Investments In India

Can an NRI make Investment 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 an a/c maintained with an AD Bank by NRI/ PIO in accordance with the relevant Regulations. 

Are there any restrictions on such investments?

Ans. A NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or engaged in Print Media.

Can a NRI invest in a LLP in India?

Ans. Yes, NRI is permitted to make FDI in an Indian LLP subject to certain conditions as prescribed by FDI policy. 

Who can form a 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. A citizen/ entity of Pakistan and Bangladesh or
b. FII or
c. FVCI or
d. QFI or
e. RFPI

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

Ans.

a. 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.

b. FDI in LLP is subject to the compliance of LLP Act, 2008

c. 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. Onus shall be on the Indian Company/ LLP accepting downstream investment to ensure compliance with the above conditions.

Can a non-resident other than NRI / PIO make investments in Partnership Firm/ Proprietary Concern in India?

Ans. A person resident outside India other than NRIs/ PIO may make an application and seek prior approval of RBI for making investment in partnership firm/ proprietary concern in India. The application will be decided in consultation with the Government of India.   

Can NRI / PIO repatriate outside India the investment made in partnership firm/ proprietary concern?

Ans. NRIs / PIO may seek prior permission of RBI for investment in sole proprietorship concerns / partnership firms with repatriation benefits. 

Can a firm or a proprietary concern make payment to a NRI or a PIO who has made investment?

Ans. A firm or proprietary concern in India may make payment to or for the credit of a NRI or PIO the sum invested by such person in that firm or the proprietary concern or the income accruing to such person by way of profit on such investment. 

What is the Portfolio Investment Scheme (PIS)?

Ans. PIS is a scheme of RBI under which NRIs can purchase and sell shares/ convertible debentures of Indian companies or units in investment vehicle on recognized stock exchanges. For this purpose, the NRI/PIO has to apply to a designated AD bank branch of a bank. All sale/ purchase transactions are to be routed through the AD bank account only. 

How can NRIs invest in shares in India?

Ans. As per RBI guidelines, NRI who wishes to invest in shares in India through a stock exchange need to approach AD Bank to administer the PIS and to open a PIS NRE a/c under the scheme for routing Investments.

Can NRIs undertake PIS transactions through their existing NRE/NRO a/c?

Ans. NRI should have a separate bank account, i.e. NRE (PIS) savings a/c exclusively for PIS transactions. Accounts can be jointly held similar to NRE savings a/c. we, understand that NRO PIS a/c can no longer be opened.

Can NRI/ invest in other securities?

Ans.

Yes, NRI/ can also invest in following securities without limit, on repatriation basis:
i.  dated Government securities (other than bearer securities) or treasury bills.
ii. Units of domestic mutual funds.
iii. Bonds issued by a public sector undertaking (PSU) in India.
iv. Shares in Public Sector Enterprises being disinvested by the Government of India.
v.  Bonds/ units issued by Infrastructure Debt Funds
vi. Listed Non-convertible/ redeemable preference shares or debentures

Does a 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.

Is there any ceiling on the investments under PIS?

Ans.

NRIs are allowed to invest in shares of listed Indian companies in recognized stock exchanges under PIS:
a) NRIs can invest on repatriation basis under PIS route up to 5 per cent of the paid- up capital/ paid-up value of each series of convertible debentures/ paid-up value of each series of convertible preference shares/ paid-up value of each series of warrants of Indian companies.
b) The aggregate paid-up value of shares/ convertible debentures/ convertible preference shares/ warrants purchased by all NRIs cannot exceed 10 per cent of the paid-up capital of the company/ paid-up value of each series of convertible debentures/ convertible preference shares/ warrants of the company.
c) The aggregate ceiling of 10 per cent can be raised to 24 per cent, if the General Body of the Indian company passes a special resolution to that effect.

How are payments to be made by NRI for shares purchased on stock exchange on repatriation basis?

Ans. Payment for purchase of shares and debentures on repatriation basis has to be made by way of inward remittance of foreign exchange through normal banking channels or out of funds held in NRE/ FCNR a/c maintained in India.

How are payments to be made by NRI for shares purchased on stock exchange on non- repatriation basis?

Ans. Payment for purchase of shares and debentures on non-repatriation basis has to be made by way of inward remittance of foreign exchange through normal banking channels or out of funds held in NRO/ NRE/ FCNR a/c maintained in India.

How can NRI/PIO remit sale proceeds?

Ans. In case of NRI/PIO, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE/ FCNR/ NRO a/c. 

Is there any tax obligation on sale of shares?

Ans. The sales proceeds are subject to tax under the head Income from Capital Gains as per the Act. Kindly refer Chapter on Capital Gains on Sale of Securities.

Can a NRI trade in shares without taking delivery of the shares?

Ans. It is mandatory for NRI to take delivery of shares purchased and give delivery of shares sold. 

A NRI wants to sell his shares to another NRI. Is he required to obtain any permission from RBI for the same?

Ans. A NRI is not required to obtain any permission from RBI to transfer (by way of sale or gift) shares/ of Indian Company to another NRI. NRI purchaser however, will be required to comply with the necessary conditions for acquiring said shares. 

Can NRIs transfer their shares/ debentures/ bonds held on non-repatriation basis to residents freely?

Ans. A NRI can freely transfer shares or debentures held on non-repatriation basis to residents by way of gift. 

A Resident wants to gift equity shares of an Indian Company to his daughter, who is a NRI. Is he permitted to do so?

Ans.

The resident is required to make an application to the RBI to gift equity shares to his daughter who is a NRI. He is required to submit following information:
a) Name and address of himself and his daughter and the relationship that they share.
b) Reasons for making the gift
c) Certificate from the Indian Company concerned certifying that the proposed gifting is in accordance will the FDI regulations.
d) Other documents as may be specified by RBI from time to time. 
RBI may permit such a transfer only after evaluating the merits of the case. 

In case a Resident Indian becomes a NRI, will he be required to change the status of his holding from Resident to NRI?

Ans. Yes. NRI can continue to hold the securities, acquired by him as a resident Indian, even after he becomes a NRI, on a non-repatriable basis. He is required to intimate the Bankers, brokers, companies about the change in his residential status. 

In case a NRI becomes a resident in India, will he be required to change the status of his holding from NRI to Resident?

Ans. Yes. It is the responsibility of the NRI to inform the Bank (through which he had made the investments in PIS) and the DP (with whom he opened the Demat a/c) about the change in his residential status. Subsequently, a new Demat a/c with a Resident status will have to be opened. Securities should be transferred from the NRI Demat a/c to the Resident Demat a/c and the NRI Demat a/c must be closed.

Can Indian Companies borrow from NRIs?

Ans. No. As per provisions of FEMA, Indian Company is not permitted to avail loan from a NRI. Alternatively, NRIs can provide deposits to an Indian company or invest in the Non-convertible Debentures offered by the Company.

Can NRI subscribe to public issues? What are the permissions/approvals required?

Ans. Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from Government of India/ RBI. Therefore, individual NRI need not obtain any permission.

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

Ans. No. NRI need not take any permission to receive bonus/ right shares. FEMA provisions allow Indian companies to issue Rights / Bonus share to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable.

What are the eligible capital instruments for FDI?

Ans.

The eligible capital instruments for FDI are as under:
• Shares
• Convertible  debentures
• Warrants; 
issued by an Indian company up to the extent and subject to the terms and conditions set out in the FDI scheme.

Can NRI invest in units of an Investment Vehicle?

Ans. NRIs can invest in units of Investment Vehicle which includes Real Estate Investment Trusts [REITs], 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 a/c.

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 including by debit to an NRE or FCNR a/c and the person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable in nature.