NRI Faq Joindre Capital Online Trading presents J Trade Who is a NRI? An Indian is said to as Non Resident Indian (NRI) outside India. For Purpose of carrying out Employment/Business or any vocation. Under circumstances indicating an intention to stay outside India for as uncertain Period Any Indian citizen deputed outside India for a temporary period in connection with employment. Definition of NRI under Fema Act and Income Tax are not same The expression of NRI under the FEMA is relevant for the investment of funds in India, whereas the expression under the Income Tax Act has relevance as it is the key enactment governing the levy and assessment of income tax in India. As per FEMA: Person resident outside India : - means a person who is not resident in India; "Person resident in India" means- 1. A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include- A person who has gone out of India or who stays outside India, in either casefor or on taking up employment outside India, or for carrying on outside India a business or vocation outside India, or for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; 2. A person who has come to check in India, in either case, otherwise than- 3. Any person or body corporate registered or incorporated in India 4. An office, branch or agency in India owned or controlled by a person resident outside India, 5. An office, branch or agency outside India owned or controlled by a person resident in India; As per Income Tax: Section 2 of the Income Tax Act does not define 'NRI'. However, for Chapter XIIA, Non Resident Indian has been defined as an individual being a citizen of India or a person of
Indian origin who is not a resident. A person is considered to be of Indian Origin if he or either of his parents or his grand parents was born in undivided India. Basis of Tax Liability in India: The tax liability of a person under the Income Tax Act depends on the residential status in the financial year (1st April to 31st March) in which the income accrues or arises to him or is received by him. For income tax purposes the residential status of an individual generally depends on his physical presence or stay in India and not on his nationality or domicile. (1) Resident: An individual is said to be a 'resident' in India in any financial year if he has been in India during that year: For a period of 182 days or more; or For a period of 60 days or more and has also been in India within the preceding four years for a period or periods of 365 days or more; However, the period of 60 days is increased to 182 days in the case of: A citizen of India or person of Indian origin who has been outside India and comes on a visit; When a citizen of India leaves India for purpose of employment outside India or as a member of a crew of an Indian ship. (2) Resident But not Ordinarily Resident An individual is said to be 'not ordinarily resident' in any financial year, if: He has not been resident in India in nine out of ten financial years preceding that financial year; or Has not during the seven financial years preceding that year, been in India for a period of periods of 730 days or more. An individual would be "not ordinarily resident" if he fulfills either of the above conditions. A Hindu Undivided Family is said to be 'not ordinarily resident' in India if its manager is 'not ordinarily resident' in India. For calculating the length of the manager's stay in India, periods of stay in India of successive managers of a Hindu Undivided Family have to be added up. The status of 'resident but not ordinarily resident' is available only to individuals and
Hindu Undivided Families. (3) Non Resident: A person who is not resident in India is a 'Non Resident'. Who is a PIO? A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if: He/She at any time held an Indian Passport. OR He/She or either of his parents or any of his/her grandparents was a citizen of India; OR Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above. Who are Overseas corporate Bodies (OCBs)? OCBs Include companies, partership firms, societies, and other corporate bodies in which atleast 60 %of the ownership is with NRIs of Indian Nationality/Origin What are the products offered to NRI? NRIs are offered Equity Trading on Pure Delivery basis on Both (NSE) National Stock Exchange & (BSE) Bombay Stock Exchange. Funds/ Shares are directly credited to Bank/Demat a/c As per regulatory guidelines, NRIs are not allowed to do Intraday trading or settlement of trades, NRIs can sell only those shares which are there in their demat account. What Type of Bank accounts NRI can open? Indian Nationals and Person of Indian origin residing abroad can open the following type of accounts. Non resident (External) Rupee Account (NRE) Foreign Currency (Non-Resident) Accounts (FCNR) Non-Resident Non-Repatriable Rupee Deposit Accounts (NRNR) Resident Foreign Currency Account (RFC) for returning Indians Ordinary Non-Resident Rupee Accounts (NRO) What steps an NRI needs to take to start investing in the Indian Stock Market? An NRI should open a new bank account (NRE/NRO or both) with designated bank which is approved by RBI (Reserve Bank of India) for this purpose.
He should apply for a general approval for investment in Indian Stock Market through his designated bank branch. He should open a Demat Account with Joindre Capital Services Ltd to hold his shares and register with Joindre Capital Services Ltd to execute his buy/sell orders on the stock exchange(s). What is an 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. What is a NRE Account? NRE Accounts are maintained in convertible rupees. The entire credit balance held in the account inclusive of interest earned can be repatriated & converted to any other foreign currency. The NRE accounts can be maintained either as a Savings Bank A/c or Current A/c or Term Deposit A/c or Recurring Deposit A/c., in the name of the NRI or in joint names, provided all the persons are NRIs or in the names of minor who is represented by natural guardians. However, NRE accounts cannot be opened by NRIs jointly with residents. Can Money be transferred from NRE account to NRO account? Yes money can be freely transferred from NRE account to NRO account. Can Money be transferred from NRO account to NRE account? No, money cannot be transferred from NRO account to NRE account. Who all can operate an NRE/NRO Account? An NRE account can be operated by the following persons: By the account holder, in the case of single account. Either or survivor (both can operate individually); Former or survivor (only former can operate during his life time, the survivor only after the death of former); Latter or survivor (only latter can operate the account during the life time, the survivor only after death of latter). Jointly by two or more persons; By the mandate-holder through a letter of mandate signed by all the account holders who can be a resident also;
By a power of attorney holder through a power of attorney [P.A.] who can be resident also. A resident PA holder or mandate holder has powers to operate the account for the purposes of making local payments only & is not allowed to repatriate funds under any circumstances. In case a resident Indian becomes a Non-resident, will he/she be required to change the status of his/her holding from Resident to Non-resident? As per section 6(5) of FEMA, NRI can continue to hold the securities, which he/she had purchased as a resident Indian, even after he/she has become a non-resident Indian, but has to transfer the shares to his NRO (Non Resident Ordinary) account. Can NRIs Invest in Shares, Debentures, units of Mutual Funds in India? 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. What is a Portfolio Investment Scheme Account? 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. Any NRI or a PIO wanting to trade/make fresh investments in the Indian Equity Secondary Market needs and must have one PIS account with only one designated bank in India. Notes: PIS Account is applicable only for NRIs and not for resident Indians. It is only for Trading in Indian markets and no any other foreign markets. It is applicable only for Equity trades and no MF Investments. What are the types of PIS account? There are two types of PIS account: NRE PIS Account NRO PIS Account Why is PIS Required?
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 PIO cannot invest more than 5% in any Indian company. How many PIS account can NRI open? NRI/PIO can open only one PIS account with any designated banks (Preferred bank HDFC Bank) in a prescribed format for PIS account, upon which the bank can issue a PIS approval letter to the investor. Can I Invest in all Products through PIS account? No. Any investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route. What is a NON PIS account? It is a normal savings bank account which can be opened with any bank in India. Non- PIS is an account for which the transactions are not reported to RBI. This account takes care of selling all those shares which are not allowed under PIS. Shares acquired under IPO or received as gift or bought as resident Indian can be sold under Non-PIS account. What are types of NON PIS Account? There are two types of NON PIS account NRE NON PIS account 2 NRO NON PIS account What type of transactions is allowed under NON PIS account Sale of Shares which were acquired other than PIS Shares acquired through IPO Gifts from relatives or otherwise Shares bought as resident Indian Fresh acquisitions through IPOs Investment in Mutual funds What is meant by Investment through direct subscription route?
As per the regulations NRIs are allowed to invest up to a certain percentage of the total paid up capital of the company by directly subscribing to the equity/convertible debentures of the company either though a public offering made by the company or through private placements on one to one basis. Regulations provide for different ceilings on such investments based on the industry to which the company belongs and also the nature of investments (repatriation / non-repatriation basis). Do Investments made through IPO/ private placements come under pis? No.Investments made by NRIs though subscription to Initial Public Offerings (IPO s) or Private placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBI's regulations with regard to Foreign Direct Investments. Can an NRI have Investments under PIS on repatriation and non-repatriation basis? Yes. Investment can be made on repatriation as well as non-repatriation basis. However, an NRI will have to open NRE account as well as NRO account with designated bank branch as the sale proceeds of non-repatriation investment can only be credited to NRO account. Under what Circumstances can investments made under PIS are repatriated? The repatriation of the sale proceeds, net of taxes, are allowed if the original purchase was made on repatriation basis and such investments were made out of funds from NRE/FCNR account or by means of remittance from abroad. Where an NRI/PIO can open demat account? NRI/PIO need to open demat account with Joindre Capital Services Ltd Which are the Depositories available in India? NSDL: National Securities depositories Ltd & CDSL: Central Securities depositories Ltd Can Investments made under different schemes be held under a single demat a/c? 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.
Income Tax What is TDS? 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 it is the responsibility of the broker and the PIS cell to determine the appropriate Tax and deduct it at source. What are the types of Rate? Long Term & Short Term capital gains Long Term: NIL Short Term: 15% + surcharge (From April 1, 2008 in Budget 2008) Computation of Capital Gains: TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term on a First-In, First-Out (FIFO) basis. If Period of Holding is more than 12 months it comes under preview of LTCG otherwise Short Term capital gain. How TDS is deducted and money is transferred in bank account? For any TDS to be deducted and money to be remitted to bank account, there are three things which have to be verified. Amount of gain = Selling price Purchase price Duration of Holding i.e. long term or short term = selling date Purchase date Sources of fund for purchase i.e. NRE or NRO Tax Implication for Investments in Shares and Mutual Funds Click here to view pdf Important: TDS is deducted only at the time of crediting sales proceeds. What do you mean by Equity Trading in BSE & NSE? NRIs can buy and sell shares through Joindre Capital Services Ltd. You can invest from your NRE as well as your NRO funds. As an NRI, it is mandatory to open a Portfolio Investment Scheme (PIS) account through a RBI accepted designated Bank. Our preferred designated banker is UTI Bank. However, you can open with any bank for the
PIS services. In case, you already have a PIS account, you can link the same to the trading and demat account opened through us. At the end of the day, your trades are reported to the respective designated bank, which is turn would report the same to RBI. What is rolling settlement? Under rolling settlement all open positions at the end of the day are bound to result in payment or delivery after n number of days. Currently trades in rolling settlement are settled on T+2 bases where T is the trade day and 2 working days there after. For example, a trade executed on Monday is bound to settle by Wednesday (considering two working days from the trade day). The funds and securities pay-in day and pay-out day are carried out on T+2 days. What is pay-in day and pay-out day? Pay-in is the day when the securities sold are delivered to the exchange by the sellers and funds for the securities purchased are made available to the exchange by the buyers. Pay-out is the day when the securities purchased are delivered to the buyers and the funds for the securities sold are given to the sellers by the exchange. At present the pay-in and the pay-out happens on the 2 nd working day after the trade is executed on the stock exchange. What are the different types of transactions in Secondary market? There are generally two types of transactions in Indian Secondary Market:- 1. Delivery Based transactions Delivery based trades can not be squared off during the day; all purchased or sold positions during the days will get into physical settlement and delivery and payment will commence on T+2 Basis. 2. Intraday transactions. NRI are not allowed to do intra day business. Are there any limits to non-resident investments in the Indian Capital Markets? For portfolio Investment by NRIs the earlier ceiling limiting total NRI/OCB equity holdings in an Indian company up to 5%, is now raised to 24%, whereas a single NRI/OCB can hold up to 1% of the equity of an Indian Company.
Were shall I need to contact? Pl feel free to get in touch at - yogesh@joindre.com & piyush@joindre.com Dubai Office: Corporate office (INDIA) JOINDRE DMCC Joindre Capital Services Ltd Jewellery & Gemplex, 11/13 Botawala Building, Bldg. No. 2, Office No: 2O-09-03, 2 nd Floor, Horniman Circle, Fort P.O.Box 45036, Mumbai 400 023 India. Dubai (UAE) Tel: +91-22-40334567 Tel: +9714-3688620, 3688621 Fax: +91-22-40334568 Fax: +9714-3688626 Procedures and overview An NRI can deal with only one bank at any point in time. If a NRI has a permission taken from another bank then the same has to be transferred to HDFC Bank. As an NRI you will be allowed to invest only upto 5 % of the paid up capital of the company. The aggregate paid up value of shares of any company purchased by all NRIs and OCBs does not exceed 10 percent of the paid up capital of the company and in the case of convertible debentures, the aggregate paid up value of each series of debentures purchased by all NRIs and OCBs doe not exceed 10 % of the paid up value of each series of convertible debentures. The NRI will have to take delivery and give delivery of the shares. You can only sell the delivery for which payout is already done. You cannot sell any delivery, which is yet to come from NSE. Every purchase and sale transaction has to be reported to the RBI. You will need to submit the original brokers contract notes to the designated Bank branch, within 24 hours of the transaction. In you case RBI reporting will be done by HDFC Bank. A NRI is required to make bill to bill payments. No adjustments of purchase against sale consideration can be done. Purchase and Sales will be dealt separately for payments / receipts. If a purchase/sale transaction has not been reported/ not approved by RBI then the transaction is not considered legitimate and the NRI will not be able to credit the sale proceeds to the NRE/NRO savings account. That transaction will have to be reversed in his account and losses if any will be charged to the client. Why India?
India on a path of growth and liberalisation! India now has a proven record of an effective and efficient market system, complemented by high standards of corporate governance. India & China are two of the fastest growing economies in the world. Here, India certainly has a competetive advantage with the median age at just 22 years. If the recent Goldman Sachs study titled "Dreaming with BRIC's - The Path to 2050" is to be believed, then by the year 2040, India will be the third largest economy in the world with a reasonably high per capita income. An important hypothesis for this prediction is the changing Indian demography; it is predicted that in 2010, India will have a staggering 53.9% of its population in the age group of 15-59 years. Advantage INDIA! India can boast of a vibrant capital market with NSE and BSE being the third and fifth largest exchanges in the world respectively, in terms of number of trades. The risk management systems adopted by the Indian stock exchanges are the best in the world and the standards in terms of market practices and technology have become international benchmarks. The strength of the Indian markets can be gauged from the fact that the RTGS is being successfully implemented and a shorter settlement cycle of T+1 day is imminent. Several initiatives have been taken, such as liberalisation of trade policy and exchange regulations, industrial decontrol, financial sector reforms, enactment of the competetion act, safeguarding of intellectual property rights, simplification of investment procedures, active transition towards capital account convertability, etc., all of which provide for a liberal and investor friendly regime for investment. When it comes to investments, destination India clearly has a cutting edge. Charges: