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 Definition of a NRIs / PIOs
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Who is a ‘Non Resident Indian (NRI)’?
A person who does not reside in India for more than 182 days in any preceding financial year
Non Resident Indians is also someone who fall under the following broad categories:
- 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.
- Indian ci.tizens working abroad on assignments with foreign Governments/government agencies or International/Regional Agencies like the UNO, IMF, World Bank, etc.
- 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.
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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,
- he, at any time, held an Indian passport, or
- 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
- 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.
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NRI Investments in India – General Regulatory Framework
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Can an NRI make investments in the Indian companies? NRIs are allowed to invest in India companies under the Portfolio Investment Scheme (buying through the secondary market) and through the Direct Subscription route (Investments though IPOs/Private Placements). |
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Portfolio Investment Scheme
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What is the Portfolio Investment Scheme? Portfolio Investment Scheme (PINS) 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 ( Authorized Dealer - AD) |
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Steps for an NRI for Investments in Indian stock markets
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Steps for an NRI to Investments in Indian stock markets?
- An NRI should open a new NRE /NRO savings bank account with designated bank (AD) branch which is approved by RBI (Reserve Bank of India) for this purpose.
- He/ She should apply for a general approval for investment in Indian Stock Market through his designated bank branch (PIS approval).
- He / She should open a Demat Account with a Depository Participant to hold his shares.
- He / She needs to register with a broker to execute his buy/sell orders on the stock exchange(s).
IL&FS Investsmart offers broking account for the NRIs to trade in equities and the NRI can trade online at his /her convenience.
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Designated bank branch for investments
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What is a ’designated bank branch’? RBI has authorized a few branches of some banks in India to conduct the business under Portfolio Investment Scheme on behalf of NRIs/OCBs. These are called Authorized Dealers
IL&FS Investsmart will guide you to open account with the designated bank branches through our exclusive tie-ups.
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Overview: NRE and NRO Bank Accounts
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NRIs/PIOs are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India.
Such accounts can be opened with banks specially authorized by the Reserve Bank in this behalf.
There are three types of Non-Resident accounts:
1) Non- Resident (External) Rupee Accounts (NRE Accounts)
NRIs and PIOs are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts for limited purposes.
The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest lying to the credit of NRE accounts is exempt from tax in the hands of the NRI. However, TDS on capital gains as per the prevailing tax provisions is processed by the Authorized Dealers before giving credit to the NRE account
Funds held in NRE accounts may be freely transferred to Foreign Currency Non Resident (FCNR) accounts of the same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holder.
2) Ordinary Non-Resident Account (NRO Accounts)
These are Rupee dominated non-repatriable accounts and can be in the form of savings, current, recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National /PIO resident in India leaves for taking up employment etc. outside the country, other than Nepal or Bhutan, his bank account in India gets designated as NRO account.
The deposits can be used to make all legitimate payments in rupees. Interest income from NRO accounts is taxable. Interest income, net of taxes is repatriable.
3) Foreign Currency Non Resident (Bank) Accounts (FCNR (B) Accounts)>
NRIs/PIOs are permitted to open such accounts in US dollars, Sterling Pounds, Japanese Yen, Euro, Canadian Dollars and Australian Dollars. The accounts may be opened in the form of term deposit for any of the three maturity periods viz; (a) one year and above but less then two years (b) two years and above but less then three years and (c) three years only. Now RBI has allowed banks to accept FCNR (B) deposits upto maximum maturity period of five years.
Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws.
FCNR (B) accounts can also be utilised for local disbursement including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines.
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Can money be transferred from NRE account to NRO account or vice versa? Funds can be freely transferred from NRE account to NRO account. But No funds can be transferred from NRO account to NRE account. |
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Can money transferred from NRE account to NRO account be transferred back to NRE account? Money once credited into NRO account cannot be transferred back to NRE account. Amount once transferred to NRO account will become non-repatriable. |
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Can a NRI have multiple NRE and NRO accounts with designated branches of different authorized banks for the purpose of investing in Indian equity markets under the Portfolio Investment Scheme? No. All investments in Indian equity markets under the Portfolio Investment Scheme must be routed through only one dedicated NRE and NRO account opened with any one of the designated branches of authorized banks. Although a NRI can have multiple NRO and NRE accounts with different banks/branches but Investments under Portfolio Investment Scheme cannot be made through more than one NRE or NRO accounts maintained with the designated bank branch. |
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Investment on Repatriation and Non-Repatriation Basis
Approval for Investments under Portfolio Investment Scheme
Role of a bank (AD) and broker for NRIs investing in equities
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Role of the Bank
- Issues authorization letter on behalf of RBI for investment under PIS
- Facilitates transfer of funds from PIS account to the broker’s account in case of a purchase transaction
- Facilitates receipt of funds in to customer’s account from broker’s account in case of a sale transaction
- Computes Capital gains and effects payment of applicable taxes to Income-Tax Authorities
- Handles mandatory reporting of PIS transactions to Reserve Bank of India
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Role of a Broker
- Provide facility for trading
- Ensure contract note for each and every transaction is sent to the bank ie. Authorized Dealer for the RBI reporting.
- Ensure that the credit for sale is not directly credited into the client account. The cheque has to be forwarded to the Authorized Dealer. The bank will credit the proceeds after applying the necessary capital gain tax.
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Maximum Permissible Investments for NRI’s
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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. |
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What happens if an NRI purchases a stock in excess of the prescribed limit? The NRI will have to immediately off load such portion of the holding, which is in excess of the prescribed limit. |
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Day Trading/ Margin Trading
Investment through Direct Subscription route (IPOs)
NRIs investing in derivatives*
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What are the regulatory requirements for a NRI to invest in derivatives?
NRIs are permitted in invest in exchange traded derivative contracts subject to the margin and other requirements which are in place for other investors. NSE has laid down the procedure for providing specific UCC number to NRIs for undertaking trades in Derivative segment. In addition, a NRI is subject to the following position limits:
| Index options |
Index Futures |
Stock Options |
Single stock Futures |
Interest rate futures |
Disclosure requirement for any person or persons acting in concert holding 15% or more of the open interest of all derivative |
Disclosure requirement for any person or persons acting in concert holding 15% or more of the open interest of all derivative |
1% of free float market capitalization or 5% of open interest on a particular underlying whichever is higher |
1% of free float market capitalization or 5% of open interest on a particular underlying whichever is higher |
Rs.100 Cr or 15% of total open interest in the market in exchange traded interest rate derivative contracts, whichever is higher. |
Source: http://www.sebi.gov.in/faq/derivativesfaq.html
* IIL currently does not offer derivatives trading for NRIs .
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Account Opening procedure
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What are the forms required for account opening?
The forms required for NREquity/NRI PMS Account are given here for download :-
Important: Please read the below mentioned documents before applying for NRI PMS Account:-
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What are the supporting documents required for NREquity Account & NRI PMS Account ?
The documents to be attached along with your above mentioned forms are as below:
ID Proof:
- PAN card copy (PAN application if card is to be obtained through IL&FS Investsmart )
- Passport Copy (relevant page where the photograph and address appears)
- Visa page required in case you are in India
- PIO card / Passport of Parents having Indian citizenship for proving PIO status
Address Proof: (For Overseas AND Indian - residential and correspondence address) -- Original OR Certified Copy of any ONE of the following:
- Recent Bank Statement / Bank passbook (not more than 2 months old)( In case of a PAN Application ,Original Bank Statement for residential address will be needed)
- Copy of Driving License
- Electricity bills (not more than two months old),
- Residence Telephone bills (not more than two months old)
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Do the documents require attestation?
Yes.
If you are applying in India:
Documents will have to attested by IL&FS Investsmart Employee
If you are applying from outside India:
For carrying out the KYC(Know you Customer norms), the signature and photo in the account opening form, identity and address proofs, PAN card copy (if given) along with the proof of address should be attested by Notary Public / Local Banker / Official of Indian Embassy and the attestation is to the effect that copies have been 'verified with the originals'.
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Where do I submit the Account opening Forms & Documents / contact incase of queries?
You can send the complete set of Account Opening Forms & Documents to the below mentioned address:
NRI Desk,
IL&FS Investsmart Securities Limited,
International Processing Wing,
Dhan Singh Processor Premises,
Dhan Singh Compound,
J.B.Nagar,
Andheri Kurla Road, Andheri (E),
Mumbai - 400059
For any queries relating to Account Opening , you may contact our Customer Relationship Executive at India Toll free 1800-209-4477 or on 91-22-3063-7777 or E-mail at nri@hsbcinv.com
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Charges and Fees for NREquity
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What are the Account opening charges?
Account opening charges (one time charges)
- INR 1200 or USD 30 (inclusive of service tax) per account
- Account opening fee to be paid by Cheque / Demand draft (Payable at Mumbai or At Par) in favour of "IL&FS Investsmart Securities Limited"
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What are the PAN card processing fees?
PAN card processing fees
- INR 750 per application or USD 20 (inclusive of service tax) if PAN card is processed through IL&FS
- Fee to be paid by Cheque / Demand draft (Payable at Mumbai or At Par) in favour of "IL&FS Investsmart Securities Limited"
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What are the Broking charges?
Broking charges (Per trade value):
- 0.6 % + (Additional Levies as per table below) ( For Quarterly assets of less than INR 1 Million)
- 0.5 % + (Additional Levies as per table below) ( For Quarterly assets of INR 1 million to 5 Million )
- 0.4% + (Additional Levies as per table below) ( For Quarterly assets of above INR 5 Million )
Assets = Demat balance at the end of the quarter*.
Slab will apply with effect by the 7th of the following month after the quarter*. E.g.
if DP balance as on 30th June is 6 million, brokerage of 0.4 % will be applicable W.E.F 7th July till 30th Sept. Similar calculation will be done for the month of October onwards. For the quarter* ended June the brokerage will be 0.6%
*Quarter would mean 3 months ending per financial year i.e. 30th June, 30th September, 31st December and 31st march or as decided by IL&FS Investsmart Securities Limited from time to time. The date of account opening will be considered for calculating the inclusion in a particular quarter for the first time.
Additional Levies: Cash segment
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Type of Levies |
Rate of Charge* |
Remarks |
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Service Tax |
12.0000% |
On Brokerage |
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Education Cess |
3.0000% |
On Service Tax |
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S T T ( Sq / Off ) |
0.0250% |
Only on Sell Values |
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S T T (Delivery Transaction) |
0.1250% |
On Delivery T Over |
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Stamp Duty (Delivery Transaction) |
0.0100% |
On Total T Over |
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Transaction Charges |
0.0036% |
On Total T Over |
*Rate as applicable from time to time
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What are the Demat charges?
Demat charges:
o Schemes:
- Scheme 1: Rs.150 per quarter to be paid at the beginning of every quarter.
At the time of new account opening Annual Maintenance Charges to be paid upfront for two quarters. NON-REFUNDABLE - will be pro-rata only for the first quarter of account opening.
- Scheme 2: The yearly Annual Maintenance Charges will be Rs. 600/-. At the time of Account opening, the Trading account will be debited with Rs. 600/-. If the Delivery brokerage percentage is greater than 0.40%, no further Market transaction DP charges will be debited. If the Brokerage earned during the month has been Rs. 4000/- or more NO FURTHER DEBIT WILL BE DONE towards Market transaction related DP charges. If any of the above condition is not satisfied, then the difference between ACTUAL BILL & the yearly advance of Rs. 600/-, would be debited. Off Market transaction charges / Pledge creation charges and other charges would be debited separately.
o Dematerialization Charges: Rs 2/- per certificate
o Additional Levies: (off-market and other charges)
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| Off Market / Inter- depository Transations |
Transactions within IL&FS a/c- 0.02% per debit instruction on the value of transaction, subject to a minimum of Rs 50/- & a maximum of Rs 300/-
Transactions outside IL&FS a/c- 0.04% per debit instruction on the value of transaction, subject to a minimum of Rs 50/- & a maximum of Rs 500/- per transaction
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| Pledge Charges Creation / Closure and Confirmation of both |
0.02% of the value of securities, subject to a minimum of Rs. 25/-
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| Pledge Charges for Invocation |
0.05% of the transaction charges, subject to a minimum of Rs. 50/-
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| Rematerialization Charges |
Rs. 25/- per certifiate or 0.05% of the value whichever is higher
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| Failed / Rejected Transactions |
Rs. 25/- per transaction
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| Demat Rejection charges |
Rs. 35/- per rejection for every 500 gms
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| Adhoc / Non periodic statement requests |
Rs. 25/- per request upto 10 pages. Every additonal 5 pages or a portion thereof will be charged at Rs. 5 plus courier charges
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| Cheque bounce charges |
Charges will be applied based on charges as determined by our bankers
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Disclaimer:
As a value added service to our customers or prospective customers, we have appended a number of Frequently Asked Questions (FAQs) with explanatory comments relating to securities transactions by NRIs/PIOs. Reasonable efforts have been taken in collecting, preparing and providing quality information, but we do not warrant or guarantee the accuracy, completeness, adequacy or currency of the information. The contents of the FAQ are subject to changes / amendments made by the regulatory authorities in India and your home country. This information is provided as general guidance and is neither a solicitation for business, investment advice nor tax advice. NRI and PIO Customers and prospects should consider seeking professional advice before opening or operating a NRI Trading Account. |
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