NRI Manual
VARIOUS CATEGORIES OF NON RESIDENT INDIANS
- First, is a Non Resident Indian of Indian Origin holding an Indian Passport. This category of NRIs are allowed to make investments under PIS Scheme under repatriation and non-repatriation basis.
- A Non Resident Indian holding a Foreign Passport and of Indian Origin. It means that either he or any of his parents/grand parents was a citizen of India by virtue of the Constitution of India. This category of NRIs are allowed to make investments under PIS Scheme under repatriation and non-repatriation basis.
- A Non Resident Indian holding a Foreign Passport who was not born in India but his spouse is an Indian Citizen. This category of NRIs are allowed to make investments under PIS Scheme under repatriation and non-repatriation basis.
- A Foreign Citizen of Non Indian origin. It means that this person is a foreigner. This category is not allowed to make investments under PIS Scheme under repatriation and non-repatriation basis.
VARIOUS CATEGORIES OF NRI ACCOUNTS
- Normal NRE Accounts: This account can be utilized for making investment in new issues of companies as well as for meeting daily routine expenses such as house rent, telephone bills, demat charges and travel expenses. Credits from sale proceeds of shares acquired under public issue, cost of acquisition of immovable property etc. can be deposited in this account.
- NRE PIS accounts: This account can be utilized only for making secondary market investments on repatriation basis and for depositing the sale proceeds of shares acquired from this account. No other expenses can be paid from this account. All investments made in this account are subject to investment limits as specified by the RBI.
- Normal NRO Accounts: This account can be utilized for making investment in new issues of companies as well as for meeting daily routine expenses such as house rent, telephone bills, demat charges and travel expenses. Credits from sale proceeds of shares acquired under public issue, cost of acquisition of immovable property etc. can be deposited in this account.
- NRO PIS accounts: This account can be utilized only for making secondary market investments on non-repatriation basis and for depositing the sale proceeds of shares acquired from this account. No other expenses can be paid from this account. All investments made in this account are subject to investment limits as specified by the RBI.
Meaning of various terms mentioned in the Operating Manual:
- NRE account or ‘Non Resident External' account - The monies available in this account can be repatriated abroad.
- NRO account or ‘Non Resident Ordinary' account – The monies available in this account cannot be repatriated abroad.
- PIS account - ‘Portfolio Investment Scheme’ account.
- PIO - ‘Persons of Indian Origin’.
- RPI - `Repatriable Investments’.
- NRI - `Non-Repatriable Investment’.
Person Resident in India: A “Person Resident in India” means:
- A person residing in India for more than 182 days during the preceding financial year, but does not include:
- A person who has gone out of or stays outside India for employment or business or vocation, or for any other purpose, indicating an intention to stay outside India for an uncertain period.
- A person who come to or stays in India other than for employment or business or vocation in India or for any other purpose, indicating an intention to stay in India for an uncertain period.
- Any person or body corporate registered or incorporated in India.
- An office, branch or agency in India owned or controlled by a person resident outside India.
- An office, branch or agency outside India owned or controlled by a person resident in India.
Non – Resident Indian (NRI) means a Person Resident outside India who is a citizen of India or is a Person of Indian origin (PIO).
Person of Indian Origin (PIO): A citizen of any country other than Bangladesh or Pakistan, is deemed to be a PIO if:
- he/she at any time held an Indian Passport or
- he/she or either of his parents or any of his/her grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act 1955 or
- he/she is a spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person referred to in or above.
Such PIOs are generally eligible for all the banking and investment options that are available to NRIs. They stand at par with the NRIs for purposes of opening bank accounts from abroad or while on a visit to India. However, accounts on behalf of Pakistani or Bangladeshi nationals should not be opened except with the prior approval of the Reserve Bank of India.
Persons living in Nepal or Bhutan are not eligible to open NRE Accounts.
Foreign Nationals (other than PIOs) whose spouse is an Indian can open NRE Account jointly with the Indian if both are based abroad. Independent NRE Accounts cannot be opened in the names of such foreign nationals.
Portfolio Investment Scheme (PIS)
NRIs are permitted to invest in shares/ convertible debentures of Indian companies, by Reserve Bank of India, under the Portfolio Investment Scheme (PIS), in secondary markets, through a registered broker on a recognized Stock Exchange.
Reserve Bank of India, vide A.P.(DIR Series) Circular No. 13 dated November 29, 2001 has prohibited OCBs to invest under PIS in India. Further, the OCBs that have already made investments under PIS have been allowed to continue to hold such shares/convertible debentures till such time these are sold on the stock exchange. The guidelines of Reserve Bank of India in respect of ceiling on investments are as under:
Investment in shares of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of shares of the company concerned.
Investment in convertible debentures of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of convertible debentures in each series, issued by the company concerned.
Aggregate investments by NRIs will be subject to a ceiling of (a) 10% of the total paid-up equity capital of the company concerned: and (b) 10% of the total paid-up value of each series of convertible debentures issued by the company concerned. Such Indian companies shall however raise the ceiling of 10% to 24% or such ceilings may be decided by the companies, by passing a special resolution in the general body of the company.
In case of investments on repatriation basis, the payment for purchase of shares/ debentures should be by way of debit to the investor’s NRE PIS account. In case of investments on non-repatriation basis, the payment for purchase of shares/debentures shall be by way of debit to the investor’s NRO PIS account.
The net sale/maturity proceeds of shares / convertible debentures, after payment of taxes, shall be credited only to the investor’s NRO PIS account if the investment was made on non-repatriation basis and shall be remitted abroad/credited to the investor’s NRE PIS account if the investment was made on repatriation basis.
Designated Branch: As per RBI norms, NRI investors are required to route all their PIS transactions through only one designated branch of a Bank, for the sake of monitoring of NRI holding in a particular company to enable consolidated reporting to Reserve Bank of India.
Opening of accounts with the designated branch:
An NRE PIS savings bank account together with an NRE Demat account, if the investments are to be made on a repatriation basis. The Demat account can be opened with the PIS bank or with Asit C Mehta Investment Intermediates Ltd.
An NRO PIS savings bank account together with an NRO Demat account, if the investments are to be made on a non-repatriation basis. The Demat account can be opened with the PIS bank or with Asit C Mehta Investment Intermediates Ltd.
Form RPI if investments are on repatriation basis and Form RPI will have to be obtained from the investor, if investments are on repatriation basis respectively.
Form NRI if investments are on non-repatriation basis and Form RPI will have to be obtained from the investor, if investments are on repatriation basis respectively.
In case of transfer of accounts, a declaration in respect of shares already held, if any, with details of acquisition and whether acquired on repatriation or non-repatriation basis. If the shares have been acquired on a repatriation basis, the designated branch should insist on a certificate to this effect from the transferring bank. If the shares purchased under PIS account through one bank are to be transferred to another bank, then the transferring bank will issue a certificate that the investment were acquired by debit to PIS NRE/NRE accounts of the investor. A NOC is required for transfer of accounts from the transferor bank.
Prior Holdings of Shares and Debentures:
A non-resident customer opening an account with the bank, under PIS, may bring with him previous holding of stock to be credited to his Demat account. In case of such transfers of stock, the designated branch will verify that whether the shares have been purchased out of repatriable / non-repatriable funds.
In case the shares have been purchased out of repatriable funds through Public Offer, the same should be supported by one of the following evidences:
Company’s certificate that allotment has been made out of NRI quota of shares or the relative share/debenture certificate which is allotted out of NRI quota on repatriable basis.
Linkage with Demat Accounts
Under PIS, outflow of funds from the account of the non-resident for investments will eventually be reflected by credit of shares/debentures in his Demat account. In order to ensure that the nature of the investment is kept demarcated as to whether the investment
is on repatriation or non-repatriation basis, a linkage will have to be maintained:
Non-Resident Repatriable PIS Account NRE PIS A/c Securities purchased to be credited to NRE Demat A/c
Non-Resident non-repatriable PIS AccountNRO PIS A/c Securities purchased to be credited to NRO Demat A/c
Operation of Accounts:
Power of Attorney duly stamped, signed and notarized, authorizing the local resident or Asit C Mehta Investment Intermediates Ltd to act as the attorney of the investor for investment decisions to be produced at the time of account opening, in original to the designated bank. The client should handover the chequebook to enable us to make payments in lieu of shares purchased from the PIS accounts.
Alternatively, if Letter of Authority is issued in favor of Asit C Mehta Investment Intermediates Ltd for operation of PIS NRE/NRO Bank account, then bank can issue a payorder in our favor against issue of contracts for purchase of shares.
In case of a sale, the covering sale note submitted by the brokers should indicate the date of purchase of the stock and the cost of acquisition. If not, the said details have to be immediately called for from the brokers to facilitate computation of tax liability of the investor on either short-term or long-term capital gains, before credit of sale proceeds.
Computation of Capital Gains
The tax liability of the non-resident customer will be computed by the designated branch in respect of sale of shares/debentures on a first-in-first-out basis. A customer-wise register will have to be maintained in the branch for this purpose. Shares fall under financial assets category. If there are capital gains on financial assets held for 12 months or more, they come under the purview of Long Term Capital Gains (LTCG). If held for less than 12 months, they come under Short Term Capital Gains (STCG).
Tax Rates: STCG : 15%
LTCG : NIL
The PIS Bank will issue TDS certificate on request made by the customer, retaining a copy thereof on the bank’s records.
Remittances - Procedure of Funds Transfer to India:
Most common methods of Remittances from abroad:
1. Wire Transfer
2. Cheque/Demand Draft from existing NRE/NRO account
3. Exchange Houses in Middle East
Time taken for Wire Transfer: Usually within two business days.
For transferring funds through wire (SWIFT Transfer), the customer/ remitter has to provide the following details to the remitting Bank (his/ her Bankers):
Name and 15 Digit Bank Account number of Customer/ Beneficiary.
Name of the Bank Branch where the Account is maintained/ to be opened along with the type of account.
3. Details of Bank‘s NOSTRO account for the particular foreign currency.
Details of NOSTRO Accounts in Major Currencies:
Currency Name and Address of Correspondent Bank Account Number SWIFTAddress
Example of the above remittance:
A customer’s instruction to his banker for a transfer through the JP Morgan Chase Account, New York will be as follows:
Pl. credit account no. 0011407376 with JP Morgan Chase Bank, New York, SWIFT Code: CHASUS33NYK, for further credit of NRE A/c ………….. of Mr/Mrs………… with _________Bank, ……… Branch.
# This is just a Remittance format and the same may differ from Bank to Bank.
Cheque/Demand Draft for inward remittance:
For transferring funds through Cheque/ Demand Draft, the Customer/ Remitter has to forward the Cheque/ Demand Draft to the Designated Branch where the Account is maintained/ to be opened.
The Cheque/ Demand Draft should be made payable to “Designated Bank A/c- (Customer / Beneficiary’s Name)”.
- INR Cheque/ Demand Draft payable in India: 2 to 10 working days depending on the location where the Cheque /draft is payable.
- Foreign Currency Cheque / Demand Draft payable overseas: 7 to 21 working days depending on the location where the Cheque / draft is payable.
Date:
The Branch Manager
(Designated) Bank Limited
Mumbai Branch
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Dear Sir,
Letter of Authority - Account No.
/ to be opened
With reference to the Non Resident (External) (PIS) / Non Resident Ordinary (PIS) account opened / to be opened (cited above) with you in my / our name, I / We hereby authorize you to:
- Honour all claims in writing received from M/s. _______________________, a body corporate, registered under the provisions of the Companies Act, 1956, having its Registered Office at_________________________________________________________________________________________, who are my / our share brokers, and represented by any of their authorized signatories (1) ______________________, (2) ______________________ (3) ______________________, whose specimen signature card is enclosed duly countersigned by me / us notwithstanding that such claim may create overdrawing in my PIS account or increase it to any extent, supported by the Contract Note in original, upto the net amount payable under the said Contract Note.
“I, my legal heirs, executors agree to indemnify and keep indemnified (Designated) Bank from any claims of any nature including damages for allowing such a transaction based on the Letter of Authority. I further confirm that I shall not raise any objection or a claim against (Designated) Bank for acting on the third parties i.e. Letter of Authority holder’s instructions and in debiting and crediting my account. I confirm that I shall ratify all the credits and debits, which (Designated) BANK may carry out, based on the instructions of the Letter of Authority holder. It shall be deemed as if the said transactions have been carried out by me.”
This authority shall continue to be in force until I / we revoke it by a notice in writing delivered to you.
Yours faithfully, Place: ____________________
Date: _____________________
Signature of letter of Authority Holder:
1) _______________________
2) _______________________
Counter signature by Account Holder : _________________________
Encl: Specimen Signature Card duly countersigned
- Whether the NRI applicant already holds any eligible securities acquired through Stock Exchange with benefit of repatriation/without benefit of repatriation. If so, please attach a complete list of such shares/convertible debentures indicating the name & address of the company, total no. & face value of the shares/convertible debentures held along with reference no. & date of RBI/AD approval/permission.
- I/We solemnly declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are citizen/s of India person/s of Indian origin.
- I/We hereby undertake that I/We have no dealing / will not deal with any other designated branch /bank under PIS.
- I/We also agree and undertake to ensure that my / total holding of equity / preference shares /convertible debentures in any one Indian company that any be allowed to be purchased through stock exchange/s (including the equity / preference shares / convertible debentures already held, if any, in that company) with repatriation benefits shall at no time exceed five percent of the paid-up capital / paid-up value of each series of convertible debentures of the company.
Place :
Date :
______________________
(Signature of the applicant/s)
@ The eligible securities will include shares/debentures/bonds of Indian companies; Govt. Securities (other than bearer securities) treasury bills/units of public sector/private sector Mutual Fund Scheme including units of UTI.
Local address may be given for correspondence and etc.
- Whether the NRI applicant already holds any eligible securities acquired through Stock Exchange with benefit of repatriation/without benefit of repatriation. If so, please attach a complete list of such shares/convertible debentures indicating the name & address of the company, total no. & face value of the shares/convertible debentures held along with reference no. & date of RBI/AD approval/permission
(iv) I/We solemnly declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are citizen/s of India or person/s of Indian origin.
(v) I/We hereby undertake that I/We have no dealing / will not deal with any other designated branch /bank under PIS.
(vi) I/We also agree and undertake to ensure that my / total holding of equity / preference shares /convertible debentures in any one Indian company that any be allowed to be purchased through stock exchange/s (including the equity / preference shares / convertible debentures already held, if any, in that company) with repatriation benefits shall at no time exceed five percent of the paid-up capital / paid-up value of each series of convertible debentures of the company.
Place :
Date :
_____________________
(Signature of the applicant/s)
@ The eligible securities will include shares/debentures/bonds of Indian companies; Govt. Securities (other than bearer securities) treasury bills/units of public sector/private sector Mutual Fund Scheme including units of UTI.
Local address may be given for correspondence purposes.
Note :- For the purpose of the facility of investment in shares and securities, a person (not being a citizen of Pakistan or Bangladesh) shall be deemed to be of ‘Indian origin’ if (a) he, at any time, held Indian passport, or (b) he or either of his parents or any of his grandparents was an Indian and a permanent resident in undivided India at any time. A spouse (not being a citizen of Pakistan or Bangladesh) of a citizen of India or of a person of Indian origin will so be deemed to be of Indian origin even though she may be of non- Indian origin.
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