Qualified Foreign Investor(‘QFI’)

December 2012

Contents Background Investment Conditions Mechanics & Process Flow Taxation & Repatriation

Background

Introduction…• Foreign investment in Indian listed securities

were permitted only under FII / Sub-account route

• Only NRIs were allowed till then

Up to August 2011

• A new category of foreign investor introduced “Qualified Foreign Investors” (QFI)

• Permitted to invest in Indian Mutual FundsAugust 2011

• QFIs are permitted to invest directly in Indian Listed Equity CompaniesJanuary 2012

• QFI are permitted to invest directly in Indian corporate debt securitiesJuly 2012

An Opportunity for the Foreign Investors to invest directly in Indian listed companies

Who is a QFI ?

• a person resident in a country that is• compliant with FATF standards;• Signatory to IOSCO’s multilateral MoU

Should Be

• a person resident in India• registered with SEBI as FII or Sub-account

Should Not Be

*Financial Action Task Force International Organisation of Securities CommissionMemorandum of Understanding

QFIs to meet KYC norms prescribed by SEBI

No Need to obtain separate SEBI Registration !!

Investment Conditions

Permissible Transactions

QFIs can

Purchase/Sale equity shares; Listed or To be Listed on recognized

stock exchange in India (including right shares, bonus shares etc.)

Purchase/Sale corporate debt; Listed or To be Listed on recognized

stock exchange of India

Purchase/Sale the units of mutual funds

QFIs cannot

Issue offshore derivative instruments / participatory notes

Investment Restrictions

Investment Limits as a % of paid up capital of the Company by a single QFI - 5% Aggregate by all QFIs – 10%

Investment limit for corporate debt is $ 1 bn for QFIs Investment limit for Debt scheme of MF is $ 1 bn and for

equity scheme is $ 10 bn

The investment limits are over and above the limits of FII & NRI investment ceilings. However, sectoral cap would need to be

complied.

Mechanics &Process Flow

Mechanics

Open DMAT account for holding shares

(Only One Permitted) Open trading a/c with recognised stock brokers(Multiple a/c permitted)

Designate one overseas bank account for remittances

Obtain Permanent Account Number

(‘PAN’)

QFI shall open a single non- interest bearing Rupee account with an AD-category-I bank in India for routing the receipt and

payments for transactions.

QFI

Process Flow…

Reverse process at the time of sale & DP to remit the money to designated overseas bank account

QFI to transfer funds to Bank account and instruct DP to purchase shares

DP to instruct broker to purchase shares

DP will make payment to broker & credit shares in DMAT account of QFI

…Process Flow…

Single non-interest bearing Rupee Bank

Account

Overseas BankAccount

DP

Dmat Account

QFI

Broker

Outside India

IndiaF

ore

ign

inward /

ou

twa

rd re

mitta

nce

th

rou

gh

no

rma

l banking ch

an

ne

l

Transfer of Funds

Request D

P to Purchase Shares

Taxation & Repatriation Aspects

Taxation & Repatriation

Taxation DP will deduct appropriate taxes as may be applicable on the income

earned by QFI Taxation will be similar to any other foreign party Indicative tax rates

Payment and Repatriation QFI to make foreign inward remittance through normal banking

channels in any freely convertible currency Sale proceeds will be directly credited in single rupee bank account

Dividend can either be credited directly to designated overseas bank or to the domestic bank account

Queries?

Care Portfolio Managers Pvt. Ltd.201, Silver Heights, TPS III, 51st Road,

Borivli(w), Mumbai – 92, India+91 22 2899 3700| info@carepms.com

SEBI Regn. No.: INP 000004128 | www.carepms.com

Disclaimer: Care Portfolio Managers Limited or any of its associates does not accept any liability for any errors or omissions in the contents of this document, and shall have no liability for any loss or damage suffered by the user, which may arise as a result of this document. This document should not be construed as any professional advice if it is received without any agreement with the addressee.

Albania  France Malta South Africa

Alberta Germany  Mexico Spain

Australia  Greece Montenegro  Sri Lanka

Austria Guernsey Morocco Srpska, Republic of

Bahrain Hong Kong Netherlands Sweden

Belgium Hungary  New Zealand  Switzerland

Bermuda Iceland Nigeria Syrian Arab Republic

Brazil India Norway Chinese Taipei

British Columbia Isle of Man Oman Tanzania 

British Virgin Islands Israel Ontario Thailand 

Bulgaria Italy Pakistan Tunisia 

Cayman Islands Japan Poland Turkey

Canada Jersey  Portugal United Kingdom 

China Jordan Qatar United States of America 

Croatia, Kenya  Québec Uruguay

Cyprus, Korea Romania West African Monetary Union

Czech Republic Kuwait Russia

Denmark  Liechtenstein Saudi Arabia

Dubai  Lithuania Serbia, Republic of

Estonia Luxembourg Singapore

Finland Malaysia SlovakiaFormer Yugoslav Republic of Macedonia

Maldives Slovenia

Signatory to IOSCO’s Multilateral MoU

Nature of income Tax rate

Dividend Income Nil

Long Term Capital Gain Nil

Short Term Capital Gain 15% of the gain amount(excluding Surcharge & Cess)

Notes:1. An equity share would be considered as long term capital asset if held for a

period of more than 12 months.2. It is assumed that the asset will be held as capital asset and the gain would

be regarded as in the nature of capital gains.3. These are the tax rates as per Indian tax laws. The benefit under tax treaty

of the investor’s jurisdiction will need to be considered separately.4. It will be advisable for the investor to seek an advice from the tax consultant

for the tax rates applicable to the specific QFI.

Indicative Tax Rates