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Faq's on NRI Care

Who is an NRI? Who is an NRI?

An NRI is an Indian citizen who stays outside India. For purposes of carrying out employment or any business or vocation, under circumstances indicating an intention to stay outside India for an uncertain duration and Any Indian citizen deputed outside India for a temporary period in connection with employment.

Who is a PIO? Who is a PIO?

A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is

  • a. PIO if: a. He/she at any time held an Indian Passport OR
  • b. He/she or either of his parents or any of his/her grandparents was a citizen of India OR
  • c. Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above

What are the products offered to NRI? What are the products offered to NRI?

NRI can invest in the following products if:

a. He/she at any given point of time ever held an Indian Passport OR
b. He/she or either of his/her parents or any of his/her grandparents was a citizen of India OR
c. Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above 

What steps an NRI needs to take to start investing in the Indian Stock Market? What steps an NRI needs to take to start investing in the Indian Stock Market?

a. An NRI should open a new bank account (NRE/NRO or both) with designated bank which is approved by RBI (Reserve Bank of India) for this purpose.
b. He should apply for a general approval for investment in Indian Stock Market through his designated bank branch.
c. He should open a Demat Account with an NBFC to hold his shares and register to execute his buy/sell orders on the stock exchange(s). 

What type of saving bank account(s) can be opened by an NRI or PIO in India? 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? 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? 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? 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? 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? 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? 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? 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.

What is PIS? 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.

a. PIS account is applicable only for NRIs and not for resident Indians.
b. It is only for trading in Indian markets and not any other foreign markets.
c. It is applicable only for equity trades and not MF investments.

Why is PIS required? Why is PIS required?

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.

What is meant by investment through direct subscription route? 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 through 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 NRIs need approvals from RBI for selling securities acquired through IPOs/Private Placement? 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.

Where can an NRI/PIO open a Demat account? 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? 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? 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? 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? What are the types of rates applicable?

TDS rate is different as per the tenure of the investment. It can be classified as: 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%.

How is TDS computed? How is TDS computed?

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? 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 verified:

a. Amount of gain = Selling price – Purchase price
b. Duration of holding i.e. long term or short term = Selling date – Purchase date
c. Source of fund for purchase i.e. NRE or NRO

Note: TDS is deducted only at the time of crediting sales proceeds

What is PMS? What is PMS?

Portfolio Management Services (PMS) 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.

How much is the risk involved while investing in Equity Investments? How much is the risk involved while investing in Equity Investments?

Equity investments are subject to market risks and there is no assurance or guarantee that the objective of the portfolio management service will be achieved. As with any investment in securities, the net asset value of the managed portfolios can go up or down depending on the factors and forces affecting capital markets. Past performance of the portfolios does not indicate the future performance.

Do NRI's require permission of Reserve Bank to acquire immovable property in India? Do NRI's require permission of Reserve Bank to acquire immovable property in India?

No, NRIs do not require any permission to acquire any immovable property in India other than agricultural/plantation property or a farm house.

Do NRIs require permission of Reserve Bank to transfer immovable property in India? Do NRIs require permission of Reserve Bank to transfer immovable property in India?

No, NRIs do not require any permission to transfer any immovable property in India. Permission is required only in the case of transferring of agricultural or plantation property or farm house to another citizen of India NRI or PIO.

Do PIOs require permission of Reserve Bank to purchase immovable property in India for their residential use? Do PIOs require permission of Reserve Bank to purchase immovable property in India for their residential use?

Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property other than agricultural land/farm house/plantation property, in India. They are, therefore, not required to obtain separate permission of Reserve Bank or file any declaration.

In what manner should the purchase consideration for the immovable property be paid by PIOs under the general permission? In what manner should the purchase consideration for the immovable property be paid by PIOs under the general permission?

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from any non-resident accounts maintained with banks in India.

Can such property be sold without the permission of Reserve Bank? Can such property be sold without the permission of Reserve Bank?

Yes, Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

Can sale proceeds of such property if and when sold be remitted out of India? Can sale proceeds of such property if and when sold be remitted out of India?

In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a NRI or PIO, the authorised dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied:

a. The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999;
b. The amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in foreign currency non-resident account or (b) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in non-resident external account for acquisition of the property; and
c. In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

What other facilities are available for repatriation? What other facilities are available for repatriation?

Authorised dealers can allow remittance up to USD 1 million for any purpose, per calendar year from balances in NRO accounts subject to payment of applicable taxes. The limit of USD 1 million per year includes sale proceeds of immovable properties acquired by the NRI/PIO's while they were resident in India and held for a period of 10 years and above. In case the property is sold after being held for less than 10 years, remittance can be made if the sale proceeds were held for the balance period in NRO account or in any other eligible instruments.

Can PIOs acquire or dispose of immovable property by way of gift? Can PIOs acquire or dispose of immovable property by way of gift?

Certainly. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of immovable properties other than agricultural land/farmhouse/plantation property by way of gift from or to an Indian citizen, NRI or PIO.

Can NRIs/PIOs rent out the properties (residential/commercial) if not required for immediate use? Can NRIs/PIOs rent out the properties (residential/commercial) if not required for immediate use?

Yes, Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income is eligible for repatriation

Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance? Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to NRIs for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of loan margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investor's NRE/FCNR/NRO Accounts.

Can authorised dealers grant loans to NRIs for acquisition of a flat/house for residential purposes? Can authorised dealers grant loans to NRIs for acquisition of a flat/house for residential purposes?

Authorised dealers have been granted permission to grant loans to NRIs for acquisition of house/flat for self-occupation on their return to India subject to certain conditions. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investors' NRE/FCNR/NRO accounts.

Can authorised dealers grant housing loan to NRIs where he is a principal borrower with his resident close relative as a co-applicant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative? Can authorised dealers grant housing loan to NRIs where he is a principal borrower with his resident close relative as a co-applicant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?

Yes, such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower.

What are the guidelines for acquisition of agricultural land / plantation property / farmhouse by NRIs and foreign citizens of Indian origin? What are the guidelines for acquisition of agricultural land / plantation property / farmhouse by NRIs and foreign citizens of Indian origin?

All requests for acquisition of agricultural land / plantation property / farm house by any person resident outside India may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.