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1.What are Foreign Exchange Assets and
Specified Assets?
Ans. As
per Section 115C of Indian Income Tax Act, 1961 Foreign
Exchange Asset means
any Specified asset which the assessee has
acquired or purchased with, or subscribed to in,
convertible Foreign exchange.
Specified Asset means
any of the following assets, namely:
- shares in an Indian company;
- debentures issued by an Indian company which
is not private company as defined in Companies
Act, 1956;
- deposits with an Indian company which is not
private company as defined in Companies Act,
1956;
- any security of the Central Government as
defined in clause (2) of section 2 of the
Public Debt Act, 1944;
- such other assets as the Central Government
may specify in this behalf by notification in
the Official Gazette.
Foreign Exchange for the purpose of the above
means foreign exchange, which is for time being
treated by Reserve Bank of India as convertible
foreign exchange for the purposes of the Foreign
Exchange Regulation Act, 1973(46 of 1973), and any
rules made thereunder. |
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2. Whether Right Shares and Bonus Shares form
part of Foreign Exchange Assets?
Ans. RBI
notification is silent on the issue of bonus
shares and right entitlements. In the case of
bonus shares, one can safely take the view that if
the bonus shares are allotted as a result of
shares for which payment is made by the way of
inward remittance in foreign currency or by debit
to NRE / FCNR account they would be treated as
foreign Exchange Assets.
Though nothing specific has been mentioned
regarding the right entitlement, one can apply the
analogy of bonus shares to right entitlements
also. If payment for the original shares has been
made by the way of inward remittance in foreign
currency or by debit to NRE/ FCNR Account they
would be treated as foreign exchange assets.
3. What are the various investment options
available to NRIs under FDI route?
Ans. Investment
options available to NRIs under FDI route can be
broadly classified under two heads namely:
I. Automatic Approval Route.
II. Prior Approval from Government Route.
Presently most of the activities are under
Automatic approval Route i.e 100% FDI. No approval
is required for FDI in case of activities under
Automatic Route only a notification to RBI is
required within 30 days.
Cases that are not covered under the Automatic
Route fall under Prior Approval from Government
Route. Approval from government is required in
such cases.
4. What is meant by investment through direct
subscription route?
Ans. As
per the regulations NRIs are allowed to invest up
to a certain percentage of the total paid up
capital of the company by directly subscribing to
the equity/convertible debentures of the company
either though a public offering made by the
company or through private placements on one to
one basis. Regulations provide for different
ceilings on such investments based on the industry
to which the company belongs and also the nature
of investments (repatriation/non-repatriation
basis.
5 . What is the Portfolio Investment Scheme?
Ans. Portfolio
Investment Scheme (PINS) is a scheme of the
Reserve Bank of India (RBI) defined in Schedule 3
of Foreign Exchange Management Act 2000 under
which the 'Non Resident Indians (NRIs)' and
'Person of Indian Origin (PIOs)' can purchase and
sell shares and convertible debentures of Indian
Companies on a recognized stock exchange in India
by routing all such purchase/sale transactions
through their account held with a Designated Bank
Branch .
6. What steps does an NRI need to take to
begin his or her investment in the Indian stock
Market?
Ans.
- An NRI should open a new bank account with
designated bank branch which is approved by
RBI (Reserve Bank of India) for this purpose.
- He should apply for a general approval for
investment in Indian Stock Market through his
designated bank branch.
- He should open a Demat Account with a
Depository Participant to hold his shares.
- He needs to register with a broker to
execute his buy/sell orders on the stock
exchange(s).
7. What is the distinction between NRE and NRO
accounts?
Ans. Funds
remitted from abroad or local funds, which can
otherwise be remitted abroad to the account
holder, can be credited to NRE Accounts. Local
funds, which do not qualify for remittance outside
India, are required to be credited to NRO
accounts.
8. What is the permission, which an NRI has to
obtain to invest under the Portfolio Investment
Scheme?
Ans. NRIs
are allowed to invest in Indian equity markets
under the Portfolio Investment Scheme. Under this
scheme NRIs are permitted to invest in
shares/debentures of Indian companies through
Stock Exchanges in India. These investments
require prior approval of RBI Designated branch of
authorized banks have been now empowered to issue
such permissions to NRIs.
9. Which are the broad schemes under which an
NRI can make investments in the Indian companies?
Ans. Broadly,
NRIs are allowed to invest under the Portfolio
Investment Scheme (buying through the secondary
market) and through the Direct Subscription route
(Investments though IPOs/offer for sale /Private
Placements).
10. Can an NRI have investments under
Portfolio Investment Scheme on repatriation as
well as non-repatriation basis?
Ans. Yes.
Investment can be made on repatriation as well as
non-repatriation basis. However, an NRI will have
to open NRE account as well as NRO account with
designated bank branch as the sale proceeds of
non-repatriation investment can only be credited
to NRO account.
11. Under what circumstances can investments
made under Portfolio Investment Scheme be
repatriated?
Ans. The
repatriation of the sale proceeds, net of taxes,
are allowed if the original purchase was made on
repatriation basis and such investments were made
out of funds from NRE/FCNR account or by means of
remittance from abroad.
12. Can NRI invest in shares/debentures of
Indian Cos., and other securities on a
non-repatriation basis?
Ans. Yes,
NRIs can invest without any limit on
non-repatriation basis in shares and convertible
debentures of Indian Cos., issued either by public
issue or private placement or right issues. NRI
can also purchase Govt. Securities (other than
bearer securities), treasury bills, units of
domestic mutual funds etc on non-repatriation
basis.
13. Can NRIs invest in Govt. Securities etc.
on repatriation basis?
Ans. Yes.
NRIs can invest on repatriation basis in:
- Govt. securities(other than bearer
securities), treasury bills or units of
domestic Mutual Funds
- Bonds issued by PSUs
- Shares in Public Sector Enterprise
disinvestments by Govt. of India
- Fund for such investment are to be received
through foreign inward remittance or to debit
of NRE/FCNR accounts.
The above securities can be sold through
stockbrokers on a recognized stock exchange or
tender units of mutual funds to the issuer for
repurchase or for payment of maturity proceeds or
tender Govt. securities/Treasury Bills to RBI for
payment of maturity proceeds. The sale proceeds
can be repatriated net of Indian Tax.
14. Can NRI/PIO invest in any immovable
property in India?
Ans. An
NRI does not require any permission to acquire any
immovable property in India or transfer any
property in India to a Resident citizen of India.
PIO's who are citizens of Pakistan, Bangladesh,
Sri Lanka, Afghanistan, China, Iran, Nepal or
Bhutan, require prior permission of RBI for
acquiring or transferring any immovable property
in India.
PIO has some restrictions. He does not require any
permission to
- Purchase a property out of forex.
- Acquire a property by way of gift from a ROI.
- Acquire a property by way of inheritance
from a Resident or a person Resident outside
India who had acquired such property in
accordance with the provisions of the foreign
exchange law in force at the time of
acquisition by him or FEMA.
- Sell any immovable property in India to a
Resident.
- Gift or sell agricultural property to a
Resident who is a citizen of India.
- Gift or sell a residential or commercial
property in India to a Resident or person
Resident outside India.
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