| 1. |
What is Portfolio Investment Scheme? |
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Portfolio Investment Scheme (PIS) is defined in Schedule 3 of Foreign Exchange Management
Act 2000. As per the scheme the NRIs can purchase and sell shares and convertible debentures
of Indian Companies on a recognised stock exchange by routing such purchase/sale transactions
through their account with a Designated Bank Branch.
(With effect from 29/11/2001 RBI has restricted OCBs from making fresh purchases.
They can however continue their existing holdings or sell off the same). |
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| 2. |
What is a designated branch? |
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Reserve Bank has authorised a few branches of each authorised dealer to conduct the business
under Portfolio Investment Scheme on behalf of NRIs. They have to route the applications
through any of the designated authorised dealer branches who have authorisation from Reserve
Bank of India. |
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| 3. |
Can the investment made under the PIS be repatriated? |
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The repatriation of the sale proceeds are allowed if the original purchase was made on
repatriation basis and the sources of investment were from NRE/FCNR account or by means of
remittance from abroad. If the original purchase was made from NRO a/c then the sale
proceeds are not repatriable |
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| 4. |
Can an investor under PIS make an investment on repatriation basis as well as nonrepatriation
basis ? |
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Yes. Investment can be made on repatriation as well as non-repatriation basis. However, the
investor will have to open NRE account as well as NRO account with the Designated Bank. The
sale proceeds of Non-repatriable investment can be collected in NRO A/c only. |
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| 5. |
Do NRIs who have an account need to open another NRE/NRO account? Can the account be
a joint account? |
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As per recent RBI guidelines, NRI should have a separate bank account exclusively for PIS
purposes. Transactions relating to their personal banking as well as on account of transactions
relating to shares acquired other then under PIS including IPOs should be routed in a separate
bank account not linked to PIS. Account/s can be of ‘joint’ type. |
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| 6. |
Is there any formal approval required for using the PIS facility from the Designated Bank? |
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Yes. The Designated Bank will issue approval on receipt of prescribed form. |
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| 7. |
What is the procedure for making applications for Portfolio Investment Scheme? |
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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. Authorised dealer issues general
permission for a period of five years, which can be renewed further by designated branch,
concerned for a period of five years at a time. |
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| 8. |
How many Designated Banks can an NRI apply? |
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NRI can apply only at one Designated branch of bank for the purpose of routing the transactions
under PIS. |
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| 9. |
Whether NRI can apply through more than one designated branch authorised dealer? |
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No. NRI can select only one authorised dealer branch for the purpose of investment under
Portfolio Investment Scheme and route the transactions through the branch designated by the
authorised dealer. |
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| 10. |
Can an NRI purchase securities by subscribing to public issue? What are the
permissions/approvals required? |
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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. |
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| 11. |
If an NRI has existing portfolio purchased under IPO in the primary market both on
repatriation and non-repatriation basis, does he still have to route the sales of such holding
through the Designated Bank? |
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The shares/convertible debentures acquired under IPO need not be routed through Designated
Bank as this does not come under PIS. Such transactions, if routed through designated bank,
should be done in a separate bank account not linked to PIS. |
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| 12. |
Does an NRI requires PIS permission to purchase shares in Primary market (IPOs) on
reptriable basis? |
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NO, NRIs can purchase shares in primary market on repatriable basis and application money can
be paid through regular NRE SB account or through inward remittance |
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| 13. |
Does NRI requires PIS permission to purchase shares in Primary market (IPOs) on non -
reptriable basis? |
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NO, NRIs can purchase shares in primary market on non-repatriable basis and application
money can be paid through regular NRE/ NRO SB account or inward remittance. |
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| 14. |
Do NRIs requires PIS permission to sell shares which were purchased in Primary market
(IPOs) on repatriable / non repatriable basis? |
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No. |
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| 15. |
Do NRIs require PIS permission to sell shares which were allotted as rights / bonus basis, on
the shares which were originally purchased in primary market(IPOs) on repatriable/ non
repatriable basis? |
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No. |
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| 16. |
Is there any limit for purchase/sale of shares / convertible debentures by an NRI in the
secondary market? |
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Yes. NRI can purchase upto a maximum of five percent of the paid up capital of a company and
maximum of five percent of paid up value of each series of debentures. For the purpose of this
ceiling investment in repatriable and non-repatriable will be clubbed. In addition to above NRIs
collectively can hold upto a maximum of 10% of such holding or any higher percentage so
permitted in respect of any particular company. Shares/debentures acquired through primary
market are excluded for the purpose of above limits |
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| 17. |
Is it mandatory to place the orders for purchase/sale of shares / convertible debentures
through the Designated Bank? |
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The orders need not be placed through the Designated Bank. Further, the reporting of the
transaction shall be done to the Designated Bank on the same day of transaction along with
original contract note. One needs to ensure that the payment and receipt of funds in
settlement of such trade has to be routed through the Designated Bank account only. |
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| 18. |
Is it mandatory to route the secondary market transactions through PIS designated account
only? |
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Yes, It is mandatory for a NRI to route all secondary market transactions through his PIS
designated account i.e For all purchase / sell of stocks in secondary market only the PIS
designated account should be debited / credited. |
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| 19. |
Can an NRI sell the shares / convertible debentures purchased within the same settlement
cycle? |
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No. NRI cannot sell without taking delivery of the shares/convertible debentures purchased.
Short selling is not permitted under PIS. |
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| 20. |
How does an NRI correct his/her position if the purchased shares / convertible debentures
are in excess of the prescribed limit, if any? |
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NRI will have to off load such portion of the holding, which is in excess of the prescribed limit. |
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| 21. |
Are NRIs required to file any reports to RBI for acquiring or selling shares / debentures? |
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The NRI investor is not required to file any Return or Report with the RBI with regard to
acquisition or sale of shares and/or debentures in an Indian Company. Only the link office of
the designated bank branch is required to furnish a report on daily basis on Portfolio
Investment Scheme Transactions to RBI. |
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| 22. |
Can securities purchased under repatriable and non-repatriable category be held in a single
Demat account? |
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No. An NRI must open separate Demat accounts for holding 'repatriable' and 'non-repatriable'
securities. |
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| 23. |
Can an NRI nominate or be nominated in depository account? Whether such nominee can be
person resident in India? |
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Yes. |
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| 24. |
Is there any tax obligation? |
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The sales proceeds can be deposited after deduction of the applicable tax. |
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| 25. |
What is "Tax Deduction at Source (TDS)" on capital gains arising out of sale of holdings by
NRIs? |
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As per Indian tax laws, all the capital gains arising out of sale transactions are subject to tax.
In the case of NRIs, the capital gain arising out of sale transaction is subject to deduction of tax
at source (TDS) i.e. at the time of crediting the sale proceeds to the respective NRE/NRO
account by the concerned bank branch. Accordingly, the concerned bank shall determine the
tax liability and tax will be deducted at source. The concerned bank, which has deducted tax
at source, shall issue a certificate in this regard. |
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| 26. |
In case a person who is resident in India becomes a non-resident, will he/she be required to
change the status of his/her holding from Resident to Non-Resident? |
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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 nonrepatriable
basis. |
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| 27. |
In case a non-resident Indian becomes a resident in India, will he/she be required to change
the status of his/her holding from Non-Resident to Resident? |
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Yes. It is the responsibility of the NRI to inform the change of status to the designated
authorised dealer 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. |
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| 28. |
Can NRIs receive shares in inheritance? |
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Yes, NRI can receive shares in inheritance. RBI permission is not required and the shares will be
held on non-repatriable basis. |
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| 29. |
What is the status of shares purchased in primary market/secondary market as a resident
Indian, once the customer becomes a NON-RESIDENT? |
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The shares purchased through Primary / Secondary market as a resident will be held on nonrepatriation
basis, once the customer becomes an NRI. These shares can be credited to NRO
DEMAT account. These shares can be sold in secondary market without PIS permission. The sale
proceeds can be credited to NRO SB account after payment of capital gain taxes. |
