Who qualifies as a Non-Resident Indian (NRI)?

Transcription

1 NRI DESK

2 Who qualifies as a Non-Resident Indian (NRI)? A person who has gone out of India or who stays outside India for any of the following: Taking up employment Business or vocation Any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period Indian citizens working abroad on assignments with foreign Governments/Government agencies or international/regional agencies like the UNO, IMF, World Bank etc. Officials of Central and State governments and Public Sector Undertakings deputed abroad on temporary assignments or posted to a Branch/Office (including diplomatic missions) abroad Indians settled abroad permanently Indians gone abroad on immigration Crew members of Indian nationality or Indian origin employed by foreign airlines/shipping companies, if they are based at foreign ports and reside abroad

3 Who is a person of Indian origin (PIO)? Investor is deemed to be a person of Indian origin if Investor is a foreign citizen (other than of Pakistan or Bangladesh), and if: Investor have at any time held an Indian passport or Investor or either of Investor parents or any of Investor grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, Investor is the spouse of an Indian citizen or of a person of Indian origin (other than of Pakistan or Bangladesh).

4 What is PIS? Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the 'Non Resident Indians (NRIs)' and 'Person of Indian Origin (PIOs)' 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.

5 How many PIS account can a NRI open? NRI/PIO can open only one PIS account with any designated banks in a prescribed format for PIS account, upon which the bank can issue a PIS approval letter to the investor.

6 What is a NRE account? A NRE bank account is an external saving bank account opened for Non resident Indians. This is why it is known as Non- Resident External account. Since it is an external account, any monies lying in NRE account can be taken outside the country or in other words, the monies lying in NRE account are fully repatriable. This money can be converted into any foreign currency at the behest of the account holder and can be remitted outside the country.

7 What is a NRO account? A NRO bank account is an ordinary saving bank account opened for Non resident Indians. This is why it is known as Non- Resident Ordinary account. Since it is an ordinary account i.e. as good as a normal saving bank account, monies lying in NRO account cannot be taken outside the country or in other words, the monies lying in NRO account are not repatriable.

8 How can NRI/PIO Invest in Indian Secondary Markets? A Non-resident Indian (NRI/ PIO) may purchase/sell shares and/or convertible debentures of an Indian company, through a registered broker on a recognised stock exchange under Portfolio Investment Scheme (PIS) The NRI/ PIO designates a branch of an authorised dealer for routing his/its transactions relating to purchase and sale of shares/ convertible debentures under this Scheme, and routes all such transactions only through the branch so designated.

9 How can NRI/ PIO Invest in Indian Secondary Markets through NSBL? STEP - I NRI/ PIO Investor needs bank accounts: 1) PIS NRE a/c for secondary market transactions only (repatriable basis) 2) PIS NRO a/c for secondary market transactions only (non repatriable basis) STEP II NRI/ PIO Investor needs DP (Demat) A/C. 1) PIS NRE a/c for shares holding (repatriable basis) 2) PIS NRO a/c for shares holding (non - repatriable basis) STEP III NRI/ PIO Investor needs 1 Trading a/c NSBL will take RBI Permission for PIS once necessary documents as provided

10 What if NRI/ PIO Investor already holding PIS account? The NRI/ PIO Investor needs to transfer this account to the bank with which NSBL has tieup. No Objection certificate from their present Banker where NRI/ PIO Investor has presently holding their PIS a/c. Their present Bankers will also issue the list of shares which the customer is holding in their PIS a/c as of date. As the NRI/ PIO Investor can only open one PIS a/c with only one Bank, NRI/ PIO Investor is required to close the said account with their previous Bank immediately.

11 PURCHASE TRANSACTION NSBL Sends one copy contract note to investors local address and submits one contract note at the PIS designated branch on the day of Transaction (within 24 hrs.) Note NSBL will also a copy to the NRI/ PIO Investor. POA/Authority holder/nri/ PIO Investor and Bank (PIS) Branch verify if all transactions are in order Debit PIS SB A/c-Credit Broker A/C Branch after getting instructions from POA/Authority holder /NRI/ PIO Investors Instructions NSBL Credits the DP (PIS) a/c of the NRI/ PIO investor after he receives Pay - out from the Exchange.

12 SALE TRANSACTION NSBL Sends one copy contract note to investor s local address and submits one contract note at the PIS designated branch on the day of Transaction (within 24 hrs.) Note NSBL l also s a copy to the NRI/ PIO Investor POA/GPA holder/nri/ PIO Investor and Bank Branch verify if all transactions are in order POA/GPA holder/nri/ PIO Investor releases share sold to NSBL Pool account. POA/GPA holder/nri/ PIO Investor receives cheque from the NSBL *Debit for Capital gain Tax Debit bank charges Debit Service tax of PIS bank then credits NRI/ PIO Investors account net of taxes*.

13 Taxation Capital Gain / Dividends Long Term Capital Gain : NIL Short Term Capital Gain : 11.33% Dividend : NIL Note:- Above is solely dependent on Finance Act - GOI

14 Illustrations on Taxation & Bank Charges Consider a NRI investor starts an account with Rs. 5,000,000 with NSBL and PIS Bank a/c with NSBL Designated Bank. Bank Charges = Rs ( Service Tax) per scrip on Purchase & Sale Brokerage + other levies ( Service tax + Security Transaction Tax + Turnover Tax)

15 How Would NRI/ PIO Investor operate the account? NRI/ PIO Investor can operate the account in following ways: NRI/ PIO Investor will give POA/GPA/Letter of Authority to NSBL to operate his/her DP (Demat) accounts and Bank accounts and he/she will operate the trading account via , chat or tele call. NRI/ PIO Investor will give POA/GPA/Letter of Authority to NSBL to operate his/her DP (Demat) account whereas he can operate his Bank account & Trading account via , fax, chat or tele call. NRI/ PIO Investor will give POA/GPA/Letter of Authority to his resident relative / friend to operate his/her Trading, DP and Bank accounts.

16 How does NRI/ PIO Investor get corporate benefits? Dividends : Dividends are given on a repatriable or non repatriable basis as the case maybe. Right issue: The issuer has to take RBI s approvals for repatriable basis. The right thus acquired is on repatriable basis only if the original shares were on the same basis. Bonus: The issuer has to take RBI s approvals for repatriable basis. The bonus shares thus acquired is on repatriable basis only if the original shares were on the same basis and the NRI/ PIO Investor has funded these shares from repatriable account.

17 If NRI Investor wants to trade only on Repatriable basis why should he needs NRO account? It serves two Purposes: Dividends cannot be repatriated; therefore it will be directed to NRO savings account, however if the original shares were purchased on repatriable basis the dividends will get directed to NRE Savings A/C. NRI Investors Indian wealth can be directed to secondary market through PIS-NRO A/C.

18 What is the status of NRI/ PIO Investors for trading derivatives segment? NRI/PIO Investor is allowed to trade in Indian Derivatives Market only on non repatriable basis. NRI/PIO Investors for derivatives segment will have to appoint a Clearing Member for clearing and settlement of trades done on the futures and options segment and get Custodian Participant Code from that clearing member.

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