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Who is an NRI?
A person who has left the country in search of job is also referred to as an NRI. An NRI is a person who travels abroad for work-related reasons.
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Types of NRI bank accounts
NRO Bank Account: NRIs seeking to manage income earned within India can opt for an NRO savings bank account. Since NRIs maintain Indian citizenship, any income received in Indian currency, such as rent, pension, business income, or dividends, should be deposited into an NRO account. Unlike NRE accounts, the balance and interest earned in NRO accounts are not entirely repatriable. NRIs can repatriate a maximum of USD 1 million per financial year from their NRO account.
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Portfolio Investment Scheme
Certain banks authorized by the RBI issue the PIS letter to NRIs, and all transactions conducted through the NRI PIS account are reported to the RBI.
However, NRIs also have the flexibility to invest in India using a non-PIS NRO trading account, making PIS optional, and allowing trading without Portfolio Management Services (PMS).
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NRI Trading Account
Through an NRI trading account, NRIs can engage in trading activities such as buying and selling stocks listed on the BSE and NSE, trading in Futures and Options (F&O) contracts, or investing in mutual funds. NRIs have the option to link either an NRE or NRO bank account to their trading account, enabling them to invest on either a repatriation or non-repatriation basis.
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NRI Demat Account
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NRI trading rules
2. NRIs are allowed to invest up to 5% of the paid-up value of each series of debentures of listed Indian companies on repatriation or non-repatriation basis.
3. Investments by all NRIs clubbed together cannot exceed 10% of paid-up capital of the Indian listed company or paid-up value of each series of debentures of the company.
4. The above aggregate ceiling can be raised to 24% if the Indian company passes a special resolution to that effect.
5. To trade in the derivatives market, NRIs need a custodial participant code. NRI investments should be on a non-repatriation basis and Rupee funds held in India should be used.
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NRI trading restrictions
2. Prohibited Sectors: NRIs are prohibited from investing in specific sectors, including lottery business. gambling and betting, including casinos, Nidhi companies, real estate business or construction of farmhouses.
3. They also cannot trade in Transferable Development Rights (TDRs).
4. They cannot invest in companies that manufacture cigars, cheroots, cigarillos, and cigarettes, whether of tobacco or tobacco substitutes.
5. They cannot invest in activities/sectors not open to private sector investment, such as atomic energy and railway operations. Also banned for NRIs are firms who have foreign technology collaboration, including licensing for franchise, trademark, brand name, and management contracts.
6. NRIs must trade on a delivery basis and are not allowed to engage in intra-day trading.
7. NRIs are prohibited from trading in commodity derivatives.
8. NRIs need to obtain RBI approval for trading in scrips under the caution list. The caution list comprises stocks where NRI investments are nearing the threshold holding limit. NRIs are not allowed to trade in stocks listed under the ban list. The ban list comprises stocks where NRI investments have reached the threshold limit set by the RBI.
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Investments allowed for NRIs on Repatriation Basis
2. Treasury bills (T-bills)
3. Units of domestic mutual funds;
4. Bonds issued by a Public Sector Undertaking (PSU) in India
5. Shares in Public Sector Enterprises being disinvested (partial dilution) by the Central Government
6. Bonds/ units issued by Infrastructure Debt Funds
7. Listed non-convertible/ redeemable preference shares or debentures
8. Perpetual debt instruments (with an overall ceiling of 24%) and Debt capital instruments issued by banks in India to augment their capital
9. Initial Public offerings
10. National Pension System
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Investments allowed for NRIs on Non-Repatriation Basis
2. Treasury bills (T-bills)
3. Units of domestic mutual funds
4. Units of Money Market Mutual Funds
5. Listed non-convertible/ redeemable preference shares or debentures
6. Initial Public offerings
7. National Pension System
8. Chit funds
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