NRI can invest/buy following products among others:
- Equity trading on stock exchanges
- Investments in unit of Mutual Funds
- Products offered by Life Insurance Companies
- Products offered by General Insurance Companies
NRI needs to do the following to start investing in the Indian Stock Market:
- Open a new bank account (NRE/NRO or both and PIS account) with designated bank which is approved by RBI (Reserve Bank of India) for this purpose. Through this bank branch apply for a general approval for investment in Indian Stock Market.
- Open a Demat account through Panam and register with Panam to execute buy/sell orders on the stock exchange(s).
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. At the end of the day all trades are reported to the designated bank, which in turn would report the same to RBI. The purchase of Equity shares/convertible debentures in each companywith repatriation and non repatriation benefits shall not exceed 5% (or as prescribed by Reserve Bank of India from time to time) of the paidup capital of the company, subject to an overall ceiling of 10% (or as prescribed by Reserve Bank of India from time to time). All consequences of failure in such compliance, including any losses arising out of reversal of transactions shall be to the customer’s account.
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank ofIndia (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the ‘Non Resident Indians (NRIs)’ and ‘Overseas Citizen Of India(OCIs)’ 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 an OCI wanting to trade/make fresh investments in the Indian Equity Secondary Market must have one PIS account with only one designated bank in India.
Above is applicable only for equity trades and not MF investments or Life and General Insurance Products.
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 OCI cannot invest more than 5% in any Indian company. Investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route.
NRIs do not require any permission to invest through Initial Public Offerings (IPO’s) or Private placements. In such cases, the Issuing Company should/does comply with all necessary regulations for issuing securities to a person resident outside India.
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 appropriate Tax is deducted at source.
Tax rate is different as per the tenure of the investment. It can be classified into:
- Long-term capital gain – If the period of holding is more than 1 year i.e. the difference between the date of purchase and sell is more than 1 year, then the Tax rate applicable is 0 %.
- Short-term capital gain – If the period of holding is less than 1 year i.e. the difference between the date of purchase and sell is less than 1 year, then tax rate applicable is 15%.
What our clients say
I am a Canadian Citizen resident in Toronto. In 2007 when I was in Pune, by sheer coincidence I happened to meet Mr Parekh and since then there is no looking back. Initially he handled financial matters with respect to Mutual Funds, DeMat accounts , PIS accounts, recommending insurance products , then on to resolving problems with Axis Bank as well as Met Life Insurance Company. Etc. This was and is much more important for me being a non-resident and visiting India for a short period maybe once in a year or two. He also helped with real estate issue like lease of my apartment etc. In a short span of two years he took the relationship beyond purely financial expertise one to a personal level like suggesting medical expertise for my niece, grand niece, my son etc.
All this , he manages with the help of two able assistants, Devang and Abhijit, an anology from Mahabharat like he is Yudhisthira and the two are Arjuna and Bhima.
Wish them all the best .
– Mr. Achut Honkan, Retired, Canada