NRI Investment Considerations

8/14/2019 NRI Investment Considerations

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Matters to be considered by NRIs

for equity investment in India


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Who is an NRI?

As per Income Tax, an individual is considered

to resident for the financial year if he/she has

been in India for

182 in the financial year; or

365 days out of preceding four financial year and

60 days in the current financial year

If these conditions are not met, then such

person is considered to be an NRI

December 17, 2009 Mili Capital 2


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Investment options for NRI

NRIs can invest in Government securities

Non-convertible debentures of Indian companies

Equity and convertible debentures of Indiancompanies, subject a cap as imposed by RBI from timeto time

Investment in mutual funds

Corporate deposits

NRIs can not invest in Public Provident Fund (PPF)

National Savings Certificates



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Banking requirements

Ordinarily every NRI opens two bank accounts inIndia Non Resident External account (NRE) Money can be

repatriated

Non Resident Ordinary account (NRO) Money cannot be repatriated

These accounts can be used for investment inIPOs, receiving/making gifts, meeting domestic

expenses etc. Shares purchased as resident Indian can be sold as

under NRO account



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Banking requirements for investing in

secondary markets

For investing in secondary markets, i.e.

purchase or sale of shares on recognized stock

exchanges, Portfolio Investment Scheme (PIS)

accounts need to be opened with RBI

approved banks

NRE PIS account

NRO PIS account



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PIS account explained

RBI has investment restrictions on foreignownership of Indian companies

Through PIS account RBI is able to monitorthese limits

Currently these limits are

24% of paid up (issued) capital for FIIs

10% of paid up (issued) capital for NRIs/PIOs 20% of paid up (issued) capital for public sector

banks



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Purpose of PIS account

All purchase and sale transactions are funded

through PIS account

Bank reports the transactions to RBI on a dailybasis through which RBI monitors the

investment limits



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Banking requirement summarized

NRIs/PIOs should open four accounts forinvestment in Indian equities

NRE saving account

NRE PIS account

NRO saving account

NRO PIS account

In case no local money will be used forinvestments, then NRO accounts are notrequired



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Accounts are linked and funds can not

be intermingled

NREaccount

NRE PISaccount

NRE demataccount


NROaccount

NRO PISaccount

NRO demataccount

Source of Funds: Abroad Source of Funds: India


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Additional investment consideration

One additional requirement for investment is

to open a demat account

NRE demat account

NRO demat account

All purchases are transferred to the demat

account and all sale must be transferred from

the demat account



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Process flow for account opening

Customerprovides KYCdocumentsfor opening

bank accounts

Bank opensNRE/NRE-PIS,NRO/NRO-PIS

accounts

NRE/NRODemat

accounts areopened and

linked torespectiveaccounts

Bank branchissues PIS

permissionletter, based

on whichbroking

accounts are

opened



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Process flow for purchase transactions

Purchasedate (T+0)

Broker executes purchase transaction after checking with RBI negativelist

Broker sends contract notes to client & bank within 24 hours of trade

Payment(T+1)

Based on contract note and after internal processing by bank, it issuesfunds to broker from client NRE/NRO account

Share receipt(T+2)

On receipt of funds, shares are automatically transferred to NRE/NROdemat account of the client

In case of delivery shortage, shares can come on T+4 day



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Process flow for sale transactions

Sale date(T+0)

Broker executes sale transaction

Broker sends contract notes to client & bank within 24 hoursof trade

Sharetransfer (T+1)

DP transfers shares for pay in to the exchange

Fund flow(T+2)

Bank receives cheque for sale value from the broker Sale proceed is credited to NRE/NRO account after deducting

capital gains tax (on FIFO basis), if any


Bank sends the TDS certificate to the client annually


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Taxation

Long term capital gain (investment held >1 year)

is currently exempt from taxation

Short term capital gain (investment held


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Other charges

In addition to brokerage commission, following statutorycharges are also levied: Security Transaction Tax (STT) @ 0.125% of transaction value

Stamp duty of 0.01% of transaction value

Exchange & SEBI charges of 0.004%

10.3% of brokerage commission as service tax and surcharge

Depositary charges for pay-in of shares at the time sale, as perDP schedule

Additionally bank will charge annual fee for maintaining PIS

accounts and a transaction fee for each security traded perday



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Other things to remember

PAN card must be obtained to transact in equitymarkets in India

NRI/PIO can not purchase shares on RBI negative list List is updated daily and can be viewed at

http://rbi.org.in/scripts/BS_FiiUSer.aspx

No short selling is allowed

An offsetting transaction (square up) can not be done Same security can not be purchased and sold on same day

on the same exchange No leverage is permissible for trading

No set off of sale with purchases can be made

Funds must be available in account before purchases



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Documents required to open broking

and demat account

PIS approval letter from bank

Account opening form duly filed and signed

Recent passport sized photograph

Copy of PAN card Copy of Passport & Visa (Copy of pages with

name, address & photograph)

Foreign address proof in name of NRI

Bank standing instruction authorizing broker todebit clients PIS account

Proof of demat account



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Documents required to open broking

and demat account (contd.) Documents valid as ID proofs

PAN card Mandatory

PIO card / OCI card Mandatory, as applicable

Voter id card

Passport

Drivers license

Documents valid as foreign address proof Foreign drivers license

Bank statement along with original cancelled cheque

Electricity bill (not older than three months)

Telephone bill (not older than three months)

Leave & License agreement / Agreement for sale

PIO Card

Resident Permit


At least one of three

At least two


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About Mili Capital Group

Mili Capital Group comprises of three

companies:

Mili Consultants & Investment Pvt. Ltd. - member

of BSE, NSE, MCX-SX and has applied for DP

license through CDSL

Mili Capital Management Pvt. Ltd. applied for

Portfolio Management Service license BRN Commodities & Trading Company Pvt. Ltd.

member of ICEX, a commodities exchange



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About Mili Capital Group (contd.)

Highly experienced in investment field with

combined investment experience of over 75

years

Team comprised of 6 Chartered Accountants

including 1 MBA and CFA and is ably

supported by competent back office staff



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Contact details

Harsh Vardhan Nahar

[email protected]

+91 93211 04744 / +91 22 4005 5161

Manak Daga

[email protected]

+91 93222 91921 / +91 22 4005 5155



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Disclaimer

This document has been prepared for solely for the clients of Mili Capital Group and its associate companies (MiliCapital) and does not constitute investment advice. The material is not be construed as a recommendation or anoffer to buy or sell or the solicitation of an offer to buy or sell any security, financial product or instrument or toparticipate in any particular trading strategy. Not all securities, products or services described are available in allcountries, and nothing in this material constitutes an offer or solicitation of these securities, products or servicesin any jurisdiction where their offer or sale in not qualified or exempt from registration or otherwise legallypermissible.

Although this material is based upon information that Mili Capital considers reliable and endeavors to keepcurrent or complete, Mili Capital does not assure that this material is accurate, current or complete, and it should

not be relied upon as such. Opinions expressed are our current opinions as of the date appearing in this materialonly. Mili Capital reserves the right to revise any material without prior intimation.

The fact that Mili Capital has made the investment choices and services provided herein available to the readerdoes not constitute a representation that any product described herein is suitable or appropriate for the reader.Many of the products described herein involve significant risks and the user should not enter into any transactionsunless the user has fully understood all such risks and has independently determined that such transactions areappropriate for the user.

Past results are not necessarily indicative of future results.

No permission is granted to copy, redistribute, reproduce, republish, in any form, any information or image

contained herein. Unauthorized downloading, re-transmission, or other copying or modification of the contentswithout prior written consent may be a violation of copyright laws and could subject the violator to legal action.

Mili Capital and its affiliates, officers, directors, and employees may have various positions, both long and short, inany of the stocks, securities and financial derivative mentioned herein.

The views and opinions expressed by the authors in this document are their own and do not reflect the views ofMili Capital.


NRI Investment Considerations

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