1. An Indian citizen or a foreign citizen of Indian origin who stays abroad for employment/carrying on business or vocation or under circumstances indicating an intention for an uncertain duration of stay abroad is a NON-RESIDENT INDIAN (NRI). (Those who stay abroad on business visit, medical treatment, study or such other purposes, which do not indicate an intention to stay there for an indefinite period, will not be considered as NRIs.)

2. Students who go abroad for studies with an intention to stay there for an uncertain period and who stayed abroad for more than 180 days in the preceding financial year will be treated as Non Resident Indians.

Portfolio Investment Scheme

Under this scheme, NRIs can acquire shares/ debentures of Indian companies or units of domestic mutual funds through the stock exchange(s) in India through portfolio investment scheme.

NRIs and OCBs could also invest in unlisted companies through portfolio investment scheme. The application is to be submitted to Reserve Bank of India through a designated branch of a bank in India in one of the prescribed forms, i.e. NRC/ NRI/ RPC/ RPI.

Reserve Bank of India has authorized a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks located close to the stock exchange(s). These branches are called designated branches. NRIs will have to go through any of these designated bank branches. Each NRI has to select one branch for this purpose for investment on repatriation/ non-repatriation basis. It is advisable to maintain a bank account with the designated branch for administrative convenience.

Reserve Bank of India's approval for portfolio investment is valid for a period of five years from the date of issue. Making a request by means of a simple letter can renew this further.

There is an overall ceiling of 10 percent of equity share capital of the company/ paid-up value of each series of convertible debentures for purchase by NRIs/ OCBs. There is no such limit or restriction in respect of portfolio investment in non-convertible debentures and master shares of UTI. The overall ceiling can be raised to 30 percent if the company concerned passes a Board resolution and a special resolution in its general body meeting.

Accounts to be opened and Documents to be submitted


TOTAL ACCOUNTS TO BE OPENED.
1. BANK ACCOUNT WITH DESIGNATED BANK.
2. ACCOUNT WITH BROKER.
3. DEMAT ACCOUNT WITH DEPOSITORY.
TOTAL DOCUMENTS REQUIRED.
1. 5 PHOTOGRAPHS SIGNED ACROSS.
2. PASSPORT COPY OF CLIENTS WITH VALIDITY PAGE AND VISA PAGE.
3. PROOF OF RESIDENCE (DRIVERS LICENCE, ELECTRICITY BILLS, ETC)

Investment on repatriation basis NRIs can make portfolio investment in shares and debentures quoted in any stock exchange in India with full benefits of repatriation of capital invested and income earned on that capital. In the case of shares/ debentures/ bonds acquired by NRIs through stock exchanges under the Portfolio Investment Scheme, transfer can be done through stock exchanges provided the sale is arranged through the same designated branch through which they were purchased. In other cases, applications for necessary permission are required to be made to Reserve Bank of India on form TS4/ TS3.

Taxes As regards tax deduction at source/ remittance, seller can repatriate immediately the funds to the extent of the cost of acquisition of investment sold or the actual amount of sale proceeds realized, whichever is less, without production of a any objection / tax clearance certificate. In case of long-term capital gains, on the remaining amount capital gains tax would be charged and the balance could be remitted. In case of short-term capital gains the taxes are to be deducted at source by the buyer but NRIs are advised to pay it as advance tax.