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.
NRIs/OCBs intending to invest in the units of domestic
mutual funds on non-repatriation/repatriation basis under
the Portfolio Investment Scheme should apply to Reserve
Bank (Central Office) in the above manner. However, approvals
already granted for portfolio investment in shares/debentures
of Indian companies will also be valid for purchase of
units of domestic mutual funds.
Investment in Joint Names
Shares/debentures purchased by NRIs/OCBs should be held
and registered in the names of either the investor himself
or an authorized dealer or the latter's nominee/s.
Shares/debentures can be purchased by NRIs in joint names
with other NRIs with permission of Reserve Bank. In such
cases, if the investment is with repatriation benefits,
the first holder is to be treated as investor for the purpose
of 5% ceiling. The second or third holder will be eligible
to invest separately in the same company in his own name
as the first holder in joint holdings up to the limit of
5%. Reserve Bank will also permit investment jointly with
residents. However, if the resident joint holder inherits
the shares/debentures, he/she will not be entitled to repatriation
benefits.
Sale / Transfer of Shares / Bonds / Debentures
by NRIs to Residents
The Reserve Bank has granted general exemptions sale/transfer
of shares/bonds/ debentures through stock exchanges in
India subject to fulfillment of certain conditions.
Applications for sale / transfer of shares / bonds /debentures
held by NRIs/OCBs by private arrangement i.e. other than
through stock exchange should be made to Reserve Bank in
form TS 1 either by the transferor or the transferee, attaching
therewith the letter of consent of the other party irrespective
of whether the shares/bonds/ debentures are listed on a
stock exchange or not. While conveying its approval, Reserve
Bank will stipulate the conditions subject to which the
sale/transfer should be effected. In cases of sale/transfer
of shares/bonds/debentures acquired on repatriation basis,
repatriation of such proceeds of bulk holdings (i.e. shares/bonds/debentures
exceeding Rupees one lakh in face value or 5% of the company's
paid-up capital whichever is lower) will be permitted only
on production of a certificate from a Chartered Accountant
or the concerned company's secretary stating that shares
with necessary transfer forms duly signed have been received/lodged
with the company for registration in favour of the transferee.
General Exemption for Sale/Transfer of Shares/Bonds
The Reserve Bank by its Notification No. FERA.149/93-RB
dated 26th April 1993 has exempted the transfer of shares,
bonds or debentures of Indian companies made by NRIs through
stock exchange in India in case where :-
In such cases, authorized dealers may credit the sale
proceeds to the seller's NRO account after verifying
the contract notes issued by recognized stock exchange
brokers through whom the sale was effected. This exemption
is available in respect of shares, bonds or debentures
acquired by NRIs under the Portfolio Investment Scheme
as well as under any Direct Investment Scheme.
For sale/transfer of shares, bonds or debentures by OCBs
acquired on non repatriation basis through a stock exchange
in India, a consolidated application giving full particulars
may be submitted to the concerned office of Reserve Bank.
Permission will be granted by Reserve Bank for a specific
period subject to renewal.
General Exemption for Sale/Transfer of Shares/Bonds/Debentures
of Indian Companies through a Stock Exchange acquired
with repatriation benefits under the Portfolio Investment
Scheme.
The Reserve Bank by its Notification No.FERA.150/93-RB
dated 26th April 1993 has exempted transfer of shares,
bonds or debentures of Indian companies registered in India
previously acquired by NRIs/OCBs with repatriation benefits
under the Portfolio Investment Scheme to persons resident
in India or persons of Indian origin resident in India
or in favour of companies or bodies corporate, incorporated
under any law in force in India if the following conditions
are satisfied :-
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.
