Overseas Indians
You know what they say about the India story? It is true! Some of you are even wondering
if you are missing out. Equity participation in the Indian Capital Markets is the
best way to own a piece of this once-in-a-generation growth; even if n+1 hasn’t
quite become n yet! As a Non-Resident Indian or a Person of Indian Origin, you are
entitled to invest in securities/shares of, and deposits with Indian companies through
the Portfolio Investment Scheme(PIS). You can also obtain loans and overdrafts overseas
through authorized banks by pledging these securities as collateral. Most banks
provide these services. Residents in the US have some additional restrictions on
the kind of trades they can execute but are equally entitled to invest in India.
Developed markets offer lower returns as a function of their stability and slower
growth. This spans the gamut of asset classes from savings accounts to equities.
Given different fundamentals in India – 65% of consumption is domestic; your investment
here diversifies to your core holdings in your country of residence. You have the
additional advantage of having read the ‘playbook’; Indian’s growth will mirror
the development in the West, albeit at a faster rate. So you know the kinds of things
that would do well as businesses and bring that knowledge to your investments in
India. As India grows, its currency will rise to reflect this strength which means
you can potentially get a bonus on your higher returns. Want more? India has zero
long term capital gains tax on equities and dividends in your hand are not taxed.
That leaves the question of whether you should use a mutual fund to gain exposure
or should you invest directly in stocks? Some mutual funds accept fund transfers
directly from overseas and set up your account online. For direct investments, you
will need to open a Dematerialized (D-Mat) Share Account typically with your banker.
Check with your broker/banker for account opening details, some do require you to
be present while opening the account for compliance reasons. Your bankers will also
help you with your PAN card and other India specific filings. Budget some time to
see your bankers on your next holiday! The whole process takes about a week and
is a matter of a few forms and some signatures. Once you have these accounts the
rest is largely done online.
All you then need is great research (nudge-nudge!!) and you are on your way. A lot
of the inspiration behind the venture comes from our own stays overseas where we
were hard pressed to find strong quantitative, fundamental research that allows
you to confidently invest at an arms length.
Welcome to iMetanoia
Some Restrictions
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Buying and selling on the same day: NRI's are not allowed to do Speculative Trades.
This means they cannot ‘buy and sell’ or ‘Sell and Buy’ on the same day and cannot
‘Buy today Sell Tomorrow’ the shares of the same company without taking delivery.
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Sales of shares bought earlier : Shares bought can be sold only after the shares
are delivered to Client’s Demat a/c.
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Approved Shares : List of RBI approved shares details for NRI's
http://www.rbi.org.in/scripts/BS_FiiUSer.aspx
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Investments in shares of company, by each NRI (both on repatriation and non-repatriation
basis) shall not exceed 5% of the paid-up value of Shares of the company concerned.
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Investments in convertible debentures of a company, by each NRI (both repatriation
and non repatriation basis) shall not exceed 5% of the paid – up value of convertible
debentures in each series, issued by the company concerned.
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Aggregate investments by NRI’s will be subject to a ceiling of (a) 10% of the total
paid up equity capital of the company concerned and (b) 10% of the total paid- up
value of each series of convertible debentures issued by the company concerned,
such Indian companies shall however raise the ceiling of 10% to 24% or such ceilings
a may be decided by the companies, by passing a special resolution in the general
body of the company.
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In case of Investments on repatriation basis, the payment for purchase of shares
/ debentures should be by way of debit to the investor’ NRE account. Incase of investments
on non- repatriation basis, the payment for purchase of shares / debentures shall
be by way of debit to the investor’s NRO account.
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The net sale / maturity proceeds of shares / convertible debentures, after payment
of taxes, shall be credited only to the investor’s NRO account if the investment
was made on non-repatriation basis: and shall be remitted abroad / credited to the
investor’s NRE / NRO account if the investment was made on repatriation basis.
Tax Rates :
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Short Term Capital Gain (STCG) : 10% + surcharge (revision proposed to 15% + surcharge
from April 1, 2008 in Budget 2008)
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Long Term Capital Gain (LTCG) : NIL The capital gains tax will be deducted by the
Bank and the necessary TDS (Tax deducted at source) certificates will be sent to
the customer by the bank.
For good resource on NRI investment regulations refer to :
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