Here is investing in Mutual Funds could prove to be a good financial decision:
Who is an NRI?NRI can invest in the following products.
Any NRI/PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.
What type of saving bank account(s) can be opened by an NRI or PIO in India?Any NRI/PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.
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.
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.
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.
What is the status of NRO/NRE accounts on the return of the account holder to India?RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.
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 and 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.
NRIs subscribe to public issues? What are the permissions/approvals required?Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GOI/RBI. Therefore, individual NRI need not obtain any permission.
Does an NRI require any permission to receive bonus/rights shares?No
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.
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:
There are two types of 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.
How many PIS account can a NRI open?NRI/PIO can open only one PIS account with any designated banks (Preferred bank – UTI 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 the types of NON PIS Account?There are two types of NON PIS account
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 IPOs or Private placements come under PIS?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.
Do NRIs need any permission of RBI to subscribe for IPOs or Private placements of equity shares/convertible debentures of existing or new companies?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.
Do NRIs need approvals from RBI for selling securities acquired through IPOs/Private Placement?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.
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.
What are the provisions for corporate benefits for investment on repatriation and non-repatriation basis?Corporate benefits may be in the form of dividend, interest, rights, bonus, etc. Any corporate benefit resulting out of investment in securities on non-repatriation basis will not carry the right of repatriation. Similarly any corporate benefit resulting out of investment in securities on repatriation basis will carry the right of repatriation. This is subject to change depending on prevailing RBI regulations.
Where can an NRI/PIO open a demat account?NRI/PIO needs to open a demat account with an NBFC as explained above.
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.
What is the procedure of Dematerialization?Client submits a DRF form along with the physical share certificate to NBFC, who in turn forwards it to the Registrar & Transfer agent for confirmation from the company. After the confirmation is received the client a/c is credited.
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 rates applicable?TDS rate is different as per the tenure of the investment. It can be classified into
What are the types of rates applicable?Long-term capital gain – If the period of holding is more than 1 year i.e. the difference between the date of purchase and sell is more than 1 year, then the TDS rate applicable is 0 %. Before 1st Oct 2004 this rate was 10% now it is tax-free.
Short-term capital gain - If the period of holding is less than 1 year i.e. the difference between the date of purchase and sell is less than 1 year, then the TDS rate applicable is 10%. Before 1st Oct 2004 this rate was 30%.
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.
How the TDS deducted and money is transferred to the 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.
Important: TDS is deducted only at the time of crediting sales proceeds.
What is PMS?Portfolio Management Services provides the benefits of diversification across assets, sectors, and funds. The experts in Portfolio Management combine best of breed investment of avenues as they aim to achieve optimal returns at managed levels of risk. It is transparent collective investments.
What is Mutual Fund?A mutual fund is nothing more than a collection of stocks and/or bonds. You can make money from a mutual fund in three ways: