Citizen of any country except Bangladesh or Pakistan can be referred as Person of Indian Origin (PIO) if:
A. He/she at any time held an Indian passport; or
B. That person or either of his/her parents or any of his/her grandparents was an Indian citizen as per the Constitution of India or the Citizenship Act, 1955; or
C. He/ she is a spouse of a citizen of Indian or a person referred to in sub-clause (A) or (B).
Investment done by PIO in Indian Securities is considered to be same as the investment by a non-resident Indian. Consequently, to invest in Indian Securities, a PIO requires same approvals as required by an NRI and enjoys same exemptions.
NRIs/PIOs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.
NRIs / PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the Portfolio Investment Scheme. The rules relating to this scheme are as given below:
i. These trades can be done only through a registered broker on a recognised stock exchange.
ii. NRI shall designate a branch of an authorised dealer and route all his/her transactions through this branch of the authorised dealer.
iii. NRI takes delivery of the shares purchased and gives delivery of shares sold.
iv. NRI shall abide by the directions given by RBI/SEBI or such authority if the transaction results in the breach of ceilings stipulated for NRI holding in the company/scheme.
v. The sale of shares will be subject to payment of applicable taxes.
The table given below summarizes the permissions required for the off-market transfer:
Reserve Bank has authorised a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated bank branches who have authorisation from Reserve Bank.
No. Each NRI has to select one branch for the purpose of investment under Portfolio Investment Scheme.
NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL/CDSL. The NRI/PIO needs to mention the type [‘NRI’ as compared to ‘Resident’] and the sub-type [‘Repatriable’ or ‘Non-Repatriable’] in the account opening form collected from the DP.
No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated banks.
No special permission is required. Holding securities in demat only constitutes change in form and does not need any special permission. However, only those physical securities which already have the status as NR – Repatriable / NR- Non-Repatriable can be dematerialised in the corresponding Depository Accounts.
No. An NRI must open separate demat accounts for holding ‘repatriable’ and 'non-repatriable’ securities.
No. Securities received against investments under Foreign Direct Investment scheme (FDI), Portfolio Investment scheme (PIS) and Scheme for Investment on non repatriation basis have to be credited into separate demat accounts. Investment under PIS could be on repatriation or non repatriation basis. Investment under FDI scheme is on repatriation basis.
As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non resident Indian, on a non-repatriable basis.
Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GOI/RBI. Therefore, individual NRI need not obtain any permission.
Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares / debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.
Yes. Authorised dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares / debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis.
Yes. It is the responsibility of the NRI to inform the change of status to the designated bank branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.
Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India.
Investment can be made both on repatriation or non-repatriation basis. For making investment on repatriation basis, it will be necessary to make payments by way of inward remittance or by debit to the NRE / FCNR account of the NRI / PIO. Investment on non-repatriation basis can also be made by way of inward remittance or by debit to the NRE / FCNR / NRO accounts.
The sale proceeds of the repatriable investments can be credited to the NRE / NRO accounts of the NRI / PIO at the option of the investor, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.
The sale of shares will be subject to payment of applicable taxes.
The application is to be submitted to a designated branch of an authorised dealer in India in the prescribed form. No permission is required from RBI.
No. NRI can select only one authorised dealer for the purpose of investment under Portfolio Investment Scheme and route the transactions through the branch designated by the authorised dealer.
An individual NRI cannot purchase under PIS shares exceeding 5% of the paid up capital of a company. The onus of monitoring this limit is that of the designated authorised dealer. Shares purchased under PIS scheme can be sold only through a stock exchange.
The following bank accounts may be given:
• For non-repatriable - NRO [dividend/interest is repatriable]
• For repatriable - NRE
The above details recorded by the DP in the demat account may be used by the Issuer to directly credit dividend or interest.
(Dividend/interest received on Investments made on repatriation and non - repatriation basis under Portfolio Investment Scheme is not an eligible credit to NRE (PIS) Account and NRO (PIS) Account respectively)
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