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You are an NRI and want to take part in the Indian growth
story. This might mean investing in the Indian stock markets.
So how will you invest in the stock market? Can you open a
demat account and invest in the stock markets just as any other Indian.
No definitely not…..If you are an NRI you will have to invest
under the PIS (Portfolio Investment Scheme) of the RBI (Reserve Bank of India).
RBI monitors the holdings of NRI’s through the PIS.
What is an NRI?
If you reside in India for 182 days or more during a
financial year and for 365 days or more during the preceding four financial
years then you qualify to be an NRI.
So how can an NRI
invest in India?
All investments you make in Indian equity markets (stocks and
mutual funds) have to be made in rupees. Mutual funds in India do not accept
foreign currency.
You will have to open an NRE (Non Resident External rupee)
account or an NRO (Non Resident Ordinary rupee) account or an FCNR (Foreign
Currency Non-Resident account) with an Indian bank.
You can directly debit money from your NRO/NRE account
through normal banking channels to buy shares or mutual funds.You will also have to submit copies of your PAN card and
address proof just as any other Indian investor in the stock markets for the
KYC norms.
But what if you are not able to make all the necessary
investment decisions yourself?
How can you invest efficiently (mainly make the Purchases, Switches
and Redemption decisions) if you are not in India?
This is when you need to give a trusted relative the power of
attorney to make investment decisions on your behalf.Your trusted relative will submit the original POA or an
attested copy at the fund house where the signatures will be verified before
any transaction is processed.
What happens if you
sell your shares or redeem mutual funds for a profit?
If you sell your shares or redeem your mutual funds then the
proceeds (returns or profits) you get will be directly remitted to your bank
account.
Any dividends you receive will also be remitted to your bank
account.
If you have an NRE or an FCNR account, then you can remit
these funds to the country in which you reside.
How can an NRI trade in
India?
You (NRI) must open a demat and trading account with a
reputed broker who is registered with SEBI. If you are an NRI you cannot
transact on your own.You require the help of a broker to do so. If you are an NRI
then you cannot be involved in speculative trading (non delivery based trading
as well as short selling).
You can buy a stock and sell it after (t+2 days).
How can an NRI invest
in an IPO?
If you are an NRI you can invest in the Indian stock markets
through an IPO. (Initial Public Offer).You do not have to invest under the Portfolio Investment
Scheme (PIS) if you invest in the stock markets through an IPO.
You will have to furnish your bank details, the
date of allotment of your shares and also the cost of acquisition of your
shares under the IPO so that taxes if applicable can be charged.
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