How can NRI’s invest in Indian stock market and Taxation for the same

How NRI’s can invest in Indian stock market and Taxation for the same

India being one of the fastest growing economies of the world, more and more people are becoming interested in investing in Indian stock market. Indian laws allow foreign individuals to invest in the domestic market.

What NRI’s can buy in Indian Stock Market?

• Dated Government securities (other than bearer securities) or treasury bills.
• Units of domestic mutual funds.
• Bonds issued by a public sector undertaking (PSU) in India.
• Shares in Public Sector Enterprises being disinvested by the Government of India.
• Exchange Traded Funds (ETFs)

How to start investing in India?

All investments made by NRIs have to be in local currency, that is, the rupee. Mutual funds in India are not allowed to accept investments in foreign currency. For investing in Indian mutual funds, therefore, an NRI needs to open one of the three bank accounts-non-resident external rupee (NRE) account, non-resident ordinary rupee (NRO) account.

An NRE account is a rupee account from which money can be sent back to the country of your residence. The account can be opened with money from abroad or local funds. An NRO account is a non-repatriable rupee account.

The relationship managers of the bank will help the NRI’s to open NRE/NRO account, to avail a PIS approval and to open a demat and trading account.

Taxation for NRI investment

• Financial year ending in India: March 31^st
• Last date for filing IT returns: July 31^st
• Long term capital gains: Zero or exempt. Any gain made on stocks held for more than 1 year is exempt from any taxes.
• Short term capital gains: 15% on any gain made on stocks sold before 1 year.
• Trading income from F&O: Considered as business income, and taxed according to the Income Tax (IT) slabs in India.

Trading in derivatives can only be done through NRO account. An approval from a clearing member to clear trades for the allotment of Custodial Participant (CP) code. The NRI client shall have only one clearing member at any given point of time.

Important points for NRIs Investing in Indian Stock Market

• NRIs need to go through the Reserve Bank of India guidelines to start investments.
• NRI wants to invest in shares of any particular Company, there is a limit of 5% paid up value of shares.
• The investments that are made by NRIs in Indian Stock Market need to be made in Indian currency.
• An NRI cannot hold more than 10% of the total holdings in an Indian listed company (20%, in case of public banks).
• NRIs cannot trade shares in India on a non-delivery basis, which means they cannot do day trading or short-selling. If they buy a stock today, they can sell it only after two days.
• An NRI cannot hold more than one PIS account, each for repatriable and non-repatriable shares.
• A Power of Attorney to an individual in India needs to be assigned to manage the assets. Power of Attorney can be assigned generally (all powers with one individual) or specific to particular asset class (property, bank accounts etc.).
• The tax liabilities arising out of the stock investments should not be ignored. Although, tax liabilities of an NRI investing in India are the same as that of a resident investor, tax is deducted at source in case of the former. This leads to a question that, ‘Are NRIs subjected to double taxation once in India and again in the country of their residence?’ Well, it depends on the country of residence. If the Indian government has an avoidance of double taxation treaty with that country, NRI will be saved from double taxation.

General documents required to open a share investment account:

• Self attested Copy of Passport & Visa
• Self attested Copy of Indian Address proof & Overseas Address proof.
• Self attested Copy of Pan Card
• Passport size photos.
• Bank statement for 3 months
• A cancelled cheque and a cheque for initial investment.

The banks and share brokers are increasingly interested in bringing back money of the NRI’s and make investment in Indian Stock Market, mainly because of the huge investment potential of the NRI’s and opportunity of making revenue from these investments.

The Road Ahead For Volkswagen..Will They Sell Some of Their Brands to Survive?

I hope, all are aware of what had happened with Volkswagen group. With this blog, I am trying to point out some ways through which the group would be able to survive years of massively expensive fines and litigation’s. In fact, what I was able to learn from some sources is that betting has already started in this topic and some are offering odds of 20 to 1 that VW Group will not be trading in stock exchanges by the end of 2016. I don’t believe that the situation is in such a bad state, but from the nature of VW’s liabilities which are like open ended could potentially mean that the company’s share price could remain depressed for several years.

What I feel is that, VW will have to shell out more from its kitty for the proposed recall work and for any potential compensation claims that arise from several government agencies and vehicle owners. They will find it difficult to raise fresh cash as the company’s borrowing costs are expected to rise on the back of these continuing litigations. So, going forward, it will have to look at ways like trimming its huge R&D expenses and potentially laying off some workers in order to control its financials.

So, on a longer term basis, what are the options available in front of the group?

In situations like these, what we have seen so far (historically) is that companies would be at risk of being taken over by hostile players. But VW group is a bit different as the majority of the company is owned by Porsche SE Holding Company and German state of Lower Saxony and hence there is less possibility that they will sell. Also, what I feel is that a company like VW wont perish because of the huge fine that they have to pay, why because they own strong brands like Audi, Porsche, Lamborgini, Bentley, Skoda, Bugatti to name a few. But one thing is sure that the brand value has definitely taken a beating and I don’t think people will trust this brand anymore.

So,if the situation worsens financially I think they can still survive by hiving off some of its group companies. This could help them to raise cash and help the share price. Almost all of their group companies are making good profit and generates better margin than Volkswagen. Its commercial truck division which has brands like MAN and SCANIA are also making good profit. I don’t think they will consider selling its luxuary car brands due to their superior quality and respect that they have in the market. So,if the situation worsens they might put the truck division for sale to pay its long term liabilities. I think, companies like Mahindra & Mahindra, TATA Motors and Ashok Leyland which are always on the lookout for potential opportunities could try their luck in acquiring these brands.

I am not saying that they will sell these brands, but if the VW brand is hit financially very hard,as BP during times of Oil Spill in the Gulf, then selling some of its group companies might be unavoidable. Its like selling some of the family silver to survive.

Is this some sort of corporate cheating?


Yes, it could be due to some corporate cheating where some of its competitors might have cheated. The entire focus could shift away from VW if they are also caught in the same act and then the scandal could engulf the entire industry.