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India is currently the 4th largest economy in the world in terms of Purchasing Power Parity behind only United States, China and Japan. A series of ambitious economic reforms aimed at deregulating the economy and stimulating foreign investment has moved India firmly into the front runners of the rapidly growing Asia Pacific Region. Today, India is one of the most exciting emerging markets in the world and is a preferred destination for investments among the global investors. India’s time tested institutions offer foreign investors a transparent environment that guarantees the security of their long term investments.

Investing in India today is the best thing NRI can do for tomorrow. For the NRI investors, the Indian stock market offers great investing value, options, and returns. NRIs residing in Gulf Co-operation Council (GCC) countries of the United Arab Emirates (UAE), Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar can invest in India through us in an easy, quick and hassle-free manner.

Please Contact us in case of any queries at nridesk@rathi.com
An Indian who is not a resident of India is an NRI.
As per the Income Tax Act, an individual is treated as a resident for the financial year if he or she is in India for at least :
182 days in the financial year; or
365 days out of the preceding four financial years and 60 days in that year.

A PIO is a Person of Indian Origin.
A citizen of any country other than Bangladesh & Pakistan is a PIO if the person held an Indian Passport at any time.

Non-Resident Indians generally fall under the following broad categories.
Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.
Indian citizens working abroad on assignments with foreign governments or government agencies, or international or regional agencies such as the UNO, IMF, World Bank, and so on.
Officials of the central and state governments and public sector undertakings deputed abroad on temporary assignments or posted to their offices (including Indian Diplomatic Missions) abroad.
The investment avenues available for the Non-Resident Indians in India are
  1. Government securities or units of Unit Trust of India
  2. Non-convertible debentures of Indian companies
  3. Bank accounts in India
  4. Investment in securities /shares & convertible debentures of Indian Cos
  5. Investment in immovable property in India
  6. Investment in mutual funds in India
  7. Company deposits.
NRIs are not permitted to invest in
  1. Public Provident Fund (PPF)

  2. National Savings Certificates (NSC) issued by post offices in India as well as
  3. other postal schemes.
RBI (Reserve Bank of India – India’s Central Bank) has allowed NRIs/PIOs to invest in shares of listed Indian companies through recognized Stock Exchanges under the Portfolio Investment Scheme (PIS). Thus, it is mandatory to open a PIS (Portfolio Investment Scheme) account through any of the RBI designated bank for trading in secondary markets/ stock exchanges. In case, applicant already has a PIS account, it can be linked with AnandRathi equity trading and demat account.

View the list of scrips available for NRI trading today

An NRI has to open the following accounts in order to invest in India.

NRIs can maintain bank accounts with banks in India.
The two main rupee accounts are
Non-Resident External (NRE) account
Non-Resident Ordinary (NRO) account.
They can also maintain a foreign currency account which is the Foreign Currency Non-Resident (FCNR) account.
NRIs or PIOs can open a demat account with any Depository Participant (DP) of NSDL or CDSL.

The NRI or 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.

An NRI must open separate demat accounts for holding repatriable and non-repatriable securities. Shares held prior to becoming an NRI are held in the non-repatriable account.

No permission is required from the RBI to open a demat account.

However, credits and debits from the demat account may require general or specific permissions from designated banks.
Portfolio Investment Scheme (PIS) is a scheme of RBI under which NRIs and PIOs can purchase and sell shares and convertible debentures of Indian companies on a recognised stock exchange in India by routing all such purchase or sale transactions through their account held with a designated bank branch.

RBI has authorised a few main branches of major commercial banks as Authorised Dealers (ADs) to offer PIS.
Equity Trading has never been so easy & comfortable for NRIs, whereby they can trade online without any hassles of bank reporting, tedious tax calculations, verification of RBI Banned scrips, maintaining cash & bank reconciliations, filing of tax returns etc. AnandRathi offers an equity trading account to NRIs/PIOs where all these complicated & manual task of RBI reporting, TDS calculations, Filing of Tax returns etc. are being taken care by dedicated team of professionals and NRIs can trade on seamlessly without any hassles in a transparent framework.

The trading accountholder can trade online on both NSE (National Stock Exchange of India Limited) & BSE (Bombay Stock Exchange) on repatriable & non – repatriable basis within the overall framework of statutory regulations and guidelines.
  1. NRIs can invest in exchange traded derivative contracts approved by SEBI from time to time, but only out of rupee funds held in India on non- repatriable basis, that is, an NRO account, subject to the limits prescribed by SEBI.
  2. The limits are the same as for the residents.
  3. For derivatives transactions, PIS permission is not needed.
  4. For derivatives, NSE allots a separate code that needs to be punched at the time of placing trades in futures and options.
  5. An application has to be made for the unique code to the NSE. If the NRI has already obtained the unique code through some other broker, the same should be used. In other words, the code will be unique across the exchange.
  6. The exchange monitors NRI positions based on the unique client code.
  7. The NRI or his or her broker has to ensure that the trades do not exceed the overall limits for NRIs as specified by the exchange.
  8. While the exchange monitors limits, for limit violations, there is a penalty.
The NRI client has to take care of the same. The TDS undertaking has to be signed by the client for derivatives trading.
  1. A company may issue an Initial Public Offering (IPO) for NRIs on repatriable or non-repatriable basis.
  2. The issuing company is required to issue shares to NRIs on the basis of specific or general permission from the GoI or RBI. Therefore, individual NRIs need not obtain any permission.
  3. For the IPO issued on repatriation basis, separate form for NRIs is available.
  4. The Power of Attorney (POA) holder of an NRI client can sign on his or her behalf.
  5. The cheque drawn on the NRE bank account needs to be attached with this application.
  6. Such transactions, if routed through the designated bank, should not be done through the PIS account.
When an NRI sells shares received in an IPO, the NRI should submit a
  1. Copy of an IPO application

  2. An NRE cheque issued at the time of subscription

  3. An allotment letter.
The sale proceeds are credited to the NRE or NRO savings account for repatriable and non-repatriable investment respectively.
NRI investors can now transact in mutual funds online through the Internet.

Thus, NRIs can now buy, sell or redeem, switch, or invest through a Systematic Investment Plan (SIP) through an online account.

  1. NRIs can apply for mutual funds through the NRE account as well through the NRO account.
  2. Most of the Asset Management Companies (AMCs) have taken the permission for NRI investments in their schemes; hence no permission is required to be taken by NRIs for investing in the schemes of those AMCs.
  3. The Power of Attorney (POA) holder of the NRI can sign on mutual funds application on his or her behalf.
  4. In case of open-ended mutual fund schemes, the NRI simply needs to fill up the redemption slip and send it to the Investor Service Centres of AMCs. The cheques are normally mailed to the investor within three to five business days from the day of receipt of the redemption request.
  5. In case of close-ended mutual fund schemes, units have to be sold at the stock exchange where the scheme is listed through a registered stock exchange member.
Accompanying the redemption proceeds are an updated account statement, a TDS certificate, and a covering letter that mentions whether the funds were invested out of NRE or FCNR or NRO accounts.
  1. The tax on capital gain is deducted after considering the indexation benefits wherever applicable, by the AMC.
  2. There are various TDS rates for mutual funds.
For short-term capital gains
  1. Equity schemes 15%+
  2. Non-equity schemes 30%+
For long-term capital gains
  1. Equity schemes 0%
  2. Non-equity schemes 20%+
The short-term and long-term capital gains tax rate as well as the Securities Transactions Tax rates as applicable to NRIs is illustrated in the table below
Taxability
TransactionSTT RateLTCGSTCG
Delivery based transaction in equity shares or equityBoth buyer and seller payExempt15%
Non-delivery based transaction in equity Seller pays 0.025%BusinessBusiness
Redemption of units of an equity-oriented scheme toSeller pays 0.25%Exempt15%
Transaction in derivative segment Seller pays 0.017%. In case of option being exercised. buyers pays 0.017%BusinessBusiness
Sale purchase of debt on SE or otherwise and also of Nil10% flat or 20% withTreated as normal
  1. As per regulatory guidelines, tax, as applicable, has to be deducted at source for profits made in the equity market transactions.
  2. Before crediting sales proceeds, the banker must determine the appropriate tax and deduct it at source.
  3. The TDS rate varies as per the tenure of the investment. TDS can be classified into long-term capital gain and short-term capital gain.
  4. In long-term capital gain, if the period of holding is more than one year, then the TDS rate applicable is zero percent.
  5. In short-term capital gain, if the period of holding is less than one year, then the TDS rate applicable is fifteen percent plus.
  6. It is to be noted that no TDS is charged on losses.
For any TDS to be deducted and money to be credited to the bank account, 3 things need to be verified
  1. Amount of gain

  2. Duration of holding, that is, long term or short term

  3. Source of fund for purchase, that is, NRE or NRO.
In case of non-PIS transaction, such as IPO shares, the NRI has to give the contract note, and demat statement or letter of allotment.
Dividend received from a domestic company or mutual funds is tax free in the hands of an NRI investor.
However, there is a Dividend Distribution Tax (DDT) at source
  1. 16.99 percent on dividends of a domestic company
  2. Equity-based schemes of mutual funds are exempt from DDT
  3. 14.16 percent in case of debt-based schemes of mutual funds
  4. 28.32 percent in case of liquid schemes.
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