NRI Services

Account Opening for NRI                                                                                                                                                               DOWNLOAD FORMS

Individuals – All compliance formalities as per SEBI’s account opening for Individual plus RBI approval, which is taken through the Bank in which NRI is having their Bank A/c.

OBCs – All compliance formalities, which are required as per SEBI’s list for Corporate account opening. Documents that are equivalent to documents required here in India (like MOA, AOA etc.) are valid for the purpose. RBI approval is required which is taken through the Bank in which OCB is having Bank A/c.

NRI investors need to adhere to various guidelines applicable to them for trading as issued by the Reserve Bank of India and Securities and Exchange of Board of India. As per the Portfolio Investment Scheme applicable to NRIs they need to settle buy trade and sell trade independent of each other without any netting. Hence, at the time of placing a buy order they should always place a hold on funds with their broker. The hold will be placed on value of order (buy rate multiplied by quantity) plus some percentage (usually five percent of value of order). This percentage mark up will take care of brokerage, market rate variations etc. In case the order does not get executed or gets executed or gets executed at a lesser price, hold on funds will be released latest by T+1 working day.

As per RBI guidelines, NRIs are not permitted to square-off trades during same settlement period. In case he transacts a square-up any loss incurred will be borne by him. However, NRIs should always place hold on funds while placing a buy order and at the time of selling shares.

NRIs should always check RBI notifications for scrips in which further investment is disallowed. Each NRI is permitted to invest up to five percent of the paid up capital of the company. There is an overall ceiling of 10 percent of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by NRIs. The overall ceiling can be raised to 24% / 30% if the company concerned passes a special resolution to that effect in its general body meeting and/or board resolution.

While limits of individual holdings by NRIs are monitored by the respective designated bank branch RBI monitors the holding limits by NRIs in aggregate.

Once the aggregate holding of NRIs builds up or is about to build up to the maximum prescribed ceiling, RBI puts the stock concerned under the Restrict List/Watch List, which is published by RBI from time to time.

In case orders are placed in such scrips, which are under the Restrict List/Watch list of RBI, the investor may be required to place a square off order. Loss on such square will be debited to his account whereas profit on such square off will not be credited.

Frequently Asked Questions

Q.1 Who is a Non-Resident Indian [NRI]?
Ans. Non-Resident India [NRI] means a ‘personal resident outside India’ who is a citizen of India or is a ‘person of Indian origin’.

Q.2 Who is a ‘person resident outside India’?
Ans. 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’. The most important change in definition [since FERA 1973] is that the citizenship of a person no longer has a bearing in determination of residential status.

Q.3 Who is a ‘person of Indian origin’?
Ans. ‘Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if

1. He at any time held Indian passport: or
2. He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constituent of India or the Citizenship Act, 1955; or
3. The person is a spouse of an Indian citizen or a person referred to in sub-clause [s] or [b].

Investment by PIO in Indian Securities is treated the same as the investment by non-resident Indians and requires same approvals and enjoys the same exemptions.

Q.4 What is an ‘Overseas Corporate Body’ [OCB]?
Ans. ‘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.

OCBs were debarred from portfolio Investment Scheme w.e.f November 29, 2001. OCBs have been banned as a class of investor w.e.f September 16, 2003. However, they have been permitted to continue to hold the securities acquired by them prior to these dates. Accordingly, OCBs may open a demat account, however it can be only for the purpose of dematerializing the existing holdings.

Q.5 Can NRIs invest in shares, debentures and units of mutual funds in India?
Ans. 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. The facilities are granted both on repatriation and non-repatriation basis.

Q.6 Can an NRI purchase securities by subscribing to public issue? What are the permissions/approvals required?
Ans. 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.

Q.7 Does an NRI require any permission to receive bonus/rights shares?
Ans. No

Q.8 What is Portfolio Investment Scheme?
Ans. Under this scheme, NRIs are permitted to acquire shares/debentures of Indian Companies or units of domestic Mutual Funds through the stock exchange(s) in India.

Investment can be made both on repatriation or non-repatriation basis. For making investment on repatriation basis, it will be necessary to make payments by way of inward remittance or by debit to the NRE/FCNR account of the NRI/PIO. Investment on non-repatriation basis can also be made by way of inward remittance or by debit to the NRE/FCNR/NRO accounts.

The sale proceeds of the repatriable investments can be credited to the NRE/NRO accounts of the NRI/PIO at the option of the investor, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.

The sale of shares will be subject to payment of applicable taxes.

Q.9 What is the procedure for making applications for portfolio investment scheme?
Ans. The application is to be submitted to a designated branch of an authorized dealer in India in the prescribed form. No permission is required from RBI.

Q.10 What is designated branch?
Ans. Reserve Bank has authorized a few branches of each authorized dealer to conduct the business under portfolio investment scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated authorized dealer branches who have authorization from Reserve Bank.

Q.11. Whether NRI can apply through more than one authorized dealer?
Ans. No. NRI can select only one authorized dealer for the purpose of investment under Portfolio Investment Scheme and route the transactions through the branch designated by the authorized dealer.

Q.12 Can an NRI purchase or sell shares or convertible debentures on a stock exchange in India on repatriation or non-repatriation basis under portfolio investment scheme?

Ans. NRIs/PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the portfolio investment scheme. The rules relating to this scheme are as given below:

• Shares purchased under PIS on Stock Exchange shall be sold on stock exchanges only. Prior approval of RBI is required if such shares are proposed to be transferred either by way of gift or under private arrangement to a non-resident / resident.
• These trades can be done only through a registered broker on a recognized stock exchange.
• NRI shall designate a branch of an authorized dealer and route all his/her transactions through this authorized dealer.
• NRI takes delivery of the shares purchased and gives delivery of shares sold.
• NRI shall abide by the directions given by RBI/SEBI or such authority if the transaction results in the breach ceilings stipulated for NRI holding in the company scheme.

The sale of shares will be subject to payment of applicable taxes.

An NRI or a PIO can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs / PIOs (also the OCBs who had purchased shares under the earlier scheme) taken together cannot purchase more than 10% of the paid up value of the company. (This limit can be increased by an Indian company to 24% / 30% by passing a General Body resolution).

Q.13 What are the permissions required for the transfer of securities by NRI/PIO through off-market trade (transfers outside the purview of Portfolio Investment Scheme of RBI)?
Ans. The table given below summarizes the permissions required for the off-market transfer:

From	To	Transaction	Permissions Required
NRI	NRI	Sale or Gift	General permission, no specific permission to be taken*
NRI	Resident Indian	Gift	Prior approval of RBI required
NRI	Resident Indian	Sale under private arrangement	General permission already available
Resident Indian	NRI	Gift	Prior approval of RBI/FIPB should be obtained
Resident Indian	NRI	Sale under private arrangement	General permission is already available provided the shares being transferred are not of the companies engaged in financial services service sectors, such transfer does not attract SEBI takeover code and the activity of the company should be eligible for FDI

*provided that the person to whom the shares are being transferred has obtained prior permission of central government to acquire the shares, if he has previous venture or tie up in India through Investment in shares or debentures or a technical collaboration or a trademark agreement or investment by whatever name called in the same field or allied field in which the Indian company whose shares are being transferred is engaged.

Q.14 Where can an NRI/PIO open a demat account?
Ans. NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL. The NRI/PIO needs to mention the type [‘NRI’ as compared to ‘Resident’] and the sub-type [’Repatriable’ or ‘Non-Repatriable’] in the account opening form collected from the DP.

Q.15 Does an NRI need any RBI permission to open a demat account?
Ans. 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 authorized dealers.

Q.16 If NRI/PIO desires to make investments under different schemes can be hold all such securities in a single demat account?
Ans. 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 basis.

Q.17 Does an NRI require RBI permission for Dematerialisation/ Re-materialisation of securities?
Ans. No Special permission is required. Holding securities in demat only constitutes change in form and does not need any special permission. However, only those physical securities, which already have the status as NR-Repatriable/NR-NonRepatriable can be dematerialised in the corresponding depository accounts.

Q.18 Can securities purchased under repatriable and non-repatriable category be held in a single demat account?
Ans. No. An NRI must open separate demat accounts for holding re-patriable and non-repatriable securities.

Q.19 Incase a person who is resident in India becomes a Non-resident, will he/she be required to change the status of his/her holding from resident to non-resident?
Ans. As per section 6(v) of FEMA, NRI can continue to hold the securities, which he/she had purchased as a resident India, even after he/she has become a non-resident Indian on a non-repatriable basis.

Q.20 In case a non-resident Indian becomes a resident in India, will he/she be required to change the status of his/her holding from non-resident to resident?
Ans. Yes. It is the responsibility of the NRI to inform the change of status to the designated authorized dealer branch, through which the investor had made the investments in portfolio investment scheme and the DP with whom he/she 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 resident account and then close the NRI demat account.

Q.21 Can a DP ask for RBI permission for executing instructions for purchase or sale?
Ans. An individual NRI cannot purchase under PIS shares exceeding 5% of the paid up capital of a company. The onus of monitoring this limit is that of the designated authorized dealer. Shares purchased under PIS scheme can be sold only through a stock exchange. See the rules explained under question no.12. No permission is required from RBI to purchase or sell under portfolio investment scheme.

Q.22 Can an NRI nominate or be nominated in depository account? Whether such nominee can be person resident in India?
Ans. Yes

Q.23 What type of Bank account details is to be given at the time of account opening and subsequently (by way of change of details)?
Ans. The following bank accounts may be given:
1. For Non-repatriable                         -           NRO (dividend/ interest is repatriable)
2. For Repatriable                                -           NRE
The above details recorded by the DP in the demat account may be used by the issuer to directly credit dividend or interest.

(Dividend/interest received on investments made on repatriation and non-repatriation basis under portfolio investment scheme is not an eligible credit to NRE (PIS) account and NRO (PIS) account respectively.)

Q24). Does it require permission from the Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
Ans. No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC.
Q25). Can loans be granted abroad against collateral of the shares/debentures of Indian companies?
Ans. Yes. Authorized dealers have the power to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies only if the concerned shares/debentures were acquired on repatriation basis
Q26). For how long is the permission valid for buying shares/debentures and units of domestic mutual funds?
Ans.  Approval from the Reserve Bank is valid for a period of five years from the date of issue. This can be renewed by a request by means of a simple letter.

Tax Obligations

Investors under the Portfolio Investment Scheme are liable to pay Capital Gains Tax on their investments, which depends on the tenure of their stocks. Prevailing rates are deducted at source by the designated bank.

Reference:

NRIs may read Master Circular number RBI/2004-05/4 dated July 01, 2004 relating to remittance facilities for NRIs/PIOs/ Foreign nationals.
• RBI notification No: 20 dated 3rd May, 2000
• FAQs hosted on RBI internet site www.rbi.org under the head “Chapter III – Investments in Securities / hsares and company deposits
• AP Dir Series Circular No.16 dated October 4, 2004.