Basic Guidelines for NRIs Investing in Shares

• The Non Resident Indian who wishes to invest in Indian stock market should hold an NRO or NRE account with any of the designated branches of banks who are appointed as authorized dealers to offer portfolio investment schemes. All the transactions towards purchase of stock are made through these authorized banks.
• The documents to open such trading accounts are to be produced by the Non Resident Indian himself and not through power of attorney.
• DEMAT accounts are mandatory today to hold stocks in Indian stock market. An NRI will have to approach a registered DP to open this account.
• Based on the nature of dividends, repatriable or non-repatriable, NRIs should have unique demat accounts. 

• Passport as proof of identity
• PAN card
• Proof of address of current residence
• Permission from designated bank to invest in PIS
• Other documents related to proof of bank accounts and DP accounts
• KYC is mandatory and this document has to be attested from Indian embassy/Consulate General in the country where client resides, Notary Public, Court Magistrate or Judge or local banker. 

• Non Resident Indians can invest in Indian shares on repatriation and non repatriation basis. If the NRI is willing to invest in Indian stock based on repatriation basis he has to invest through PIS. Investment in stock market by NRI on non-repatriation basis can be made through specified channels of investment.
• Non Resident Indians can invest in shares of all Indian companies listed by RBI except for specific sectors that require permission from Foreign Investment Promotion Board.
• The Non Resident Indians are allowed only delivery based trading. They don’t have a facility of intraday trading and short selling in the cash market.
• The share holding of all NRIs in a particular company is limited to 10% of its total paid up share capital in general and this limit can go up to 24% by passing a special resolution and necessary permission from RBI.
• The authorized dealers have to report the share holding pattern of NRI/FII to the RBI on a daily basis. When the total holdings reach 2% below the overall limit specified, the RBI issues a notice of caution to the authorized dealers whereby, no further purchases the sector can be made without prior approval of RBI. Once the overall limit is reached, RBI puts a ban on that stock and no further purchases can be made by NRIs.
• Payments towards purchase of shares can be made through regular banking channels or through their NRE accounts. If the shares are of non repatriation type then the payments can be made through NRI’s funds in India in NRO account.
• The shares acquired by Non Resident Indians other than those under PIS can be sold in Indian stock exchange through brokers. The NRI should note that such sale proceeds are regulated by FEMA and timely reports of such sale proceeds is to be updated at concerned department (eg : form FCTRS).
• The concerned DP and authorized dealer has to be informed in case of change of status of any individual from resident to NRI or vice versa so that necessary changes can be made in the account type.