Q1). After returning to India, for how long can a person
hold on to the stocks and mutual funds that he has invested in
abroad?
Ans: You can continue to hold stocks and mutual
funds abroad so long as your status is that of a 'not-ordinary
resident'.
Q2). If I sell the investments I bought abroad once
I return to India, will I have to pay capital gains on it?
Ans: Capital gains on your foreign stock shall
be taxable in India if it is received or deemed to be received
or accrued or deemed to be accrued in India. So, yes, you will
have to pay taxes on capital gains. In case you also have to
pay taxes abroad, you are eligible to take credit for such taxes
paid abroad when filing your returns in India.
Q3). On returning to India, do I have to declare the
money and assets that I have abroad?
Ans: Individuals who have returned to India
on or after April 18, 1992 and have stayed abroad for a continuous
period of not less than one year have been granted general the
following permission:
To maintain and operate their foreign currency accounts with
banks abroad
To hold, transfer, dispose off their other foreign currency
assets (shares, securities, life insurance policies, immovable
property) abroad
To enjoy absolute freedom for utilization of their foreign
currency assets, including freedom to gift or settle their
foreign currency assets to anybody, anywhere
To earn, retain abroad pension and retirement benefits after
return to India
To earn, hold, dispose off or invest, in any manner they
deem fit, income on their foreign currency assets
To make any payments to or make any further investments
abroad provided that the payments and the cost of such fresh
investments and any subsequent payments required thereof and
met exclusively out of their currency assets
Hence, they can continue to maintain their foreign currency
accounts, shares, securities, property abroad without declaration
to the Reserve Bank of India (RBI), provided these funds and
assets were lawfully acquired by them out of foreign currency
earned through employment or business taken up when they were
outside India.
Q4). Once I come to India, can I continue to invest
in the markets abroad?
Ans: The last two points above mentioned above
will answer that question. To sum, you are allowed to trade
in stocks only if it is done from your foreign funds.
Q5). Can NRIs invest in the Indian stock market?
Ans: Yes. NRIs are allowed to invest in shares
and debentures through the stock exchanges in India under the
Portfolio Investment Scheme. There is a repatriation scheme
and a non-repatriation scheme.
Q6). Is any approval needed?
Ans: Yes again. These investments require
prior approval of the RBI. This is granted for a four-year period
and can be continuously renewed.
Q7). How is this done?
Ans: The application is to be submitted to
RBI through a designated branch of a bank in India in one of
the prescribed forms (NRC/NRI/RPC/RPI).
The RBI has authorized a few branches of each bank to conduct
the business under Portfolio Investment Scheme on behalf of
NRIs. These branches are the main branches of major commercial
banks located close to the stock exchange/s. Your application
will have to be routed only through these.
Q8). Can NRIs invest in IPOs of Indian firms in India?
Ans: The prospectus of the company seeking
investment will specify whether the investment in its IPO is
covered under 'automatic approval' or 'specific approval of
RBI.'
Q9). Can I hand over the Power of Attorney to someone
and ask them to invest on my behalf?
Ans: Yes. That person will have to attach
a photocopy of the PoA along with the application form while
applying for the shares. Generally, the forms for NRIs are different
from those for the general public.
Q10). Are there any limits on how much I can invest?
Ans: Yes. NRIs cannot hold more than the overall
ceiling of 10 per cent of the paid-up equity share capital of
the company or paid-up value of each series of convertible debentures.
The company can raise this limit to 30 per cent at a special
resolution in its general body meeting.
Q11). Is there any limit individually?
Ans: Individually, there is a limit too. It
is restricted to 5 per cent of the paid-up equity share capital
or each series of convertible debentures.
Q12). Will I be subject to capital gains tax on selling?
Ans: Yes. Depending on when you sell, you
have to pay either short-term or long-term capital gains tax.
Q13). Any restrictions on mutual funds?
Ans: If mutual funds are what you have set
your sights on, then go for it. No restrictions on that end.
Q14). What is the exchange rate to be utilized while
selling?
Ans: The average exchange rate is the average
of the telegraphic transfer buying rate and telegraphic selling
rate of the foreign currency initially utilized in the purchase
of said asset.
For this purpose, telegraphic transfer buying/selling rate
in relation to a foreign currency rate is rate of exchange adopted
by State Bank of India for purchasing or selling such currency
where such currency is made available by that bank through telegraphic
transfer.
Q15). Can an NRI continue investing in his PPF account?
Ans: Yes
Q16). Can NRIs invest their funds in Government securities
or Units of Unit Trust of India(UTI)?
Ans: Yes. NRIs are freely permitted to invest
their funds in Government securities or Units of UTI through
authorized dealers. Units can also be purchased directly from
UTI.
Q17). Can NRIs make investments in National Savings
Certificates issued by Post Offices in India?
Ans: Yes. Investments in National Savings
Certificates can be made by NRIs subject to the terms and conditions
applicable to the sale/issue of such certificates. However,
NRIs are not permitted to invest in bearer securities like Indira
Vikas Patra/Kisan Vikas Patra.
Q18). Can Government securities/units be freely transferred
or sold?
Ans: Yes, provided the transfers/sales are
arranged through an authories dealer. Units can, however, be
repurchased directly by UTI.
Q19). Are sale/maturity proceeds of Government securities/Units/National
Savings Certificates allowed to be repatriated abroad?
Ans: If such securities were purchased out
of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity
proceeds can be repatriated. Sale/maturity proceeds of securities
purchased out of funds in NRO accounts can only be credited
to NRO accounts and cannot be remitted abroad. Interest earned
during the financial year 1994- 95 and onwards can, however,
be remitted to the extent permitted by Reserve Bank.
Q20). Can NRIs invest in companies in India?
Ans: NRIs are permitted to make direct investments
in proprietary/partnership concerns in India as also in shares/debentures
of Indian companies. They are also permitted to make portfolio
investments i.e. purchase of shares/debentures of Indian companies
through stock exchanges in India. These facilities are granted
both on repatriation and non repatriation basis.
Q21). Is permission of Reserve Bank required for NRIs
to invest in proprietary/partnership concerns on non- repatriation
basis?
Ans: No. Reserve Bank has granted general
permission to non- resident individuals of Indian nationality/origin
to invest by way of capital contribution in any proprietary
or partnership concern in India on non- repatriation basis provided
the investee concern is not engaged in any agricultural/plantation
activity or real estate business. This facility is, however,
not available to OCBs.
Q22). Is permission of Reserve Bank required for making
investments in new issues of Indian companies on non- repatriation
basis?
Ans: No. Indian companies have been granted
general permission to accept investments on non-repatriation
basis, in shares/convertible debentures by way of new/rights/bonus
issue provided the investee company is not engaged in agricultural
/plantation activity or real estate business(excluding real
estate development i.e. development of property and construction
of houses).
Q23). Are any formalities required to be completed by
NRIs for getting the benefit of the above general permission?
Ans: No. However, the firms/companies concerned
are required to file declarations with Reserve Bank in form
DIN giving particulars of the investments made. within ninety
days from the date of the investment.
Q24). Can NRI individuals make investments in domestic
public/private sector Mutual Funds or Money Market Mutual Funds
floated by commercial banks and public/private sector financial
institution on non/repatriation basis?
Ans: Yes.
Q25). Can Overseas Corporate Bodies make similar investments
in mutual funds on non-repatriation basis?
Ans: OCBs can make such investments only
in domestic public/ private sector Mutual Funds. They can also
make investments in Money Market Mutual Funds.
Q26). Can NRIs make investments in non-convertible debentures
of Indian companies?
Ans: Yes. Applications for necessary permission
should be made to Reserve Bank (Central Office) by the concerned
Indian Company in form ISD.
Q27). Can NRIs purchase existing shares/debentures of
Indian companies by private arrangement?
Ans: Yes. Reserve Bank permits NRIs , on
application in form FNC 7, to purchase shares/debentures of
existing Indian companies on non-repatriation basis. An undertaking
about non-repatriation is to be given in form NRU.
Q28). Is it necessary for a resident, holding securities
in Indian companies, to secure any approval from Reserve Bank
on his becoming a non-resident for holding such securities?
Ans: No. Reserve Bank has granted general
permission to companies in India to enter the overseas addresses
of the shareholders in their books in such cases provided the
companies obtain undertakings from the holders that they will
not seek repatriation of any income or sale proceeds of the
security.
Q29). Is income/interest earned on investments/deposits
held in India by NRIs on non-repatriation basis allowed to be
repatriated?
Ans: Yes. Income/interest accruing during
the financial year 1994-95 and onwards on bank deposits and
investments held by NRIs with non-repatriation benefits will
be eligible for repatriation as under:
- Up to U.S. $ 1,000 or its equivalent in full and one-third
of the balance income earned during the financial year 1994-95;
- Up to U.S. $ 1,000 or its equivalent in full and two third
of the balance income earned during the financial year 1995-96;
- The entire income earned during the financial year 1996-97
and onwards.
- The entire income earned during the financial year 1996-97
and onwards.
Q30). What is the procedure to be followed for seeking
repatriation in such cases?
Ans: NRIs should designate a branch of an
authorised dealer through whom the remittance of income is to
be made and make an application in form RCI to the designated
branch giving details of incomes earned during the previous
financial year alongwith a Chartered Accountant's Certificate.
The designated branch will allow the remittance of net amount
(i.e. after payment of tax) or credit it to NRE/FCNR account
of the applicant.
Q31). What are the schemes available to NRIs for direct
investments in India with repatriation benefits?
Ans: NRIs can make investments in new issues
of shares/convertible debentures of Indian companies under direct
investment schemes such as 24% scheme/40% scheme/100% scheme.
They can also invest in the schemes of domestic Mutual Funds
floated by public/private sector institutions/companies and
bonds issued by public sector undertakings, Non-resident investors
are not required to apply for permission to invest but the company
concerned will have to obtain permission from Reserve Bank.
Q32). What is 24% Scheme?
Ans: Under the 24% scheme, Indian companies
engaged or proposing to engage in any activity including finance,
hire purchase, leasing, trading or other services, establishment
of schools/colleges. etc.(except agricultural/plantation activities)
are allowed by Reserve Bank to issue shares/debentures to NRIs
with repatriation benefits to the extent of 24% of the new issue.
Q33). What is 40% Scheme?
Ans: A Under the 40% Scheme, Indian companies
engaged or proposing to engage in the following activities are
allowed by Reserve Bank to issue shares/debentures to NRIs with
repatriation benefits to the extent of 40% of the new issue.
- Industrial and Manufacturing units
- Hotels with 3, 4 or 5 star category
- Hospitals and diagnostic centres
- Shipping companies
- Development of computer software
- Oil exploration services
Q34). Is remittance of interest/dividend to NRI investors
freely allowed under the 24% /40% Scheme?
Ans: Yes. There is no ceiling or restriction
on the amount of remittable dividend. Remittance of interest/dividend
to NRI investors will be allowed by authorised dealers under
the posers delegated to them.
Q35). What are the specified industries under the 100%
Scheme?
Ans: Under 100% Scheme, NRIs are permitted
to invest in high priority industries listed in Annexure III
to the Statement on Industrial Policy dated 24th July 1991 of
the Government of India up to 100% of the new issue.
Q36). Is dividend/interest earned in respect of investment
made under the 100% Scheme freely remittable to the NRIs abroad?
Ans: Dividend/interest can be remitted freely
except in the case of consumer goods industries where the outflow
on account of dividend is required to be balanced by export
earnings of the company either in the year of declaration of
dividend or in the years prior to the declaration of dividend,
This requirement is enforced for a period of seven years from
the commencement of commercial production.
Q37). How does an NRI obtain permission of Reserve Bank
for investment under the 24% or 40% or 100% Scheme?
Ans: The NRI investor need not apply to Reserve
Bank. Application for necessary permission under the schemes
should be made by the Indian company/firm to the Central Office
of Reserve Bank in Mumbai in form ISD/ISD(R).
Q38). Besides the 24%, 40% and 100% Schemes is there
any other scheme for investment by NRIs in the equity of Indian
companies?
Ans: Yes. NRIs are permitted to undertake
revival of sick industrial units by making bulk investment in
them to the extent of 100 per cent either by way of purchase
of existing equity shares or in the form of subscription to
new equity issues.
Q39). Is the capital brought into India for revival
of a sick Industrial unit allowed to be repatriated?
Ans: Yes.
Q40). How can an NRI obtain permission of Reserve Bank
for investment in a sick industrial unit?
Ans: Application for necessary permission
should be made by the Indian company to the Central Office of
Reserve Bank in Mumbai in form RSU.
Q41). Under the existing Industrial Policy, investment
by foreign collaborators upto 51% of the equity is allowed by
Reserve Bank on repatriation basis in certain high priority industries.
Can NRIs take up the balance 49% equity in such cases on repatriation
basis?
Ans: Yes.
Q42). Can NRIs make investments in companies engaged
in real estate development in India?
Ans: Yes. Investment up to 100% in the new
issue of equity shares/convertible debentures of Indian companies
engaged in the followed areas is allowed-
- Development of serviced plots and construction of built
up residential premises;
- Real estate covering construction of residential and commercial
premises including business centers and offices;
- Development of township;
- City and region level urban infrastructure facilities including
roads and bridges;
- Manufacture of building material;
- Financing of housing development.
Q43). What is the procedure for obtaining Reserve Bank
permission in this regard?
Ans: Applications for the purpose should
be made by the concerned Indian company to the Central Office
of Reserve Bank in Mumbai in form ISD(R).
Q44). Will repatriation of the original investment and/or
dividend income be freely permitted?
Ans: Yes. Repatriation of original investment
will be permitted after a lock-in period of three years from
the date of issue of the equity shares/convertible debentures.
In addition, OCBs will be permitted to repatriate net profit
(upto 16 per cent) arising from the sale of such investment
after the lick-in period of three year. Annual dividend/interest
on equity shares/debentures can, however, be freely remitted
subject to payment of tax.
Q45). Are investments in Air Taxi operations permitted
to be made by NRIs?
Ans: Yes. Investments up to 100% equity participation
for carrying on Air Taxi operations are permitted in terms of
the guidelines issued by the Director General of Civil Aviation
for Air Taxi operations. Applications for the purpose should
be made to Reserve Bank (Central Office) in form ISD(R) by the
concerned Indian company.
Q46). Are there any restrictions on repatriation of
the investment made under this scheme or income earned thereon?
Ans: No. However, repatriation of the investment
and /or remittance of dividend will be permitted only after
the expiry of five years of operation and only out of accumulated
net foreign exchange earnings.
Q47). Can NRIs invest in non-convertible debentures
on repatriation basis?
Ans: Yes. Applications for necessary permission
should be made to Reserve Bank (Central Office) by the concerned
Indian company in form ISD.
Q48). What is the procedure to be followed for making
investment in the schemes of domestic Mutual Funds or public sector
bonds with repatriation benefits?
Ans: The concerned Fund/Public Sector Undertaking
should obtain necessary permission from Reserve Bank for issue
of units/bonds to NRIs. Applications for the purpose are required
to be made to the Central Office of Reserve Bank in form ISD(R).
Q49). Can NRIs invest in 100% Export Oriented Units
on repatriation basis?
Ans: Yes. NRIs will be permitted to invest
up to 100% in 100% Export Oriented Units subject to obtaining
approval from the Government of India, Ministry of Industries
(SIA) for setting up the EOU. In the case of units located in
Export Processing Zones, approval from the Development Commissioner
of the concerned zone is required to be obtained. Thereafter
an application should be made to the concerned regional office
of Reserve Bank in form ISD alongwith copy of Government approval
for necessary clearance under FERA 1973.
Q50). Can NRIs acquire shares disinvested by Government
of India in Public Sector Enterprises (PSEs) by inviting sealed
tenders?
Ans: Yes. Reserve Bank has granted general
permission to NRIs to acquire shares of PSEs on their bids being
successful provided the holding of a single NRI investor does
not exceed one per cent of the paid up capital of the PSE concerned,
the purchase consideration /bid money is paid by way of remittance
from abroad or by debit to his NRE/FCNR accounts.
Q51). What is the procedure for issue of rights entitlement
to NRIs?
Ans: The concerned company should approach
Reserve Bank for issue of rights entitlement to NRIs in the
prescribed form if on repatriation basis. However, rights entitlement
on non-repatriation basis would be covered by the general permission
(Please see Answer to Question No. 52 and 53).
Q52). What is the procedure required to be followed
by NRIs for renunciation of rights entitlement?
Ans: NRIs can make an application to Reserve
Bank by a letter detailing therein the folio number of the shares
held and the manner in which the rights are being sold.
Q53). What is the procedure for issue of bonus shares?
Ans: The concerned Indian company should
approach Reserve Bank for issue of bonus shares to NRIs if the
original investment is on repatriation basis. Issue of bonus
shares in respect of investment on non-repatriation basis is
covered by general permission (Please also see Answer to Question
No. 52).
Q54). Can NRIs obtain loans abroad against the collateral
of share/debentures of Indian companies?
Ans: Yes. Authorized dealer have been permitted
to grant loans/overdrafts abroad to NRIs through their overseas
branches and correspondents against collateral of the shares/debentures
of Indian companies held by them, provided the concerned shares/debentures
were acquired on repatriation basis.
Q55). Can sale proceeds of the shares/debentures be
remitted abroad for liquidation of outstanding against such loans/overdrafts?
Ans: Yes, subject to payment of Income tax,
Capital Gains tax etc. payable, if any.
Q56). What is the Portfolio Investment Scheme?
Ans: Under this scheme, NRIs are permitted
to acquire shares /debentures of Indian companies or units of
domestic Mutual Funds through the stock exchange/s in India.
Q57). What is the procedure for making applications?
Ans: The application is to be submitted to
Reserve Bank through a designated branch of a bank in India
in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI.
Q58). What is a designated branch?
Ans: Reserve Bank has authorised a few branches
of each bank to conduct the business under Portfolio Investment
Scheme on behalf of NRIs . These branches are the main branches
of major commercial banks located close to the stock exchange/s.
NRIs will have to route their applications through any of the
designated bank branches who have authorisation from Reserve
Bank.
Q59). Whether NRI can apply through more than one designated
branch?
Ans: No. Each NRI has to select one branch
for this purpose for investment on repatriation/ non-repatriation
basis.
Q60). Is it necessary to maintain a bank account with
the designated branch through whom the application is made?
Ans: It is advisable to maintain a bank account
with the designated branch for administrative convenience.
Q61). What is the validity period of Reserve Bank approval
for the purchase of shares/debentures of Indian companies or units
of domestic Mutual Funds?
Ans: Reserve Bank approval is valid for a
period of five years from the date of issue. This can be renewed
further by making a request by means of a simple letter.
Q62). Is there any ceiling on the investment under the
Portfolio Investment Scheme?
Ans: There is an overall ceiling of 5% of
paid- up equity share capital of the company/paid-up value of
each series of convertible debentures for purchase by NRIs /OCBs.
The overall ceiling can be raised to 30% if the company concerned
passes a special resolution to that effect in its general body
meeting and a board resolution. Individually, NRIs/OCBs can
make investment upto 1% of the paid-up equity share capital/each
series of convertible debentures. However, there is no ceiling
on investment in domestic Mutual Funds.
Q63). Can NRIs keep deposits with companies in India
with repatriation benefits?
Ans: Yes. NRIs are permitted to keep deposits
with public limited companies in India for a minimum period
of three years subject to certain ceilings/conditions. Application
for the purpose is required to be made by the company receiving
the deposits through an authorised dealer.
Q64). Do NRIs need permission of reserve Bank for placing
funds in fixed deposits with firms/companies on non- repatriation
basis?
Ans: Yes. Permission for placement of funds
in fixed deposits with firms/companies in India is granted by
Reserve Bank on application by the depositor or the deposit
accepting firm/company, on non-repatriation basis, subject to
certain ceilings/conditions.
Q65). Are NRIs permitted to invest in Commercial Paper(CP)
issued by Indian companies?
Ans: Yes. General permission has been granted
by Reserve Bank to Indian companies to issue CP to NRI individuals
subject to the conditions that the amount invested will not
be repatriated outside India and the CP will not be transferable.
Q66). Is permission of Reserve Bank required for sale/transfer
of Government securities/units?
Ans: No. Authorized dealers have been permitted
to undertake sale of Government securities/units on behalf of
NRIs without prior approval of Reserve Bank. Sale/maturity proceeds
can be remitted abroad if the original investment was made out
of funds remitted from abroad or funds in NRE/FCNR accounts.
Otherwise, they will have to be credited to NRO account of the
holder.
Q67). Is permission of Reserve Bank required by NRIs
for sale/transfer of shares/debentures of Indian companies to
other NRIs?
Ans: No. Transfer of shares/debentures of
Indian companies by NRIs to other non-residents does not require
permission of Reserve Bank. However, the transferee NRI would
need permission for purchase of such shares for which an application
is required to be made to Reserve Bank in form FNC 7.
Q68). Can NRIs transfer/sell their shares/ debentures/bonds
held on non-repatriation basis to residents freely?
Ans: Yes. General exemption has been granted
by Reserve Bank for transfer/sale of shares/debentures/bonds
by NRIs/OCBs through stock exchanges if such transfers are made
in favour of an Indian citizen or a person of Indian origin
or a company incorporated in India and sale proceeds thereof
are credited to NRO account.
Q69). What is the procedure for sale/transfer of shares/debentures/bonds
held by NRIs with repatriation benefits?
Ans: In the case of shares /debentures /bonds
acquired by NRIs through stock exchanges under the Portfolio
Investment Scheme, general exemption has been granted for transfer
through stock exchanges provided the sale is arranged through
the same designated branch through whom they were purchased.
In other cases, applications for necessary permission are required
to be made to Reserve Bank in form TS 4.
Q70). What is the procedure to be followed by NRIs for
sale/transfer of shares /debentures to residents by private arrangements?
Ans: NRIs are required to submit application
in form TS 1 to Reserve Bank for sale of shares/debentures by
private arrangements.
Q71). Can shares/debentures be given away as gifts to
relatives?
Ans: Yes. Reserve Bank has granted general
permission to NRIs to transfer, by way of gift, shares, bonds
and debentures of Indian companies held by them with Reserve
Bank's permission to their resident close relative/s.
Source: Reserve Bank of India
