For most NRI's the difficult part about
knowing how to go about investing in the
Indian stock markets is finding one place
where they can get all the required infoother
related frmation. To start off with, there
is definitely quite an amount of paper
work. For instance you would need to open
bank accounts and complete ormalities.
But what investors prefer is to have an
account with a good bank, open an account
with a good stock broker and be comfortable
that their funds are safe and that all
trades would be executed fairly and transparently.
So here are the basics
on how an NRI could invest in the Indian
stock markets
Q. How
do NRI's get started once they
decide to invest in the Indian
stock market?
A:
Firstly they need to
open a bank account
and decide whether they
need to trade on a repatriable
or a non repatriable
basis. Now those who
already have bank accounts
should check with their
bankers to find out
whether those are suitable
for stock trading. Know
that you can nominate
only one bank account
for your stock trading.
Some of the leading
private banks are competent
in this regard and can
help you open an account
through the internet
that can be faster.
Q: But isn't that cumbersome
paper work?
A:
There is definitely
some amount of paper
work to be done. But
if you download the
application form from
the bank's website it
will be a lot faster.
If you want to do it
through the internet,
you would have to get
copies of your passport,
may be some bank statements
in original. But the
advantage with bigger
banks is that all such
information would be
available on the website
so you would not have
much of a problem. Here's
an overview of the Indian
stock market.
With over 20 million
shareholders India has
the largest investor
base in the world after
the US and Japan. Investors
from all across India
invest in shares and
debentures, mutual funds
and securities among
other investment tools.
Shares can be traded
in BSE (Bombay Stock
Exchange) or the NSE
(National Stock Exchange).
Investors can trade
on line or over the
phone through the help
of an intermediary.
Indian investors can
buy shares on day to
day basis or use the
futures and options
route. Futures and options
route is a contract
that seeks assurance
from an investor that
he/she will trade in
a stocks at a future
date. NRI's can invest
in the Indian stock
market under PIS (Portfolio
Investment Scheme) which
is regulated by RBI
and NRI's are not allowed
to trade in the stock
market on day to day
basis. Stock market
in India has been an
unprecedented boom in
the past year with the
Sensex recently hitting
a new high by bridging
the 7500 mark. There
are 23 recognised stock
exchanges in India but
the most active ones
are the NSE and the
BSE. NSE set up has
a model exchange as
a fully automated screen
based system. BSE one
of the oldest in the
world accounts for the
largest number of listed
companies has also started
a screen based trading
system with the introduction
of the Bombay online
trading system. Regulations
on the capital markets
and the protection of
investors interest is
primarily the responsibility
of the Securities and
Exchange Board of India
(SEBI) headquartered
in Mumbai.
Q. Kindly explain the various
tools available to invest in
Indian stocks and equities,
mutual funds, debentures, government
securities etc. What is the
process of investment for each
of these?
A:
To invest in mutual
funds visit the respective
mutual fund website
or call them up. You
can send them the necessary
documents and payment
can be made from the
NRE or NRO bank accounts.
However, taxation might
be an issue. But then
the mutual fund companies
can answer your queries
regarding this. For
stock trading you can
trade online, by the
phone or even through
a broker.
Q: What is the difference between
investments that have a repatriation
benefit and those that do not?
A:
If an investor wants
to bring in USD 10000
into India and has decided
to stay back, then he
can invest that money
and he won't have to
go through much paper
work particularly when
it comes to taxation.
Now that is non-repatriable.
But if he wants to take
the principal out plus
the profits then he
would need an NRE account
in which case he would
be allowed to take out
the principal and the
profits after paying
the due taxes.
Q: Are there any guidelines
set by the RBI for NRI's to
be followed while investing
in the Indian markets?
A:
You would have to ask
your bank for Portfolio
Investment Scheme (PIS)
approval. The bank may
charge you a nominal
fee of around Rs 1000
to Rs 2000 and you would
be allowed to invest
in the markets. Another
important rule is that
you would not be allowed
to day trade. Indian
non-resident investors
are not allowed to speculate
on a day-to-day basis
in the markets. For
instance if they buy
shares on Monday they
would have to wait till
Wednesday to sell it.
However, they would
be allowed to trade
in the futures segment
of the market. These
are the basic general
guidelines. RBI has
relaxed its rules and
it is for your bank
to verify your paper
work and the contract
notes. They would definitely
charge you a fee for
these no doubt. So shop
around and look for
the best bank where
you can get the best
deal.
Q: Does an NRI have to pay extra
transaction charges for his
demat account linked with an
NRO account?
A:
That would depend on
the bank. So you would
need to take a look
at the fine print while
applying for a bank
account. Brokers state
that there is no such
charge but the bank
may charge extra for
demat accounts with
shares in it. Now that
would be mentioned in
the application when
you open an account
Q: Is it necessary to have a
broker in India even if the
NRI has a demat account?
A:
Yes that is a must.
An NRI will not be able
to execute any trade
without nominating a
stock broker. There
is no limit as to how
many stockbrokers you
need to have but you
must have a stock broker
nominated in India.
Q: Can an NRI execute trades
through relatives in India?
A:
Yes. He can give power
of attorney. There are
many who do this and
its also a lot easier
and faster. Not a bad
idea as long as you
give them the power
of attorney just to
make things more faster
and efficient for the
client and his family
here.
Q. How should NRI's go about
investing in stocks? Do they
look for RBI designated banks
and if so where can they start?
A:
First and foremost they
will have to open a
bank account with a
RBI designated bank
which allows NRE, NRI,
NRO accounts and that
is available with the
website of RBI or any
banks they can go and
check it out, on the
site whether they are
designated banks or
not. So they will have
to open an account there.
That is step one because
that is where the money
will be coming. Step
two would be to open
a demat account and
when I say demat account
like you have a bank
account for your cash,
for your assets like
you have equities, debentures
or your mutual fund
units you need an account
where those assets as
and when you buy and
make the payments will
be transferred to. So
that is step two and
step three would be
that you will have to
open an account with
a brokerage firm- a
SEBI registered brokerage
firm or a SEBI registered
mutual fund advisor
to buy or sell any of
these products and there
are designated stock
brokers in this country
close to 1600 who are
SEBI registered and
who are allowed to access
the trading site or
the trading platform
of NSE and BSE.
Q: What about IPO's and private
placement? Do they have to
go through the SEBI registered
portfolio investment scheme
and if so you could tell us
a little bit about how that
works?
A:
In case of an IPO you
just need to fill up
the IPO form and give
a cheque along with
it for whatever amount
they want to subscribe
to. For private capitals
there is an entirely
different set of rules
that guide them and
private equity can come
into quite a few areas
except plantation, agriculture,
real state development
although 100% FDI has
come but there are restrictions
in terms of the township
that they have to make.
Those fall basically
into FDI. In case of
IPO's all they have
to do is fill the form,
tell the amount of money
they want to put in
the shares that they
are subscribing and
just send it across.
Q.
The most important concern
of NRI, PRO,OCB is how to
choose an intermediary, the
financial institution, the
stock broker or the bank through
which they need to transact
business. Please explain?
A:
The first and foremost
criteria for anybody
choosing a bank or a
broker is to see how
tech savvy the banks
are since these are
long distance transactions.
Such ease would enable
easy transfer of funds.
Besides the broker too
needs to be tech savvy.
Secondly before opening
an account with the
broker you need to find
out their net worth,
the strength of the
balance sheet of the
broker. For instance
if the total net worth
of a broker is Rs 1
crore and the NRI sells
stocks worth Rs 50 crore
and transfer the asset,
the security of your
money is doubtful. While
all brokers are strictly
regulated by SEBI you
must choose a broker
with a strong balance
sheet, strong net worth
so that your money is
safe.
Q.
Any other factor that needs
to be considered while assessing
the credibility of the broker?
A:
It's the reputation
of the broker, his balance
sheet numbers that are
important. Besides you
can cross check with
SEBI, NSE or BSE. You
may ascertain whether
the broker in question
has defaulted earlier
or he has had issues
with compliance.
Q. Can you throw some light
on the various charges that
need to be paid while opening
all these accounts? Are there
any hidden costs, any transaction
fees that one needs to watch
out for?
A:
If you open a DP account
with an Indian address
you are charged Rs 250
rupees while if it is
with a foreign address
the charge is Rs 1000.
No other charges as
far as the DP is concerned.
But with the brokerage
firm obviously when
it comes to transactions
from the US you would
be charged per transaction.
Typically in India today
it is that the value
of the transaction.
So you will have to
check out with the broker.
This is pre-negotiated
when you open an account
and there is a lot of
flexibility depending
on the size of the client
transactions besides
there's STT too. Additionally
there are statutory
charges like stamp duty,
a turnover tax.
Q. How does one ensure that
he gets the highest return
on his investments and how
can one prevent losses?
A:
There are three important
aspects and they are
fear, greed and hope.
The moment you enter
into a transaction there
is a fear. After that
there is greed when
you say let me wait
for some more and subsequently
hope and I think that
is the worst. If you've
made a wrong decision,
cut your losses and
get out. Don't get emotionally
attached to a position,
to a stock or to an
investment. Don't look
for phenomenal returns.
The way the Indian markets
are going they will
give you the best results.
But be realistic. Don't
expect unrealistic returns.
Besides do some basic
homework before you
take the plunge.
Q. What are the taxes that
are levied? Also is there
a system of double taxation
for NRI's?
A:
That depends on the
country in question.
But here currently if
it is a repatriable
account, there's an
STT's levied. Its the
minimum levied by the
Indian government.
Q. Is there a significant
advantage in investing under
repatriable?
A:
All that depends on
the individual's choice
per se, whether he wants
the money repatriated
or he doesn't.
Q. Can NRI's, PIO, OCB's invest
in government securities?
What are the restrictions?
A:
There are no restrictions.
The only issue is repatriation,
non-repatriation .
Q. There are individuals who
are not even of Indian origin
but would like to invest in
the Indian market. Now is
that possible?
A:
The best way they can
enter the market is
through FII Mutual funds
which is registered
in the U.S and which
is investing in India.
Today, globally most
of the advanced markets
have India specific
funds. For instance
Japan had come out with
India specific funds.
So you never knew whether
that money is going
to Brazil or Thailand
or to Malaysia or India.
At present there is
quite an amount of interest
in Indian equities.
So most of the Mutual
funds investing in Indian
equity have India Specific
Funds. That way you
can put in your money
and rest assured that
your money is safe.
Q. What about Over The Counter
stock exchanges. How does
it work?
A:
I think OTCEI is nearly
defunct. It was a great
idea which came in 94
and OTCEI was the first
exchange where dematerialisation
happened. There is nothing
much happening there.
Today you have two options
the NSE and the BSE
for listed equity, debenture
and debt. There is a
retail market segment
also on the NSE.
Q. Are there any guidelines
that foreign investors, NRI's
need to keep in mind in terms
of RBI guidelines?
A:
That is routine permission
required when you sell
stocks. You need to
give such information
to RBI and thereafter
there are no hassles.
Its quite relaxed compared
to the situation around
nine years ago. But
now the regime is very
investor friendly.
Source:
South Asia World
Useful
information for NRI Community
1. Differences between NRIs,PIOs/
PIO Card Holder and OCIs
NRI
PIO
PIO Card
Holder
OCI
Definition
An Indian
Citizen who is residing
outside
India and holds
an Indian
passport.
A person who or whose
any of the ancestors
was an Indian national
and who is presently
holding another country's
citizenship/nationality
i.e. he/she is holding
foreign passport.
A person registered
as PIO card holder under
MHA's scheme vide Notification
No. 26011/4/98-F.I dated
19.8.2002
A person registered
as Overseas citizen
of India under section
7A of the Citizenship
Act, 1955
Eligibility
-
-
Any person who at
any time held an Indian
Passport; or he or either
of his parents or grandparents
was born in or was permanently
resident in India as
defined inGovernment
of India Act, 1935 and
other territories that
became part of India
thereafter provided
neither was at any time
acitizen of Afghanistan,
Bhutan, China, Nepal,
Pakistan and Sri Lanka;
Or who is a spouse of
a citizen of India or
a person of Indian origin
as mentioned above.
A foreign national,
who was eligible to
become citizen of India
on 26.01.1950 or was
a citizen of India on
or at anytime after
26.01.1950 or belonged
to a territory that
became part of India
after 15.08.1947 andhis/her
children and grand children,
provided his/her country
ofcitizenship allows
dual citizenship in
some form or other under
the local laws, is eligible
forregistration as Overseas
Citizen of India (OCI).
Minor children of such
person are also eligible
for OCI. However, if
the applicant had ever
been a citizen of Pakistan
or Bangladesh, he/she
will not be eligible
for OCI.
Access
-
-
Eligible persons to
apply in the prescribed
form along with enclosures.
Form available on Ministry
of Home Affairs's website:www.mha.nic.in.
Eligible persons to
apply on line/down load
application form from
MHA's website:www.mha.nic.in.
Place to Apply
-
-
Applications for the
PIO card should be made
:
1) Any Indian Mission
in the country where
the applicant ordinarily
resides. ( like in your
case, in the U.S itself)
Applicants already in
India on Long-Term Visa
(more than one year)
should make the application
for issue of a PIO Card
to the following authorities:
2) Any of the Foreigners
Regional Registration
Offices in India or
3) The Joint Secretary
(Foreigners), Ministry
of Home Affairs
To the Indian Mission/Post
of thecountry of applicant's
citizenship or where
he/she is not in the
country of citizenship,
tothe Indian Mission/Postof
the country in which
he/she is ordinarily
resident. If the applicant
is in India, he/she
canapply to the FRRO
at Delhi, Mumbai, Kolkota,Amritsar,
CHIO, Chennai or to
the Under Secretary,
OCI Cell, Citizenship
Section, Foreigners
Division, Ministry of
Home Affairs, Jaisalmer
House, 26 Mansingh Road,
New Delhi-110011.
Fees
-
-
Rs. 15,000/- or equivalent
in local currency for
adults. For the children
upto the age of 18 years,
the fee is Rs. 7500/-
or equivalent in local
currency.
US $ 275 or equivalent
inlocal currency. In
case of PIO card holders,
it is US$ 25 or equivalent
in local currency.
Nationals eligible
-
-
PIOs of all countries
except Afghanistan,
Bangladesh, Bhutan,
China, Nepal, Pakistan
and Sri Lanka
PIOs of all countries
except Pakistan and
Bangladesh provided
the country of nationality
allows dual citizenship
in some form or other
under the local laws.
Benefits/Privileges
1. Benefits
2. Visa
Requirement for visiting
India
3. Requirement of registration
with Indian police authorities
4. Activities
allowed to be undertaken
All benefits as available
to
Indian citizen
subject to
notifications
issued bythe Government
from time to
time No
visa requirement
No requirement
All activities can be
undertaken
No specific benefits.
Visa required of specific
type depending on his/her
purpose of visit. Required
Activities undertaken
as specified in the
visa
(i)Shall not require
a separate visa to visitIndia.
(ii) Will be exempt
from the requirements
of registration if his/her
stayon any single visit
in India does not exceed
180 days.
(iii) In the event of
continuous stay in India
exceeding 180 days,
he/she shall have to
get himself/herself
registered within 30
days of theexpiry of
180 days with the concerned
FRRO/FRO.
(iv) Parity with NRIs
in respect of all facilities
available to the later
in the economic, financial
and educational fields
except in maters relating
to the acquisition of
agricultural/ plantation
properties. No parity
shall be allowed in
the sphere of political
rights. Can visit India
without visa for 15
years from the date
of issue of PIO card.
(i) A multiple entrymulti-purpose
life long visa for visiting
India.
(ii)Exemption fromregistration
with local police authority
for any length of stay
in India.
(iii) Parity with Non
resident Indians (NRIs)
in respect of economic,
financial and educational
fields except in relation
to acquisition of agricultural
or plantation properties.
No parity shall be allowed
in the sphere of political
rights.Any other benefits
to OCIs will be notified
bythe Ministry of Overseas
Indian Affairs (MOIA)under
Section 7B(1) ofthe
Citizenship Act,1955.
Can visit India without
visa for life long.
No requirement All activities
except mountaineering,
missionary and research
work and existing PAP/RAP
which requirespecific
permit.
Requirement to acquire
Indian citizenship
He /she should
be an Indian
citizen
As per section
5(1)(a) & 5(1) (c)of
the Citizenship Act,
he/she has to reside
in India for minimum
7 years before making
application
for granting Indian
citizenship
As per section 5(1)
(a) &5(1) (c) of
the Citizenship Act,
he/she has to reside
in India for minimum
7 years before making
application forgranting
Indian citizenship
Registered OCI may
be granted Indian citizenship
after 5 years from date
of registration provided
he/she stays for one
year in India before
making application
2. Facilities available to NRIs,
PIO for investment in India.
I. Bank Accounts and
Deposits
A) Non-Resident (External)
Rupee (NRE) Accounts
(Principal / Interest
Repatriable)
Savings - The interest
rates on NRE Savings
deposits shall be at
the rate applicable
to domestic savings
deposits. Currently
the interest rate is
3.5%.
Term
deposits – For
1 year to 3 years,
the interest rates
on fresh repatriable
Non-Resident (External)
Rupee (NRE) Term deposits
should not exceed
the LIBOR/SWAP rates,
as on the last working
day of the previous
month, for US dollar
of corresponding maturity
plus 50 basis points.
The interest rates as determined above
for three year deposits
should also be applicable
in case the maturity
period exceeds three
years.
The changes in interest rates will
also apply to NRE deposits
renewed after their
present maturity period.
B) FCNR (B) (Principal/Interest
Repatriable)
Deposits of funds in the account may
be accepted in such
permissible currencies
as may be designated
by the Reserve Bank
from time to time.
Presently
the term deposit can
be placed with ADs
in India in 6 specific
foreign currencies
(US Dollar, Pound
Sterling, EURO, Japanese
Yen, Australian Dollar
and Canadian Dollar).
Rate
of Interest - Fixed
or floating within
the ceiling rate of
LIBOR/SWAP rates for
the respective currency/corresponding
term minus 25 basis
points.
Maturity
of deposits: 1-5 years.
C) NRO Accounts (Current
earnings repatriable)
Savings
- Normally operated
for crediting rupee
earnings / income
such as dividends,
interest. Currently
the interest rate
is 3.5 per cent.
Term
Deposits - Banks are
free to determine
interest rates.
D) Repatriation from
NRO balances
Authorised Dealers can allow remittance/s
upto USD 1 million per
financial year (April-March)
for bonafide purposes,
from balances in NRO
accounts subject to
payment of applicable
taxes. The limit of
USD 1 million per financial
year includes sale proceeds
of immovable properties
held by NRIs/PIO.
II. Other Investments
on repatriation basis
Government
dated securities/treasury
bills.
Units
of domestic mutual funds.
Bonds
issued by a public sector
undertaking (PSU) in
India.
Non-convertible
debentures of a company
incorporated in India.
Shares
in Public Sector Enterprises
being dis-invested by
the Government of India,
provided the purchase
is in accordance with
the terms and conditions
stipulated in the notice
inviting bids.
Shares
and convertible debentures
of Indian companies
under FDI scheme (including
automatic route &
FIPB).
Shares
and convertible debentures
of Indian companies
through stock exchange
under Portfolio Investment
Scheme.
Perpetual
debt instruments and
debt capital instruments
issued by banks in India.
III. Other Investments
on non-repatriation basis
Government
dated securities (other
than bearer securities)/treasury
bills.
Units
of domestic mutual funds.
Units
of Money Market Mutual
Funds in India.
Non-convertible
debentures of a company
incorporated in India.
The
capital of a firm or
proprietary concern
in India, not engaged
in any agricultural
or plantation activity
or real estate business.
Deposits
with a company registered
under the Companies
Act, 1956 including
NBFC registered with
RBI, or a body corporate
created under an Act
of Parliament or State
Legislature, a proprietorship
concern or a firm out
of rupee funds which
do not represent inward
remittances or transfer
from NRE/FCNR(B) Accounts
into the NRO Account.
Commercial
Paper issued by an Indian
company.
Shares
and convertible debentures
of Indian companies
other than under Portfolio
Investment Scheme.
IV. Facilities to returning
NRIs/PIO
Returning NRIs/ PIO
May
continue to hold, own,
transfer or invest in
foreign currency, foreign
security or any immovable
property situated outside
India, if such currency,
security or property
was acquired, held or
owned when resident
outside India.
May
open, hold and maintain
with an authorised dealer
in India a Resident
Foreign Currency (RFC)
Account to transfer
balances held in NRE/FCNR(B)
accounts. Proceeds of
assets held outside
India at the time of
return, can be credited
to RFC account. The
funds in RFC accounts
are free from all restrictions
regarding utilisation
of foreign currency
balances including any
restriction on investment
in any form outside
India.
3. Features of various
deposit schemes available to Non-Resident
Indians (NRIs).
NRIs (individuals
/ entities of Bangladesh/
Pakistan nationality/ownership
require prior approval
of RBI)
NRIs (individuals
/ entities of Bangladesh
/ Pakistan nationality
/ ownership require
prior approval of RBI)
Any person resident
outside India (other
than a person resident
in Nepal and Bhutan)
(individuals / entities
of Bangladesh / Pakistan
nationality / ownership
as well as erstwhile
OCBs require prior approval
of RBI)
Joint account
In the names of two
or more non-resident
individuals
In the names of two
or more non-resident
individuals
May be held jointly
with residents
Nomination
Permitted
Permitted
Permitted
Currency in which
account is denominated
Pound Sterling, US
Dollar, Jap. Yen, Euro,
Canadian Dollar and
Australian Dollar
Indian Rupees
Indian Rupees
Repatriable
Repatriable
Repatriable
Not repatriable except
for the following in
the account - 1) Current
income 2) Upto USD 1
Million per financial
year (April- March),
for any bonafide purpose
out of the balances
in NRO account / sale
proceeds of assets in
India acquired by way
of inheritance / legacy
inclusive of assets
acquired out of settlement
subject to certain conditions.
Type of Account Term
Deposit only
Term Deposit only
Savings, Current,
Recurring, Fixed Deposit
Savings, Current,
Recurring, Fixed Deposit
Period for fixed deposits
For terms not less
than 1 year and not
more than 5 years.
At the discretion
of the bank
As applicable to resident
accounts.
Rate of Interest
Subject to cap
:
Subject to cap
:
LIBOR / SWAP rates
for the respective currency
/ corresponding maturities
minus 25 basis points
Fixed Deposits
:
LIBOR / SWAP rates,
as on the last working
day of the previous
month, for US dollar
of corresponding maturities
plus 50 basis points
with effect from close
of business on January
31, 2007.
Savings Bank AccountInterest
rate shall be at the
rate applicable to domestic
savings account with
effect from close of
business in India on
17-11-2005.
Banks are free to
determine interest rates
for term deposits.
Operations by Power
of Attorney in favour
of a resident by the
non-resident account
holder
Operations on the
account in terms of
Power of Attorney is
restricted to withdrawals
for permissible local
payments or remittance
to the account holder
himself through normal
banking channels.
Operations on the
account in terms of
Power of Attorney is
restricted to withdrawals
for permissible local
payments or remittance
to the account holder
himself through normal
banking channels.
-
Loans
a. In India
i) to the Account
holder
ii) to Third Parties
Permitted up to Rs.20
lakhs
Permitted upto Rs.20
lakhs
Permitted upto Rs.20
lakhs
Permitted upto Rs.20
lakhs
Permitted
Permitted
b. Abroad
i) to the Account
holder
ii) to Third Parties
Permitted upto Rs.20
lakhs
Permitted upto Rs.20
lakhs
Permitted upto Rs.20
lakhs
Permitted upto Rs.20
lakhs
Not Permitted
Not Permitted
c. Foreign Currency
Loans in India
i) to the Account
holder
ii) to Third Parties
Not Permitted
Not Permitted
Not Permitted
Not Permitted
Not Permitted
Not Permitted
Purpose of Loan
a. In India
i) to the Account
holder
i) Personal purposes
or for carrying on business
activities. *
ii) Direct investment
in India on non-repatriation
basis by way of contribution
to the capital of Indian
firms / companies
iii) Acquisition of
flat / house in India
for his own residential
use. (Please refer to
para 9 of Sch. 2 to
FEMA 5)
i) Personal purposes
or for carrying on business
activities. *
ii) Direct investment
in India on non-repatriation
basis by way of contribution
to the capital of Indian
firms / companies
iii) Acquisition of
flat / house in India
for his own residential
use. (Please refer to
para 6(a) of Sch.1 to
FEMA 5)
Personal requirement
and / or business purpose
*
ii) to Third Party
Fund based and / or
non-fund based facilities
for personal purposes
or for carrying on business
activities *. (Please
refer to para 9 of Sch.
2 to FEMA 5).
Fund based and / or
non-fund based facilities
for personal purposes
or for carrying on business
activities *. (Please
refer to para 6(b) of
Sch. 1 to FEMA 5)
Personal requirement
and / or business purpose
*
b. Abroad
To the account holder
and Third Party
Fund based and / or
non-fund based facilities
for bonafide purposes.
Fund based and / or
non-fund based facilities
for bonafide purposes.
Not permitted.
4. Foreign Investments in India -
Foreign Investments in India (As on
April 1, 2007).
The FAQs cover broadly the following
areas :
Foreign
Direct Investment.
Foreign
Technical Collaboration.
Foreign
Portfolio Investment.
Investment
in Government Securities
and Corporate debt.
Foreign
Venture Capital Investment.
Procedure
for opening Branch/Project/Liaison
Office.
Foreign Direct Investment
1. What are the forms
in which business can
be conducted by a foreign
company in India?
A
foreign company planning
to set up business
operations in India
has the following
options:
As
an incorporated entity
by incorporating a
company under the
Companies Act, 1956
through
Joint
Ventures; or
Wholly
Owned Subsidiaries
As
an office of a foreign
entity through
Liaison
Office / Representative
Office ·
Project
Office
Branch
Office
Such offices can undertake activities
permitted under the
Foreign Exchange Management
(Establishment in India
of Branch Office or
other place of business)
Regulations, 2000
2. How does a foreign
company invest in India?
What are the regulations
pertaining to issue
of shares by Indian
companies to foreign
collaborators/investors?
Automatic Route
FDI
up to 100% is allowed
under the automatic
route in all activities/sectors
except the following
which require prior
approval of the Government:
where provisions of
Press Note 1 (2005
Series) issued by
the Government of
India are attracted.
where more than 24%
foreign equity is
proposed to be inducted
for manufacture of
items reserved for
the Small Scale sector.
FDI in sectors/activities
to the extent permitted
under Automatic Route
does not require any
prior approval either
by the Government
or the Reserve Bank
of India.
The investors are
only required to notify
the Regional Office
concerned of the Reserve
Bank of India within
30 days of receipt
of inward remittances
and file the required
documents along with
form FC-GPR with that
Office within 30 days
of issue of shares
to the non-resident
investors.
5. Acquisition
and Transfer of Immovable Property
in India by a person resident outside
India.
In
order to address various
issues relating to acquisition
and transfer of immovable
property in India by
a person resident outside
India under the provisions
of the Foreign Exchange
Management Act, 1999,
a set of FAQs has been
prepared for the information
of all the concerned.
These FAQs seek to cover
the broad spectrum of
issues relating to acquisition
and transfer of immovable
property in India by
a non-resident Indian
(NRI) or a foreign national
of Indian origin (PIO)
or a foreign national
of non-Indian origin
as also by a person
resident in India who
is not a citizen of
India.
6.
Permanent Account Number (PAN) Related
Queries.
Q1. What Is Permanent
Account Number (PAN)
?
Permanent Account Number (PAN) is
a ten-digit alphanumeric
number, issued in the
form of a laminated
card, by the Income
Tax Department.
Q2. Why Is It Necessary
To Have Permanent Account
Number (PAN) ?
It is mandatory to quote Permanent
Account Number (PAN)
on return of income,
all correspondence with
any income tax authority.
From 1 January 2005
it will be mandatory
to quote PAN on challans
for any payments due
to Income Tax Department.{Section
139A (5) (a) and (b)}
It is also compulsory
to quote Permanent Account
Number (PAN) in all
documents pertaining
to financial transactions
notified from time-to-time
by the Central Board
of Direct Taxes. Some
such transactions are
sale and purchase of
immovable property or
motor vehicle or payments
in cash, of amounts
exceeding Rs. 25,000/-to
hotels and restaurants
or in connection with
travel to any foreign
country. It is also
mandatory to mention
PAN for obtaining a
telephone or cellular
telephone connection.
Likewise, Permanent
Account Number (PAN)
has to be mentioned
for making a time deposit
exceeding Rs. 50,000/-
with a Bank or Post
Office or depositing
cash of Rs. 50,000/-
or more in a Bank.{Section
139A (5) (c) read with
Rule 114B}
Q3. Who must have a
Permanent Account Number
(PAN) ?
i. All existing assesses or taxpayers
or persons who are required
to furnish a return
of income, even on behalf
of others, must obtain
Permanent Account Number
(PAN) .{Section 139A
(1) and (1A)}
ii. Any person, who
intends to enter into
financial transaction
where quoting Permanent
Account Number (PAN)
is mandatory, must also
obtain Permanent Account
Number (PAN) .{ Section
139A (5) (c) read with
Rule 114B}
iii. The Assessing Officer
may allot PAN to any
person either on his
own or on a specific
request from such person.{Section
139A (2) and (3)}
Q4. Can a person obtain
or use more than one
Permanent Account Number
(PAN) ?
Obtaining or possessing more than
one Permanent Account
Number (PAN) is against
the law.{Section 139A
(7)}
Q5. Where to apply for
Permanent Account Number
(PAN) ?
In order to improve PAN related services,
the Income Tax department
has authorized UTI Investor
Services Ltd (UTIISL)
to set up and manage
IT PAN Service Centers
in all cities or towns
where there is an Income
Tax office and National
Securities Depository
Limited (NSDL) to dispense
PAN services from TIN
Facilitation Centers.
For convenience of PAN
applicants in big cities,
UTIISL has set up more
than one IT PAN Service
Center and likewise
there are more than
one TIN Facilitation
Centers.
Q6. How to apply for
a Permanent Account
Number (PAN) ? Can an
application for PAN
be made on plain paper?
PAN application should be made only
on Form 49A. A PAN application
(Form 49A) can be downloaded
from the website of
Income Tax department
or UTIISL or NSDL (www.incometaxindia.gov.in,www.utiisl.co.in
or tin.nsdl.com) or
printed by local printers
or photocopied (on A4
size 70 GSM paper) or
obtained from any other
source. The form is
also available at IT
PAN Service centers
and TIN Facilitation
centers.
Q7. Can an application
for PAN be made in Form
49A obtained from anywhere?
Yes. Yes, PAN application may be made
on Form 49A obtained
from any source other
than IT PAN Service
Centers or TIN Facilitation
Centers. For instance,
a PAN application may
be made on form downloaded
from the website of
Income Tax department
or UTIISL or NSDL; or
on form printed by local
printers or a photocopy
of downloaded or printed
form
Q8. Can an application
for Permanent Account
Number (PAN) be made
through Internet?
Yes, application for fresh allotment
of PAN can be made through
Internet. Further, requests
for changes or correction
in PAN data or request
for new PAN card (for
an existing PAN) may
also be made through
Internet. For more details
visit (www.tin-nsdl.com)
Q9. How do I get a Permanent
Account Number (PAN)
allotted quickly (TATKAL)?
If an application for allotment of
PAN is submitted through
Internet and payment
made through a 'nominated'
credit card, the PAN
is allotted on priority
and communicated through
email.
