| FAQ’s FOR NRIs / PIOs |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Demat account and DP servicess |
| |
|
|
| |
| Taxation of Capital Gains and Double Taxation Avoidance Treaty |
| |
|
|
|
|
|
| |
| Investment through Direct Subscription route (IPOs) |
| |
|
|
|
|
|
| |
| Maximum Permissible Investments – Restrict List / Watch List |
| |
|
|
| |
|
| Who is an ‘Non Resident Indian (NRI)’? |
Non Resident Indians fall under the following broad categories:
a. Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.
b. Indian citizens working abroad on assignments with foreign Governments/government agencies or International/Regional Agencies like the UNO, IMF, World Bank, etc.
c. Officials of the Central and State Governments and Public Sector Undertakings deputed abroad on temporary assignments or posted to their offices (including Indian Diplomatic Missions) abroad.
|
|
|
|
| Who is a ‘Person of Indian Origin’ (PIO)? |
|
| |
|
| A citizen of any country (other than a citizen of Bangladesh or Pakistan) is deemed to be of Indian origin, if, i. he, at any time, held an Indian passport, or
ii. he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 ,or
iii. a spouse (not being a citizen of Bangladesh or Pakistan or Sri Lanka) of an Indian citizen or of a person of Indian origin is also deemed to be PIO. |
|
|
|
| What are the investment opportunities available to NRIs? |
|
| |
|
There are two types of investment opportunities available to NRIs:
a. Investment with repatriation benefits
b. Investment under non-repatriation basis. |
|
|
|
| Who can open a NRI account with TRANSWORLD? |
|
| |
|
Indian citizens who fall under the definition of NRIs described above are eligible to open an account.
|
|
|
|
| How do I open a NRI Account with TRANSWORLD? |
|
| |
|
You may request an NRI account opening application through e-mail at marketing@transworldsecurities.com or by fax or phone. Please ensure that you fill the application form with all relevant information and send it along with the necessary documents.
|
|
|
|
| What are the steps NRIs should take before they start investing in the Indian stock market? |
|
| |
|
All that you have to do is open a bank account with an RBI approved bank branch, and then contact TRANSWORLD to open the DP and Trading Account
|
|
|
|
| How can TRANSWORLD assist NRIs to invest in the Indian stock market? |
|
| |
|
Transworld Securities Ltd, a part of the “Transworld” group with the Corporate Membership of National Stock Exchange (NSE), The Stock Exchange, Mumbai (BSE) and Depository participant of National Securities Depository Limited (NSDL). Transworld has more than 25 branches spread across India with our head office in New Delhi. Transworld has succeeded in servicing the needs of the investor through its advanced and user defined CTCL solutions which offer the facilities to trade in the equity and derivatives segment of NSE & BSE in a single screen, thereby ushering in a revolution to the totally scientific outlook to the stock broking scenario in India.
We have also established the facility to trade in Cash, Margin Trading and Derivatives segment through the Internet for the convenience of investors to trade from anywhere in the world. |
|
|
|
| How can NRIs convert physical certificates into Demat form? |
|
| |
|
If you hold shares issued in an IPO, RBI would have given a general approval to the issuing company and you need not take any separate approval. If, however, you bought the shares in the secondary market, you will need to submit a Demat request form to TRANSWORLD, along with a copy of the RBI approval obtained at the time of acquiring these securities. |
|
|
|
| What are the formalities required for opening a bank account? |
|
| |
|
It is preferable that NRI investors deal only with one designated bank branch under portfolio investment services. To open an account, an undertaking letter, the bank account opening form and the following annexure should be submitted:
1. Two photographs signed across.
2. Copy of passport (first four pages and last page) and visa. These copies should be attested by the Bank Branch Manager (Overseas)/ Notary Public/an official of the Indian Embassy in the country of residence.
3. RPI form for repatriating the benefits or NRI form for non-repatriating the benefits. |
|
|
|
| I am an NRI. How do I trade through the secondary market? |
|
| |
|
You can trade in shares and debentures through any member of a stock exchange, after obtaining necessary RBI permission. To obtain RBI permission, you need to open a bank account in India (under the Portfolio Management Scheme) with a designated bank. Through this bank, the RPI form is forwarded to RBI seeking permission to trade in shares and debentures from the secondary market on a repatriable basis. This form is to be filled by the client in duplicate.
RBI permission is blanket permission valid for five years. Investments on a non-repatriation basis can also be made from NRO accounts and also from funds remitted directly. For this, an NRI form must be submitted to RBI. |
|
|
|
| Do I need to get approval from RBI to buy and sell shares in the Indian capital market? |
|
| |
|
| Yes, RBI approval is necessary for NRI investors to deal in the Indian capital market. |
|
|
|
| Is it necessary for me to get direct RBI permission to invest in Indian companies? |
|
| |
|
No, the RBI has granted permission to authorized dealer banks to purchase such shares/Debentures on behalf of NRIs/OCBs. |
|
|
|
| How does a Dealer Bank obtain permission from RBI on the behalf of NRI? |
|
| |
|
You are requested to fill in any one of the prescribed forms NRC/NRI/RPC/RPI available with Authorized Dealer bank. This form is submitted to RBI, who further grants permission. |
|
|
|
| What is a designated bank/branch? |
|
RBI has authorized a few branches of each bank to conduct business under Portfolio Investment Scheme (PIS) on behalf of NRIs/OCBs. These are the main branches of major commercial banks located close to the stock exchanges. NRIs/OCBs will have to route their applications through any of the designated bank branches that have authorization from RBI. |
|
|
|
| I already have a bank account in India. Can I route my transactions through this bank? |
|
| |
|
You can have as many NRI/NRO accounts in India but you should have only one designated bank for sale/purchase of shares under the Direct/Portfolio Investment Schemes. RBI guidelines permit NRI investors to designate only one bank authorized by RBI to undertake purchase/sale of shares/debentures through the stock exchange.
The client has to give a declaration that he has not obtained RBI permission for sale/purchase of shares under the Direct/Portfolio Investment Schemes through any other bank. |
|
|
|
| What are the documents that I need to submit for opening an account with TRANSWORLD? |
|
| |
|
TRANSWOLD has its own application kit comprising Trading Account opening form, TRANSWORLD Depository application form, and power of attorney. These forms should be dully filled and submitted along with
1. 2 Photographs signed across.
2. Copy of passport and visa (passport copy should be attested by Bank Branch Manager in Overseas/Notary Public or an official of the Indian Embassy in the country of residence.)
3. Alien registration card or any other ID.
4. Copy of driving license.
5. Power of attorney in favour of TRANSWORLD or any other representative of Indian residential status. |
|
|
|
| Why does TRANSWORLD require a power of attorney? Can I give this power of attorney to a party other than TRANSWORLD? |
|
| |
|
RANSWORLD requires a power of attorney to execute transactions related to depository operations (in case of your sale) on your behalf. This reduces the risk of delay in executing your instructions.
You can give the power of attorney to your friends or relatives who are Indian residents. |
|
|
|
| Demat account and DP servicess |
|
| |
|
What is a Demat Account? |
|
| |
|
In the advanced countries, depository systems and services have played a significant role in not only facilitating smooth trading and settlement but also attracting foreign investment in the capital market.
The depository system evolved by the National Securities Depositories Limited (NSDL) enables investors to overcome all problems related to handling physical certificates. NSDL is an organization formed to provide electronic depository facilities for securities traded. The securities of investors are held in electronic form through the medium of Depository Participants.
The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. A depository can therefore be conceived of as a "Bank" for securities. An investor wishing to utilise the services offered by a depository has to open an account with the depository through the Depository Participant. This is very similar to opening an account with any of the branches of a bank in order to utilise the services of that bank.
|
|
|
|
| What is a Depository? Who is a Depository Participant? |
|
| |
|
| A depository holds the securities of investors in electronic form just like a bank holds cash of its customers. As in a Bank, investors can deposit/withdraw and transfer securities. The National Securities Depository Limited (NSDL) is the first depository in India. The functions of NSDL are regulated by the Securities and Exchange Board of India (SEBI).
The Depository Participants (DPs) are the link between the Shareholder, the Company and NSDL. Banks, Financial Institutions, Custodians, Stock Brokers etc. can become DPs subject to their meeting certain requirements prescribed by NSDL and SEBI. NSDL publishes from time to time the list of DPs registered with them.
You can open your accounts with one or more DPs, as you like. The procedure for opening an account with the Depository Participant is similar to opening a Savings Bank Account with the Bank. After opening the account, you can hold shares of any number of companies in your account, provided all such companies have entered the depository system.
|
|
|
|
| Taxation of Capital Gains and Double Taxation Avoidance Treaty |
|
| |
|
| What are the different taxes on NRI profits? |
|
| |
|
Short term Capital gain, Long term Capital gain & Speculative Gains
Short term capital gain: Any capital gain arising out of sell of shares/debentures held for a period not more than 12 months from the date of its acquisition shall be a short term capital gain.
Long term capital gain: Any capital gain arising out of sell of shares/debentures held for more than 12 months from the date of its acquisition shall be a long term capital gain. Presently the long-term capital gain is totally free of any Tax.
The period of holding is defined as the period from the date of purchase to the date of sale.
For example if the sale transaction date is 01-01-2005, all those purchases, which are affected up to 01-01-2004, are eligible as long term capital gain tax. Purchase made on 02-01-2004 and thereafter will be subjected to short term capital gain tax.
Speculative Profits are not eligible for taxation under these special provisions. Speculative profits are taxable at normal rates as applicable to any resident individual. Speculative loss cannot be set off against any income including speculative profits.
|
|
|
|
| How is amount of capital gain determined? |
|
| |
|
Capital gain is the calculated based on the difference between the net sale consideration (sell price less brokerage) and the cost of acquisition (purchase price plus brokerage) of the concerned holding. Value of holding is calculated on FIFO (First In First Out) basis.
|
|
|
|
| What is the cost of acquisition of bonus shares? |
|
| |
|
Cost of bonus shares is taken as nil. At the same time, the original holding on which the bonus shares have been issued shall continue to carry the same cost of acquisition.
Example: Cost of acquisition of 100 shares of company ‘A’ is Rs.500 per share. Bonus shares in the ratio of 1:1 are allotted. Cost of acquisition of 100 bonus shares will be Rs.0 and original 100 shares will continue to have the cost of Rs.500 per share
|
|
|
|
| What is ‘Double Taxation Avoidance Treaty’? |
|
| |
|
India has entered into Double Taxation Avoidance Treaties with certain countries under which NRIs who are residing in any of these countries, are liable to pay income tax at the rate applicable in India or in the country where they are residing, which ever is lower.
|
|
|
|
| How can NRIs, residing in any of these countries, take benefit of ‘Double Tax Avoidance Treaty’? |
|
| |
|
To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to the designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated bank. |
|
|
|
| Investment through Direct Subscription route (IPOs) |
|
| |
|
| 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 though subscription to Initial Public Offerings (IPOs) or Private placements also come under the preview of Portfolio Investment Scheme? |
|
| |
|
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 RBI’s regulations with regard to Foreign Direct Investments. |
|
|
|
| Do NRIs need any permission of RBI to subscribe to Initial Public Offerings (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 any approval from Reserve Bank of India for selling of the 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. |
|
|
|
| Do NRIs need to route the sale of securities acquired through IPO/Private Placement through the designated bank branch for Portfolio Investment Scheme, if any? |
|
| |
|
No. The shares/convertible debentures acquired under IPO cannot be routed through designated bank branch, as this is not covered by Portfolio Investment Scheme. |
|
|
|
| Maximum Permissible Investments – Restrict List / Watch List |
|
| |
|
| Is there any limit for purchase of shares/convertible debentures by NRIs under the Portfolio Investment Scheme? |
|
|
|
Yes. An NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the company (equity as well as preference capital) or the aggregate paid up value of each series of convertible debentures as the case may be. For the purpose of this ceiling, investment under the Portfolio Investment Scheme on repatriation as well as non-repatriation basis will be clubbed together.
There is an overall ceiling of 10% of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by all NRIs/OCBs put together. The overall ceiling can be raised to 30% if the company concerned passes a special resolution to that effect in its general body meeting.
Shares/convertible debentures acquired through IPO/Private Placement are excluded for the purpose of above limits.
|
|
| |
|
| Who monitors these ceilings on the holdings by NRIs/OCBs? What is RBI’s Restrict List/Watch List? |
|
|
|
While limits of individual holdings by NRIs/OCBs are monitored by the respective designated bank branch, RBI monitors the holding limits by NRIs/OCBs in aggregate. Once the aggregate holding of NRIs/OCBs builds up/ about to build up to the maximum prescribed ceiling, RBI puts the concerned stock under the Restrict List/Watch List which is published by RBI from time to time.
What happens if an NRI purchases a stock in excess of the prescribed limit?
An NRI will have to immediately off load such portion of the holding, which is in excess of the prescribed limit. |
|
| |
|
|
|
|
|
|
|
