A Non-Resident Indian is a citizen of India (holding a valid passport of Govt. of India) temporarily residing in the country of his/her present residence. He/she should not have applied or planning to apply in the near future for acquiring citizenship of his/her present country of residence or any other country.
Investments by NRIs in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investor.
To invest on a repatriable basis, you must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:
- The mutual fund should comply with the terms and conditions stipulated by SEBI.
- The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE/FCNR account of the non-resident investor.
- The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.
The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions:
- Funds for investment should be provided by debit to NRO account of the NRI investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
- The current income in the form of dividends is allowed to be repatriated.
No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.
No. As an NRI one does not need any specific approval from the RBI for investing or redeeming from Mutual Funds. Only OCBs and FIIs require prior approvals before investing in Mutual Funds.
There are no investment restrictions on NRIs for investing in mutual funds. RBI does not restrict investment in mutual funds either on repatriable or non-repatriable basis.
Although SEBI regulations allow Mutual Funds to offer guaranteed returns subject to the Fund meeting certain conditions, most Mutual Funds in India do no provide a guaranteed return on their schemes. In such cases, the sponsor, the AMC, or any other person, guarantees a minimum level of return and makes good the difference if the actual returns are less than the guaranteed minimum. The name of the guarantor and the manner in which the guarantee shall be met must be disclosed in the offer document by the Mutual Fund. Investment in mutual funds is not guaranteed by the Government of India, the Reserve Bank of India or any other government body.
Yes. Certain funds do permit gifting of units. One should refer to the offer document of the specific fund to know the details.
If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment are eligible for repatriation subject to regulatory guidelines in force at the time of repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriation.
If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment is eligible for repatriation subject to regulatory guidelines in force at the time of the repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriation.
NRIs can redeem their units by signing on the tear-off portion of the account statement & sending it to any of the AMC or your personal MF investment advisor through post or by sending a letter requesting redemption with the signatures and the amount to be redeemed. The redemption request would be processed at the applicable NAV based price. The redemption proceeds will be sent directly to the bank branch where NRE/NRO account depending upon whether repatriable or non-repatriable account within three business days. The redemption proceeds will be net of tax deduction at source on the profits.
Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of More than twelve months immediately preceding the date of transfer, will be treated as a long term capital asset for the computation of capital gains â€“ thus attracting long term capital gains tax rate. In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long term or short capital gains and tax thereon is applicable on redemptionâ€™s. Though there is currently no long-term capital gain tax liability for redemptions from equity schemes, there is a liability at the time of redeeming from the debt schemes.
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.
NRI can invest in the following products.
- Equity trading on BSE and NSE
- Derivatives trading on the NSE
- IPO online
- Portfolio Management
- Investments in Mutual Funds
Any NRI/PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.
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.
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.
Yes money can be freely transferred from NRE account to NRO account.
No, money cannot be transferred from NRO account to NRE account.
RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.
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.
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.
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.
- PIS account is applicable only for NRIs and not for resident Indians.
- It is only for trading in Indian markets and not any other foreign markets.
- It is applicable only for equity trades and not MF investments.
There are two types of PIS account:
- NRE PIS account
- NRO PIS account
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.
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.
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.
There are two types of NON PIS account.
- NRE NON PIS account
- NRO NON PIS account
- Sale of shares which were acquired other than PIS.
- Shares acquired through IPOs.
- Gifts from relatives or otherwise.
- Shares bought as resident Indian.
- Fresh acquisition through IPOs.
- Investment in Mutual Funds.
No. Investments made by NRIs though subscription to Initial Public Offerings (IPOs) or Private placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBIs regulations with regard to Foreign Direct Investments.
No. NRIs do not require any permission to invest though Initial Public Offerings (IPOs) or Private placements. In such cases, the Issuing Company should comply with all necessary regulations for issuing securities to a person resident outside India.
No. NRIs can sell such shares/debentures on the Exchange without any approval. However, while seeking the credit of sale proceeds to NRE/NRO account, the bank should be provided with the details regarding date of allotment and cost of acquisition to calculate the taxes, if any.
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.
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.
NRI/PIO needs to open a demat account with an NBFC as explained above.
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.