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NRI investment guide for stock market & mutual fund

What is the process NRI or PIO should follow to invest in Indian securities? This post offers an NRI investment guide, outlining rules and process for stock market and mutual fund investing.

Who is an NRI or PIO

NRI is an Indian citizen who stayed less than 182 days in India in a financial year.

Person of Indian Origin (PIO) is someone who meets any of the following criteria:

Has held an Indian passport at any time
Is son/daughter or grandchild of Indian citizens
Is spouse of an Indian citizen, or
Is spouse of a person covered under first two points above

NRI investment eligibility and restrictions

NRIs and PIOs are both allowed to invest in India.

Process

NRIs or PIOs interested to invest in India needs to follow the following process:

Open NRE/NRO savings account with bank
Open PINS Account – RBI approval for investing in securities with designated bank
Open NRI Demat & Trading Account with broker

Restrictions

The key issue with NRIs/PIOs pertains to repatriation of sale or redemption proceeds, depending on the source of funds. If your source of funds is external, i.e. funded in foreign currency, you can freely take the sales proceeds out of the country without restrictions. If however, your source of fund is in Indian Rupees, there are restrictions.

NRE, NRO accounts

The bank account through which investments are routed is used to determine the source of funds. Funds that are remitted from abroad into the Non-Resident External (NRE) and then invested, can be freely routed back. If however, investments are made from Non-Resident Ordinary (NRO) accounts, proceeds are repatriable only to the extent of USD 1M per financial year, principal and interest combined.

All incomes earned in India on investments are freely repatriable, irrespective of the source of funds, provided taxes as per Indian law has been paid. Incomes may include interests on bonds, dividends on shares, rental income, etc.

Income from sale of capital assets, such as shares, bonds, property etc. held in India are repatriable only to the extent of funds remitted from abroad for acquiring the asset.

Know Your Client (KYC) for NRIs & PIOs

NRIs & PIOs need to submit filled up KYC form, along with necessary supporting documents – Proof of ID, Proof of Address & PAN Card.

KYC Form (download link)

CAMS – CKYC Form for Individual

SEBI – KYC Application Form

Following are the additional documents that NRIs & PIOs need to provide:

Certified True Copy of Passport
Certified True Copy of Overseas Address
Permanent Address
Certified True Copy of PIO Card (for PIOs only)
In case of merchant navy NRIs – Mariner’s declaration or certified true copy of CDC (Continuous Discharge Certificate)

Portfolio Investment NRI Scheme (PINS) Account

PINS is an RBI scheme which mandatorily needs to be adopted by an NRI or PIO who intends to transact in shares of Indian companies on a recognized stock exchange in India. NRIs or PIOs can open a PINS account in designated bank branches and ensure all transaction in listed securities are routed through this account. An NRI PIO can have only one PINS account (one NRE (PIS) and one NRO (PIS) for investments on repatriation and non-repatriation basis respectively)

You can open a PINS account only in designated branches of banks as authorised by the RBI under the PIS. The addresses of designated branches are usually available on banks’ websites.

Documents Required

You should check with designated bank for the specific process for PIS application with RBI. Usually, documents required are as follows:

PIS Application Form, filled up
Copy of current Passport
Valid Work Permit or Employment Visa
Proof of Address
PIO card (if applicable)
CDC (for merchant navy employees)

NRI Demat & Trading Accounts

Once you have received PIS approval, you should contact your broker for opening demat and trading account. Broker will take care of opening the demat account with DP on your behalf.

NRI Demat Account

You need to have a Demat account opened with any Depository Participant for holding securities in dematerialized format. Account type should be ‘NRI’ (as opposed to ‘Resident’) and sub-type should be as desired – ‘Repatriable’ or ‘Non-Repatriable’. You must maintain separate demat accounts for ‘Repatriable’ and ‘Non-Repatriable’ securities.

NRI Trading Account

Trading account can be opened with any registered broker of a stock exchange. NRIs can have 2 separate trading accounts linked to NRE and NRO accounts.

Documents required

Check with your broker. Usually, documents required are as follows:

Copy of Passport
PIS permission letter from designated bank
Copy of PAN card
Overseas address
Photograph
Proof of bank accounts (cancelled cheque)
Declarations: FEMA, FATCA, P.O
Note: Copy of PAN card, Passport and Foreign address proof to be notarized by Indian Embassy or any other competent authority like Consulate General / Notary Public / Any Court / Magistrate / Judge / Local Banker in the country where the NRI resides. The attesting authority should affix a “verified with original” stamp, name, designation, signature and date on the said documents

Power of Attorney

You can empower someone you trust to do transactions on your behalf by granting and executing a Power of Attorney (PoA). This facility is generally used by NRIs & PIOs who are unable to manage their financial transactions, and like their advisors to manage their investments on their behalf.

A PoA has two parties: the grantor, who is the primary investor or account holder and grants the rights; and the attorney, or holder, who is authorized to execute an agreed set of actions on behalf of the grantor.

The PoA holder can potentially exercise almost all rights of an investor, except for example certain transactions like account opening or closing, appointing a nominee, etc. Although, the actual rights depends on what the grantor is willing to delegate. The grantor of the PoA can continue to operate the account even after giving the PoA.

To be valid, PoA must be: