Sometime back I wrote an article on how resident Indian’s can invest in shares of companies listed on foreign stock exchanges. Likewise, many overseas investors would like to invest in shares of companies listed on the Indian stock exchanges.
In this article, I will focus on how Non Resident Indians (i.e. NRI’s) can invest in Indian shares. For this purpose, I will go by the definition of NRI as per the Income Tax Act, 1961. Accordingly an NRI will be someone who was residing outside India for at least 182 days in a financial year. By the above definition, I have been an NRI for 4 out of the last 10 years.
To keep things simple I will not go into other detailed provisions of The Income Tax Act or the FEMA. The main purpose of this article is to explain things practically and not get into any detailed explanation of any regulation. Many NRI’s are worried about whether they are allowed to invest in Indian shares and about the documentary requirements which apply to them.
I will try to answer these questions below.
NRI’s, must be differentiated from Persons of Indian Origin (PIO) and those who have become citizens of a foreign country and are no longer a citizen of India. In case you fall under any of those categories and would like to learn how you can invest in Indian shares, you can write in to me at – [email protected].
Distinguish between NRI’s who maintain (i) a regular savings / current bank account in India, and; (ii) have a place of communication in India, versus those who do not have one or both the above. If you hold a bank account in India and have a place of communication, i.e. – an address proof, then you should consider yourself very much in India to start investing/ or trading in Indian shares. Put differently:
IN SUCH A SITUATION, THERE WILL PRACTICALLY BE NO DIFFERENCE BETWEEN NRI INVESTMENT AND INVESTMENT BY A FULL TIME RESIDENT OF INDIA.
These days, all commercial banks offer three in one accounts (i.e. linking your trading and demat account to your savings account). You can open such an account on your next visit to India. Transferring funds between your trading and bank account is easy using online banking facility and then you can trade/ invest in Indian shares from anywhere in the world.
Also, as far as income taxation is concerned, being an NRI or a resident Indian will have no bearing on your income / gains derived from activities in India. You will be paying Income Tax in India in either event.
Disclaimer: Nothing in this article constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Sana Securities does not advise on the tax consequences of investments and you are advised to contact an independent tax advisor.
Again, if you are an NRI and do not have a basic savings/ current bank account in India, I highly recommend that you consider opening one on your next visit. You can also open a basic NRE/ NRO account which can hold dual currencies but if you need an account, mostly to remit to India for investment or for any other purpose (and not from India abroad) then a basic savings account will be far more helpful.
So the short answer for NRI’s – much worry about nothing. Start investing in India!
NRI Investments: Documentary requirements:
(Actual requirements may vary based on the bank / broker / depository participant you choose)
- An account opening (KYC) form – will be provided by the Bank;
- Self attested copy of your PAN card;
- An address proof (Indian);
- A Cancelled cheque (Indian ban account);
- Bank statement (3 months old transaction);
- If you choose to mention that you are an NRI, then in addition to the above:
- Two recent colored passport size photographs;
- Self attested copy of Indian passport clearly reflecting Indian address and page with the latest immigration details;
+ Self attested copy of any one of the following towards proof of foreign address-
- Valid Driving License Copy;
- Valid Passport Copy constituting first page and page consisting residential address;
- Residence landline telephone / electricity bills (not more than three months old) as provided by Statutory / regulatory authority;
- FEMA declaration (will be provided by the bank);
- In Person Verification – effected through web cam.