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NRI Investments in India

NRI Investments in India

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Published by bhavnesh_mutha
NRI Investments in India, Equity Investments, Indian Stock Market for NRIs, Indian Capital Market for NRIs, Indian Share Market for NRIs.
NRI Investments in India, Equity Investments, Indian Stock Market for NRIs, Indian Capital Market for NRIs, Indian Share Market for NRIs.

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Published by: bhavnesh_mutha on Aug 03, 2010
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10/25/2012

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Investing in India
Points to know for NRIs investing in India brought to you byHSBC InvestDirect (India) Limited
http://www.hsbcinvestdirect.co.in
 
 
 Definition of a NRIs / PIOs
Who is a ‘Non Resident Indian (NRI)’?
A person who does not reside in India for more than 182 days in any preceding financial yearNon Resident Indians is also someone who fall under the following broad categories:
 
Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any otherpurpose in circumstances indicating an indefinite period of stay outside India.
 
Indian citizens working abroad on assignments with foreign Governments/government agencies orInternational/Regional Agencies like the UNO, IMF, World Bank, etc.
 
Officials of the Central and State Governments and Public Sector Undertakings deputed abroad ontemporary assignments or posted to their offices (including Indian Diplomatic Missions) abroad.
Who is a ‘Person of Indian Origin’ (PIO)
A citizen of any country (other than a citizen of Bangladesh or Pakistan) is deemed to be of Indian origin, if,
 
he, at any time, held an Indian passport, or
 
he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution ofIndia or Citizenship Act, 1955 ,or
 
Spouse (not being a citizen of Bangladesh or Pakistan or Sri Lanka) of an Indian citizen or of a person ofIndian origin is also deemed to be PIO.
NRI Investments in India – General Regulatory Framework
Can an NRI make investments in the Indian companies?
NRIs are allowed to invest in India companies under the Portfolio Investment Scheme (buying through thesecondary market) and through the Direct Subscription route (Investments though IPOs/Private Placements).
Portfolio Investment Scheme
 
What is the Portfolio Investment Scheme?
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 ofForeign Exchange Management Act 2000 under which the ‘Non Resident Indians (NRIs)’ and ‘Person of IndianOrigin (PIOs )’ can purchase and sell shares and convertible debentures of Indian Companies on a recognizedstock exchange in India by routing all such purchase/sale transactions through their account held with aDesignated Bank Branch ( Authorized Dealer - AD)
Steps for an NRI to Investments in Indian stock markets?
 
An NRI should open a new NRE /NRO savings bank account with designated bank (AD) branch which isapproved by RBI (Reserve Bank of India) for this purpose.
 
He/ She should apply for a general approval for investment in Indian Stock Market through hisdesignated bank branch (PIS approval).
 
 
He / She should open a Demat Account with a Depository Participant to hold his shares.
 
He / She needs to register with a broker to execute his buy/sell orders on the stock exchange(s).
HSBC InvestDirect Securities (India) Limited** (HISL) offers broking account for the NRIs to tradein equities and the NRI can trade online at his /her convenience.
 
What is a ’designated bank branch’?
RBI has authorized a few branches of some banks in India to conduct the business under Portfolio InvestmentScheme on behalf of NRIs/OCBs. These are called Authorized Dealers
Overview: NRE and NRO Bank Accounts
 
NRIs/PIOs are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchangebrought in from abroad or out of funds legitimately due to them in India.Such accounts can be opened with banks specially authorized by the Reserve Bank in this behalf.There are three types of Non-Resident accounts:
1) Non- Resident (External) Rupee Accounts (NRE Accounts)
 NRIs and PIOs are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be inthe form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds infree foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can becredited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted toresidents for operation of accounts for limited purposes.The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest lyingto the credit of NRE accounts is exempt from tax in the hands of the NRI. However, TDS on capital gains as perthe prevailing tax provisions is processed by the Authorized Dealers before giving credit to the NRE accountFunds held in NRE accounts may be freely transferred to Foreign Currency Non Resident (FCNR) accounts of thesame account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the sameaccount holder.
2) Ordinary Non-Resident Account (NRO Accounts)
 These are Rupee dominated non-repatriable accounts and can be in the form of savings, current, recurring or fixeddeposits. These accounts can be opened jointly with residents in India. When an Indian National /PIO resident inIndia leaves for taking up employment etc. outside the country, other than Nepal or Bhutan, his bank account inIndia gets designated as NRO account.The deposits can be used to make all legitimate payments in rupees. Interest income from NRO accounts istaxable. Interest income, net of taxes is repatriable.
3) Foreign Currency Non Resident (Bank) Accounts (FCNR (B) Accounts)
>NRIs/PIOs are permitted to open such accounts in US dollars, Sterling Pounds, Japanese Yen, Euro, CanadianDollars and Australian Dollars. The accounts may be opened in the form of term deposit for any of the threematurity periods viz; (a) one year and above but less then two years (b) two years and above but less then threeyears and (c) three years only. Now RBI has allowed banks to accept FCNR (B) deposits upto maximum maturityperiod of five years.Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but notordinarily resident status under the Indian tax laws.FCNR (B) accounts can also be utilised for local disbursement including payment for exports from India,

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