NRI – Non Resident India
A Non Resident Indian (NRI) as per India’s Foreign Exchange Management Act 1999 (FEMA), is an Indian citizen or Foreign National of Indian Origin resident outside India for purposes of employment. Carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period. An individual will also be considered NRI if his stay in India is less than 182 days during the preceding financial year.
Who is a PIO?
A person who is not a citizen of India is deemed to be of Indian origin if he is not a citizen of Pakistan or Bangladesh and if
- He at any time held an Indian passport; or
- He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955.
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?
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 non-repatriable basis.
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?
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
Can NRIs receive shares in inheritance?
Yes, as an NRI you can receive shares in inheritance. RBI permission is not required to be obtained and the shares will be held on non-repatriable basis.
How will the resident status shares be settled by an NRI?
The shares purchased through primary/secondary markets as a resident will be held on non- repatriation basis. Once the customer becomes an NRI, these shares can be credited to an NRO DEMAT Account. These shares can be sold in the secondary market without PIS permission. The sale proceeds can be credited to NRO SB Account after payment of applicable capital gain taxes
Does an NRI require PIS permission to purchase shares in the primary market (IPOs) on repatriable/non repatriable basis?
No, as an NRI you can purchase shares in the primary market on repatriable/non repatriable basis and application money can be paid through regular NRE SB/NRO SB Account or through inward remittance.
Can an NRI do an intraday trade?
No. NRIs cannot sell without taking delivery of the shares/convertible debentures purchased. Short selling is not permitted under PIS under NRE category
Can rights/bonus shares be issued to NRI?
FEMA provisions allow Indian companies to issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable.
Can NRI trade in futures and options segment of the Exchange?
Yes, NRIs are allowed to invest in futures and options segment of the exchange out of Rupee funds held in India on non repatriation basis (NRO), subject to the limits prescribed by SEBI.
What are the banned and caution scrip for NRI customers?
Once a company is placed in the Banned/Caution List, no NRI can purchase the shares of the company under the Portfolio Investment Scheme. List of caution/banned RBI script is available at
Can an NRI transfer shares purchased under PIS to others under private arrangement?
Shares purchased under PIS on stock exchange shall be sold on stock exchange only. Such Shares cannot be transferred by way of sale under private arrangement or by way of gift (except by NRIs to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India) to a person resident in India or outside India without prior approval of the Reserve Bank of India.
Can securities purchased under repatriable and non-repatriable category be held in a single Demat account?
No. An NRI must open separate Demat accounts for holding ‘repatriable’ and ‘non-repatriable’ securities.
How much tax is deducted on Short Term Capital Gains – Section 111A?
The bank is required to deduct tax from the capital gains on sale of shares at specified rates of 15% (plus Education Cess @ 2% as per Clause (11) and Secondary and Higher Secondary Education Cess as per Clause (12) 0.15% thereon) on short-term capital gains.
Do NRIs have exemption of Long Term Capital Gains?
No, Long term capital gains tax is applicable to NRI if the sale is through recognised stock exchange and STT is deducted on the same
What is “Tax Deduction at Source (TDS)” on capital gains arising out of sale of holdings by NRIs?
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.
Can an investment made under PIS be repatriated?
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.
How many Designated Banks can an NRI appoint?
NRI can appoint only one Designated Bank for the purpose of routing the transactions under PIS for NRE investments.
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?
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
Is it mandatory to route the secondary market transactions through PIS designated account only?
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.