Before investing in India market any NRI needs to remember certain important points/restrictions. These restrictions are imposed by the Indian regulators to protect the Indian market from illegal money to be used in the stock market. But one good thing is NRIs need not get any approval from the regulators to invest in India unlike FIIs (foreign institutional investors) who has to get the approval from the capital market regulator. certain rules and regulation . Here I would like to share few important rules and regulation which has to be strictly followed by NRIs before they start investing into Indian market.
- NRIs has to go through the Know Your Customer (KYC) form and submit to the regulator through their brokerage firm/company. This is similar as for the normal resident investors.
- NRIs are not allowed to speculate the market. It means that, NRI can not do the day trading, all trade has to be done on delivery basis.
- An NRI can not buy more than 5% of the paid capital of the company.
- Also, total NRI investment on a company can not exceed more than 10% of the paid up capital of the company. This can be increased to 24% if the board agrees in the shareholders meeting (with the consent of the existing share holders).
- One of the big challenge for NRI is trading on Indian market time. To avoid the problem, NRI can provide power of attorney to resident Indian. But, power of attorney can not remit the money outside India.
- Taxation is similar for NRI and normal resident. Only difference is filling the tax returns. For NRI, if it is short term capital gain then tax is deducted at source. If it is short term capital loss, while income tax return filing, he/she can claim the refund.
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