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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.
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.
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.
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.
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.
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.
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 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:-
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.
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