI linked performance conditions.
  • FDI in LLP is subject to the compliance of LLP Act, 2008.
  • Downstream investments by an LLP having foreign investment will be permitted to make downstream investment in another company  or LLP in sectors in which 100% FDI is allowed under automatic route and there are no FDI- linked performance conditions.

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PIS is a scheme of RBI under which NRIs can purchase and sell capital instruments of listed Indian company on recognized stock exchanges. For this purpose, NRI/PIO has to apply to AD Bank. All sale/ purchase transactions are to be routed through the said account only.

Capital instruments means equity shares, debentures, preference shares and share warrants (subject to explanation provided in definition of the capital instrument).

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As per RBI guidelines, NRI who wishes to invest in shares in India through a stock exchange under repartriable basis need to approach AD Bank to open a NRE PIS a/c under the scheme for routing investments.

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NRI should have a separate bank account, i.e. NRE (PIS) savings a/c exclusively for PIS transactions. Accounts can be jointly held similar to NRE savings a/c. We understand that NRO PIS a/c is re-designated as NRO account.

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Yes, NRI can also invest in following securities without limit – on repatriation basis:

  • Government dated securities (other than bearer securities) or treasury bills or Units of domestic mutual funds.
  • Bonds issued by a public sector undertaking (PSU) in India.
  • Shares in Public Sector Enterprises being disinvested by the Government of India.
  • Bonds/ units issued by Infrastructure Debt Funds
  • Listed Non-convertible/ redeemable preference shares or debentures

Further, NRI/ can also invest in following securities without limit – on non-repatriation basis:

  • Dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of money Market Mutual Funds, or National Plan/ Savings Certificates
  • listed non-convertible/ redeemable preference shares or debentures in case of Merger & Demerger
  • subscribe to the chit funds authorized by the Registrar of Chits or an officer authorized by the State Government in this behalf.

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No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated AD Banks.

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NRIs are allowed to invest in shares of listed Indian companies in recognized stock exchanges under PIS:

  • NRIs can invest on repatriation basis under PIS route up to 5 per cent of the paid- up capital/ paid-up value of each series of convertible debentures/ paid-up value of each series of convertible preference shares/ paid-up value of each series of warrants of Indian companies.
  • The aggregate paid-up value of shares/ convertible debentures/ convertible preference shares/ warrants purchased by all NRIs cannot exceed 10 per cent of the paid-up capital of the company/ paid-up value of each series of convertible debentures/ convertible preference shares/ warrants of the company.
  • 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.

Ans. Payment for purchase of shares and debentures on repatriation basis has to be made by way of inward remittance through normal banking channels or NRE a/c funds.

Ans. Payment for purchase of shares and debentures on non-repatriation basis has to be made by way of inward remittance through normal banking channels or out of funds held in NRO/ NRE/ FCNR a/c.

Ans. If shares sold were held on repatriation basis, sale proceeds (net of taxes) may be credited to NRE/ FCNR/ NRO a/c (subject to conditions).

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The sales proceeds are subject to tax under the head Income from Capital Gains as per the Act. Kindly refer to Chapter 17: Capital Gains on Securities.

Ans. It is mandatory for NRI to take delivery of shares purchased and give delivery of shares sold.

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No RBI permission is required for transfer (by way of sale or gift) shares/ of Indian Company to another NRI/OCI or to non-resident other than an NRI or an OCI. However, it is required to comply with necessary conditions for acquiring said shares.

Ans. NRI can freely transfer shares or debentures held on non-repatriation basis to residents by way of gift.

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The resident is required to make an application to RBI to gift equity shares to his daughter (NRI) and comply with conditions. Further, he also required to submit following information:

  • Name and address of himself and his daughter and the relationship that they share.
  • Reasons for making the gift
  • Certificate from the Indian Company concerned certifying that the proposed gifting is in accordance will FDI regulations
  • Other documents as may be specified by RBI from time to time.
  • RBI may permit such a transfer only after evaluating the merits of the case.

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Yes. NRI can continue to hold the securities, acquired by him as a resident Indian, even after he becomes a NRI. He is required to intimate AD Banks, brokers, companies about change in his residential status.

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Yes, NRI needs to inform AD Bank (through which he had made investments in PIS) and Depository (with whom he opened Demat a/c) about the change in his residential status. Subsequently, a new Demat a/c with relevant resident status will have to be opened. Securities should be transferred from the NRI Demat a/c to the Resident Demat a/c and  NRI Demat a/c must be closed.

Ans. No. As per provisions of FEMA, Indian Company is not permitted to avail loan from a NRI. Alternatively, NRIs can provide deposits to an Indian company or invest in the Non-convertible Debentures offered by the Company.

Ans. Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from Government of India/ RBI. Therefore, individual NRI need not obtain any permission.

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No. NRI need not take any permission to receive bonus/ right shares. FEMA provisions allow Indian companies to issue Rights / Bonus share to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable.

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The eligible capital instruments for FDI are as under:

  • Equity Shares;
  • Fully, compulsorily and mandatorily convertible debentures;
  • Share warrants;
  • Fully, compulsorily and mandatorily convertible preference shares.

Ans. Person Resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh) can invest in units of Investment Vehicle which includes Real Estate Investment Trusts [REITs], Infrastructure Investment Trusts [InvITs] and Alternative Investment Funds [AIFs].

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The payment for the purchase of the units of the REITs, InvIts and AIF shall be made by an inward remittance through normal banking channel including by debit to NRE or FCNR a/c.

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NRI can subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels including by debit to NRE or FCNR a/c and the person is eligible to invest as per provisions of PFRDA Act. The annuity/ accumulated saving will be repatriable.

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