|Portfolio Investment in Shares/Debentures of Indian Companies and in Domestic Mutual Funds|
|Portfolio investments in shares/debentures by NRIs/OCBs are permitted only through designated branches of authorized dealers, preferably located at centers having stock exchanges. Authorized dealers should inform the names of such branches to Central Office of Reserve Bank and obtain approval. The Code number allotted by Reserve Bank should be quoted in all correspondence undertaken with Reserve Bank in this regard. Non-resident investors can also authorize Indian residents or stock exchange brokers as their agents in India to purchase/sell shares on their behalf under the schemes but all transactions should be routed through the designated branch of authorized dealer.|
General Conditions for Purchase with Repatriation or Non-Repatriation rights
|Consequently, it is not necessary for NRIs/OCBs to obtain Reserve Bank’s permission for sale of shares/bonds/debentures effected in the above manner. As regards the repatriation of sale proceeds received by the designated branches, Reserve Bank will, while granting approval for purchase of shares/bonds/debentures also grant approval for repatriation of the sale proceeds if and when shares/bonds/debentures are sold in the above manner. The actual repatriation of the sale proceeds or credit thereof to the NRE/FCNR account of the beneficiary will be subject to payment of Indian taxes.Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefits under the Direct Investment Scheme and sold through the Stock Exchange in India will require permission of Reserve Bank. Applications for necessary permission should be made by NRIs/OCBs to the Central Office of Reserve Bank in form TS 4 through the designated bank branch of an authorized dealer. In such cases, permission for sale/transfer of shares / bonds/ debentures acquired with the right of repatriation will be granted by Reserve Bank to the bank branch designated by the seller or to the authorized dealer, as the case may be, who may sell the holdings at the ruling market price through a stock exchange at any time within the validity of the permission.
While granting permission for sale/transfer, Reserve Bank will also authorize the designated branch/authorized dealer to credit the sale proceeds to the NRE or FCNR account of the seller or to remit them abroad subject to payment of taxes on capital gains, if any. Where the amount of capital gains tax is not immediately determinable, the designated branch/authorized dealer may allow repatriation of sale proceeds or credit thereof to the seller’s NRE/FCNR account to the extent of the original cost of investment immediately on realization of the sale proceeds. The excess amount, if any, representing capital gain should be kept by the designated branch/authorized dealer in a separate NRO account of the seller or in a suspense account.
The designated branch/authorized dealer may allow withdrawal of this amount for credit to the NRE/FCNR account of the seller or remit it abroad, on production of necessary tax clearance certificate under Section 204 of the Income-tax Act 1961 and after deduction of income tax at source.
|General exemption for transfer of rupee securities by non-residents as gift|
|By its Notification No. FERA.151/93-RB dated 26th April 1993, Reserve Bank has also exempted transfer, by way of gift, of any share, bond or debenture of a company registered in India made by a non-resident Indian or person of Indian origin to a citizen of India or a person of Indian origin resident in India provided :-such share, bond or debenture was held by the transferor with the permission of the Reserve Bank,
such transfer is between relatives as defined in Section 6 of the Companies Act, 1956.
|Transfer of Rupee Securities to Non-residents as Gifts|
|Transfer of rupee shares/securities by residents to non-residents by way of gift requires prior approval of Reserve Bank. Applications for such transfers should be made to the concerned Office of Reserve Bank and should, inter alia, contain the following information:-(a) Name, address and permanent place of residence of both the transferor and the transferee.
(b) Relationship between the transfer or and the transferee.
(c) Reason for making the gift.
|Recording of Overseas Address by Indian Companies consequent on Resident Security Holder Becoming Non-resident|
|The Reserve Bank, by its Notification No. FERA 122/92-RB dated 17th September 1992, has granted general permission to companies in India to enter the overseas address in such cases provided the company obtains an undertaking from the holder of any security that he will not seek repatriation of any income, dividend or sale proceeds of the security. The dividend/interest earned on such securities or sale proceeds thereof should, therefore, be credited only to the Ordinary Non-resident Rupee (NRO) Account of the holder with a bank in India.|
|Conversion of Holdings of Securities into Joint Holdings Between Residents/Non-residents|
|The Reserve Bank, by its Notification No. FERA.145/93-RB dated 26th April 1993 has granted general permission to NRIs/resident Indian citizens for conversion of their holdings in securities issued or registered in India, into joint holdings by addition of the names of persons of Indian nationality or origin subject to the following conditions:-
(a) An NRI may convert his holding into joint holding by addition of name/s of person/s of Indian nationality/origin resident in India provided (i) transfer formalities as required under the Companies Act, 1956 are complied with and (ii) dividend income or sale proceeds of the securities accruing to the person resident in India are not repatriated outside India in the event of his becoming a non-resident sole (or joint named) holder of the security by succession, gift or otherwise.
(b) A resident Indian citizen may convert his holding into a joint holding by addition of name/s of an NRI/s provided (i) the resident holder continues to be the first holder; (ii) the joint holding is treated as non-resident holding in the books of the company; (iii) any dividend or income or sale proceeds becoming payable to NRIs are credited to his NRO account and (iv) the securities are not sold or disposed of otherwise than through a member of a recognized stock exchange in India, except with the permission of Reserve Bank.