Investments In India

Can an NRI Invest in Partnership Firm/ Proprietary Concern in India?

Ans. A NRI / PIO resident outside India can contribute to the capital of a firm or a proprietary concern in India on non-repatriation basis subject to certain restrictions. The amount is invested by inward remittance or out of NRE / FCNR(B) / NRO a/c.

Who can form an LLP in India?

Ans. A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. However, the following persons shall not be eligible to invest in LLPs:

  • a citizen/entity of Pakistan and Bangladesh or
  • FII or
  • FVCI or
  • QFI or
  • RFPI

What are the eligibility criteria of LLP for accepting foreign Investment?

Ans.

  • FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI- linked performance conditions. 
  • FDI in LLP is subject to the compliance of LLP Act, 2008.
  • Downstream investments by an Indian Company or LLP having foreign investment will be permitted to make downstream investment in another company or LLP in sectors in which 100 % FDI is allowed under automatic route and there are no FDI –linked performance conditions subject to certain conditions.

Does an NRI need any RBI permission to open a demat account?

Ans. No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated ADs.

How can NRIs invest in shares in India?

Ans. As per Reserve Bank of India (RBI) guidelines, NRI who wishes to invest in shares in India through a stock exchange need to approach the designated branch of any Bank authorized by reserve bank to administer the PIS (Portfolio Investment Scheme) to open a NRE (Non Resident External) account under the scheme for routing Investments.

Is there any limit specified by RBI upto which NRI’s can invest under PIS? If yes, then who will keep track of such limit?

Ans. An individual NRI cannot invest more than 5 % in any scrip of the company. Further, all the NRI’s put together should not invest more than 10 % in any scrip of the company. This information is published on daily basis on RBI website. NRI should before investing in any scrip, visit the website and accordingly invest in any scrip.

Can I gift the shares received under PIS?

Ans. Shares /convertible debentures acquired by the NRI under the Scheme shall not be transferred out of his name by way of gift except to his close relatives as defined in Section 2(77)  of the Companies Act, 2013,  with prior approval of Bank.

Does an NRI require any permission to receive bonus/rights shares?

Ans. No.

What are the permitted activities of an Indian company?

Ans. As per its ‘main objects’ stipulated in the Memorandum of Association subject to Indian regulations. However, depending on the sector of the company, FDI limits (percentage limits upto which investment can be made in a particular sector) have been stated in the FDI Policy. Further, FDI policy also states whether any approvals  from RBI/FIPB/Other governmental authorities is required to be obtained or not.Further, listed below are the sectors prohibited for FDI:

(a)  Lottery Business including Government/ private lottery, online lotteries, etc.

(b)  Gambling and Betting including casinos etc.

(c)  Chit funds

(d)  Nidhi company

(e)  Trading in Transferable Development Rights (TDRs)

(f)   Real Estate Business or Construction of Farm Houses

(g)  Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(h)  Activities / sectors not open to private sector investment e.g. Atomic energy and Railway operations (other than permitted activities mentioned in the FDI Policy)

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Can an NRI have saving account in one Bank and PIS account in some other Bank?

Ans. An NRI is supposed to compulsorily have saving account in the bank in which he has a PIS account in order to invest under PIS.

Is NRI permissible to invest in an Indian company which is involved in development of townships?

Ans. Real estate business shall not include development of township, construction of residential/commercial premises, roads, bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. Hence, investment by NRI for development of townships, is permissible.

Can NRI’s invest under FPI?

Ans. Since NRI’s are not allowed to register as an FPI, a company which is majority owned by one or more NRI/PIOs shall not be allowed to make investments as an FPI. However, if such company is appropriately regulated it may be given registration as Category II FPI for the purpose of acting as investment manager for other FPIs. Alternately, a fund having NRIs as its investors is also not prohibited from obtaining registration as an FPI.

Can FPI undertake short selling and borrowing and lending of securities ?

Ans. FPI may undertake short selling as well as lending and borrowing of securities subject to conditions.

Are NRIs permitted to make investments in Life insurance policies in India?

Ans. Yes. NRIs are permitted to make investments in Life insurance policies in India.

Are maturity proceeds received from Life insurance policy taxable in the hands of NRI?

Ans. No, the maturity proceeds received from the life insurance company is exempt under Indian Income-tax laws subject to certain conditions.

Are NRIs permitted to make investments in PPF in India?

Ans. Government of India has notified that NRIs are not permitted to make Investments in PPF.

Can NRIs hold existing PPF accounts that were opened when such persons were resident in India?

Ans. It has been expressly mentioned in The Public Provident Fund Scheme, that Non-resident Indians are not permitted to open accounts under the PPF Scheme.

However, a Resident who subsequently becomes NRI during the course of term of the PPF investment may continue to hold the same till maturity. This means, they cannot open a new account or extend the scheme beyond its maturity. However, an already existing investment may be continued till maturity.

What are the eligible capital instruments for FDI?

Ans. The eligible capital instruments for FDI are as under

  • Fully paid and partly paid capital equity shares
  • Fully and compulsorily and mandatorily convertible preference shares
  • Fully and compulsorily and mandatorily convertible debentures
  • Warrants

Can NRI’s invest in Real Estate Investment Trusts?

Ans. NRI's can invest in units of Real Estate Investment Trusts [REITs]. Apart from REITs, NRI can also invest in Infrastructure Investment Trusts [InvIts] and Alternative Investment Funds [AIFs].

How can NRI make the payment for the purchase of the units of REITs, InvIts and AIF?

Ans.

The payment for the purchase of the units of the REITs, InvIts and AIF shall be made by an inward remittance through normal banking channel including by debit to an NRE or FCNR Account.

Can NRI invest under National Pension System?

Ans.

NRI can subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable in nature.