Non-Resident Indian - FAQ's
Can a non-resident Indian (NRI) / Person of Indian Origin (PIO) invest in shares in India?

Yes, NRI can purchase shares of an Indian companyon a stock exchange in India, under the portfolio investment scheme on repatriation and / or non-repatriation basis. PIO is considered as a NRI and hence all the benefits / conditions shall apply accordingly.

How can NRI invest in shares in India?

As per Reserve Bank of India (RBI) guidelines, NRI who wishes to investin shares in India, needs to approach the designated branch of any authorized dealer (bank) for routing his transactions relating to purchase and sale of shares under the PIS (Portfolio Investment Scheme).

NRI has to open a Bank Account, Demat Account with the authorized dealer (bank) and a trading account with a registered stock broker.

How the investment is bifurcated between repatriation and non-repatriation basis?

If the investments are made through the Non Resident External (NRE) Rupee Account, then such investments and proceeds from such investments would be considered as on repatriation basis and can be freely repatriable.

If the investments are made through the Non Resident Ordinary (NRO) Rupee Account, then such investments and proceeds from such investments would be considered as on non-repatriation basis.

The funds from NRO account can be repatriated freely if the amount does not exceed 1 mn USD per financial year and the remitter has to submit an undertaking and a certificate by a Chartered Accountant in prescribed form.

What is the difference between investments done through NRE and NRO accounts?

Apart from repatriation conditions as discussed in the above question, practically there is no difference as far as investments are concerned. However, the interest income earned on NRO attracts income tax deduction at source.

How payments could be made by NRIs for shares purchased on stock exchange?

Payment for purchase of shares 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 account maintained in India. If the shares are purchased on non-repatriation basis, the NRIs can utilise their funds in NRO account in addition to the above.

How the proceeds from the investments be credited?

The sale proceeds, dividends etc., will be credited (net of taxes) to the NRE account in case the investments were made was on repatriation basis. In case of non-repatriation basis, the proceeds would be credited to NRO account.

How the funds can be remitted outside India?

Transfer from NRE: Transfer of funds from an NRE is freely permitted, subject to payment of taxes, as applicable. 

Transferfrom NRO: Transfer of funds from NRO account is permitted within the overall ceiling of USD one million or equivalent per financial year (April - March), subject to payment of taxes, as applicable. You need to submit Form 15CA (online application form) and 15CB (Chartered Accountant Application) to your Branch for transferring funds.

What is the tax implications on income received from investments in shares in India?

Equity shares are treated as short-term capital assets if they have been held for less than 365 days. The shares held for more than 365 days then they qualify as long-term capital assets.

Dividend Income
Dividend income received by virtue of holding Indian company shares is not taxable in the hands of the shareholders.

Long Term Capital Gain
Any gain arising out of sale of shares (held for >365 days) would be classified as long term capital gains and the same will be not chargeable to income-tax.

Short Term Capital Gain
If the shares (<365 days) are sold and there is gain, then it will attract 15% capital gains tax.

Is it compulsory for an NRI to file tax returns?

A NRI is required to furnish his return of income if his total taxable income exceeds the maximum amount which is not taxable. As per the income-tax laws, aNRI is not required to furnish return of income, if -

  • Total income consists only of investment income from foreign exchange assets or long-term capital gains or both.
  • Tax has been deducted at source on such income.
Thus, from the above, it can be derived that if NRI has income from Short Term Capital Gains on equity shares, he would be required to file tax returns in India.

Why the NRI should file the ROI?

  • The actual liability to pay tax for the year for NRI as against the TDS deducted from income credited to NRI could be lower for different reasons, to name a few:
    • Income up to the basic exemption limit, currently Rs. 2,50,000 (for FY 2016-17) (other than capital gains) earned by NRI is not liable to taxation.
    • The income earned may not be liable to tax but the Payer in following cases deducts the tax.
      • Capital losses can be set off against Capital Gains but tax is deducted at sourcefrom capital gains without setting off the losses.
      • Taxchargeable on income as per Double Taxation Avoidance Agreements (DTAA) with thecountry where NRI resides, may be lower.

In view of above, NRI should file Return of Income to claim refund of excess tax deducted.

  • Sometimes, NRI may incur short-term or long term capital loss on sale of investments. He can set off such loss against long term capital gain from sale of investments in subsequent year(s) provided he has filed Return of Income within the prescribed time for the year in which he has incurred loss.

Hence the NRI should file the return of Income declaring loss in such asituation.

Resident - FAQ's
Who can sign PMS ?
Where will my funds be invested ?
Will the investment be in my name ?
Can I introduce my current portfolio of investments? What is the minimum size of investments ?
Will have any control over my portfolio ?
What is an Investment Horizon Period that I should keep in mind before providing funds to
you ?
How do I know value of my portfolio ?
How are the fees charged for the Portfolio Management services ?
What kind of return can I expect ?
How safe are my securities under portfolio management service ?
What are the risks involved ?
How do I sign up ?
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