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Investment Guidelines- NRI's.

Here are some of the guidelines to be followed before you decide to invest in the Indian Capital Market.

Information relating to purchase of shares in the Indian Capital Market.

NRI Investment in shares & debentures of Indian Companies:
Both NRIs and OCBs (Overseas Corporate Bodies) are permitted to invest in Indian Equity.
Investment in Shares and Debentures of Indian Companies can be made by either;
By applying to New Issues / Public Issues, i.e. through the Primary Market open to NRIs on repatriation / non - repatriation basis; or
By purchasing shares through any registered stock exchange in India, i.e. through the Secondary Market.
Reserve Bank of India (RBI) approvals:
While investing in the Primary Markets, no RBI permission is required. However, the issue must have been specifically offered to NRIs in the prospectus.
Prior RBI permission is required for purchase of shares and debentures from the secondary market. This approval is for a specific NRE account through which all payments for purchases made have to be done. This approval is for a particular combination of holders.This means that if the approval is in the name sequence "A and B" then shares cannot be purchased in the name sequence of "B and A". "A" will have to be first holder. For "B" to be a first holder a separate application and approval will be required.
The RBI permission to purchase shares / debentures from the stock exchange is general in nature and is usually valid for 5 years.However, all such purchases need to be reported to the RBI.
Payment for purchases from the secondary markets:
While applying to the RBI for the purchase approval, a NRE account needs to be opened by you. All payments need to be made from this account.
Purchase Quantities:
Each NRI is allowed to purchase up to a maximum of 1% of the paid up capital of the company from the Stock Exchange. Further RBI does not allow total NRI holdings within a company to exceed 24%.

Information relating to sale of shares in the Indian Capital Market.

Repatriation of the sale proceeds:
If the scrips to be sold had been originally purchased from the secondary market on a repatriable basis, there is no RBI permission required at the time of selling. This is true as long as the scrips are;
  • sold through a member broker on a recognized stock exchange in India; and
  • the sale proceeds are credited to the same NRE account from where the purchase approval was granted, and the shares paid for.
In case the scrips to be sold was purchased from the Primary market, a prior RBI approval is required to ensure that the sale proceeds are repatriable.
The RBI guidelines specify that the credit of the sale proceeds has to go to the NRE account nominated in the approval, normally held in a branch specifically designated by RBI.
Disinvestment:
The stocks can be sold any time after purchase, provided they have been transferred in the buyers name. There is no minimum holding period. This is applicable to both Primary or Secondary market transactions as long as the necessary approval as explained above is obtained. The holding period is calculated as the time elapsed from date of transfer / allotment of shares in your name.
In case of repatriation of the proceeds of the sale, a specific "No Objection Certificate (NOC)" from the Indian Taxation Authorities is required.This approval is required to be obtained from your specific Income Tax Circle / Unit, with the assistance of your Tax Attorney / Chartered Accountant.
Approval for stocks purchased from the Primary market:
Immediately on allotment one can apply to the RBI for approval. Once the approval has been received the securities can be sold whenever you wish.
If the scrips had been purchased from the Primary market then each scrip will need an RBI approval prior to selling it. However, a single application to the RBI could contain more than one scrip.
For all securities procured from either Rights or Bonus Issues an RBI approval is required prior to selling them, as these are treated like a Primary market purchase.
In case you do not wish to repatriate the sale proceeds, a specific RBI permission is not required. In such a case, the capital gains tax will not be deducted at "source." Taxes, if any, will be required to be paid and filed by you directly with the relevant tax authorities as part of your annual Income Tax returns. In this case the funds will have to be credited to your NRO (non-repatriable) a/c.

Common tax related issues.

Interest and dividend will be taxable and the tax will be deducted at source by the company. Capital gains taxes are either Short Term or Long Term (defined below), and are required to be deducted by the bank before crediting the sale proceeds to your NRE account as per the following table;

Account HoldersShares and Debentures
Short-term Long-term
NRI' s 30% 20%
OCB's 40% 60%

If you choose to fully reinvest the sale proceeds of your repatriable scrip in shares / debentures / property then the capital gains tax on the initial gain is exempted. These re-investments have to be held for a minimum 3 year period in order to avail of the exemption. To avail of this you need a Re-investment Approval from the RBI. In case you need to sell prior to the 3 year period you will need to pay capital gains tax on both the new and old gains.

Payment Guidelines:

Payment of funds is normally by checks or drafts drawn on any banks. You can send your payment to Citibank which offers a facility by which you can transfer the funds to us through the NRI business account operated by them at various places . All you have to do is transfer the amount to the specific NRI business account or NRI treasury services account and give instructions favouring our Citibank current account. Refer the following table and also contact the nearest Citibank office for further details.
NRI Business Account.
CurrencyCitibank BranchAccount No.
US DollarNew York36058933
Pounds SterlingLondon608041
Deutsche MarksFrankfurt4100012087
Japanese YenTokyo0221815408

The instructions should read as:
Pay to Citibank New York in MT100 format, a credit of USD 1000 for credit to Citibank NRI Business Account 36058933 favouring Amrok and Co for Citibank current A/C No 18425009 .


DISCLAIMER:
This information is provided for the benefit of MakroIndia members with no recommendation or opinion. Members are advised to read carefully all documents supplied before investing. MakroIndia disclaim any and all liability what so ever arising from or use of this information.




(An Amrok Group Concern)
H-1 Sudharshan Gardens,102-Velachery Road,
Guindy,Madras-600032. India.
Tel: 91-44-2353610,2353612,2352200,2350133.
Fax: 91-44-2350485.
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Email:amrok@makroindia.com