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Q. Who is a Non-Resident Indian [NRI]? |
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Non- Resident Indian [NRI] means a ‘person resident outside India’ who is a citizen
of India or is a ‘person of Indian origin’. |
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Q. Who is a ‘person of Indian origin’?
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‘Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh
or Pakistan, if a. He at any time held Indian passport; or b. He or either of his
parents or any of his grandparents was a citizen of India by virtue of the Constitution
of India or the Citizenship Act, 1955; or c. The person is a spouse of an Indian
citizen or a person referred to in sub-clause [a] or [b]. Investment by PIO in Indian
Securities is treated the same as the investment by non-resident Indians and requires
same approvals and enjoys the same exemptions.
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Q. What are the investment opportunities available to NRIs? |
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There are two types of investment opportunities available to NRIs: a. Investment
with repatriation benefits called NRE A/c b. Investment under non-repatriation basis
called NRO A/c
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Q. What is Repatriation and Non-Repatriation? |
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Repatriation Means you can take back your capital, profits, and dividends in foreign
exchange, which you invested originally in foreign exchange. NRIs are permitted
to invest in shares/convertible debentures of Indian companies by Reserve Bank of
India, under Portfolio Investment Scheme (PIS). It means that, if you are a NRI
living in the USA, you can convert the sale proceeds of your investments in US dollars
and can transfer to your bank account in USA without any restrictions. Non-repatriation
Means you can get back the proceeds only in Indian rupees, irrespective of the currency
you used to invest in the same. Normal procedures for investing in shares/debentures
of a company and mutual fund units are applicable here .You cannot repatriate your
investment/capital in foreign exchange. The investment made can be in new issues
of companies or listed shares in Stock Exchanges. Investment on non-repatriation
basis can be made from NRE / FCNR / NRO accounts. It means that If your investment
is on Non-Repatriation Basis, you cannot convert your rupees in any foreign currency.
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Q. Being an NRI, what are the prerequisites to start investing in the Indian stock
market? |
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To trade on Indian Stock Exchanges in the capacity of an NRI, you would need to:
• Open a bank account with a RBI (Reserve Bank of India) approved designated bank
branch. • Take RBI approval for investment in the Indian Stock Market. (Portfolio
Investment Scheme) • Open a Demat Account with a Depository Participant. • Appoint
a broker to execute trades on your behalf on the Exchange.
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Q. What is a designated bank/branch? |
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RBI has authorized a few branches of each bank to conduct business under Portfolio
Investment Scheme (PIS) on behalf of NRIs/OCBs. These are the main branches of major
commercial banks located close to the stock exchanges. NRIs/OCBs will have to route
their applications through any of the designated bank branches that have authorization
from RBI. You can have as many NRI/NRO accounts in India but you should have only
one designated bank for sale/purchase of shares under the Direct/Portfolio Investment
Schemes. RBI guidelines permit NRI investors to designate only one bank authorized
by RBI to undertake purchase/sale of shares/debentures through the stock exchange
.The client has to give a declaration that he has not obtained RBI permission for
sale/purchase of shares under the Direct/Portfolio Investment Schemes through any
other bank.
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Q. What is a PIS account? Do I need it to start trading in the Indian Market? |
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PIS Stands for Portfolio Investment Scheme Letter. It’s a one time RBI Permission
for NRIs to do Trade in Indian Secondary Stock Market. Authorised bank issues this
letter. Yes, It is mandatory letter to start trading in the Indian stock market.
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Q. How do I apply for PIS? |
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The application is to be submitted to a designated branch of an authorized dealer
in India with the prescribed form. Reserve Bank has authorized a few branches of
each authorized dealer to conduct the business under Portfolio Investment Scheme
on behalf of NRIs. These branches are the main branches of major commercial banks.
NRIs will have to route their applications through any of the designated authorized
dealer branches that have authorization from Reserve Bank. You can open as many
NRE/NRO account but one can have only One PIS permission |
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Q. How does a Dealer Bank obtain permission from RBI (PIS) on the behalf of NRI? |
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You are requested to fill up any one of the prescribed forms available with Authorized
Dealer bank. This form is submitted to RBI, who further grants permission. |
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Q. If I already have a NRE/NRO account, then how do I apply for a PIS account? |
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If you have a NRE/NRO account with any of the above named authorized dealers, then
all you need to do is submit an application form for a PIS account. If you however
have a NRE/NRO account with a bank other than, you will need to approach any of
the authorized banks and provide them details of your account and then apply for
the PIS through them.
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Q. New Qs: Why RBI gives PIS permission to NRIs? |
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RBI needs to track each and every transaction of NRI from secondary market for the
Taxation purpose. All transactions of NRI routes through PIS Account maintain by
the authorized bank. RBI views these transactions regularly. |
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Q. Which Transactions are excluded from the ambit of PIS? |
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All transaction form primary market is excluded from ambit of PIS.Securities purchased
as a resident individual are not covered under this scheme. Derivative segment transactions
or Mutual fund unit purchases are not within the ambit of the PIS scheme. Shares
purchased through IPO's (Initial public offers) |
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Q. Does an NRI require RBI permission for dematerialization/ rematerialization of
securities? |
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No special permission is required. Holding securities in Demat only constitutes
change in form and does not need any special permission. However, only those physical
securities which already have the status as NR – Repatriable / NR- Non-Repatriable
can be dematerialized in the corresponding Depository Accounts |
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Q. Does NRI require any permission to subscribe to Rights issue of a company? |
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No |
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Q. Does NRI require any permission to receive bonus shares? |
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No |
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Q. Can I apply for IPO’s? If YES, then how? |
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Yes. The issuing company is required to issue shares to NRI on the basis of specific
or general permission from GoI/RBI. Therefore, individual NRI need not obtain any
permission. |
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Q. Do NRIs need to route the sale of securities acquired through IPO/Private Placement
through the designated bank branch for Portfolio Investment Scheme, if any? |
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No. The shares/convertible debentures acquired under IPO cannot be routed through
designated bank branch, as Portfolio Investment Scheme does not cover this. |
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Q. Why complying with requirement of KYC, I/We are advised to approach to submit
the documents duly verified by embassy or Notarized? |
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It is a Mandatory requirement from NSDL. In India it is compulsory to have “In Person
Verification” of Client at the time of Opening an Account, But in case of NRI if
they are not able to come to India than in that case they have to Notarized Each
and Every Document from Indian Embassy or have to do Notary from the country they
are residing. For the Purpose of “ In person Verification” and have to give validation
of a genuineness of a person. Therefore, clients have to comply with KYC Norms. |
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Q. Why do I have to give Bank details while opening an account? |
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Bank details are required as per KYC norms. If you provide a Bank Number than you
will receive a Dividend declared by company directly to your bank account through
ECS facility. |
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Q. Can I appoint a POA for Trading Account? |
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Yes, you can appoint a POA to operate your Trading Account. However, you have to
submit POA documents as per requirement. |
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Q. Why it is necessary to give Financial Details in Trading Account? |
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It is mandatory from exchange to give your financial Details in Trading Account
Form |
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Q. How will I know that my account is active? |
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You will receive Welcome letter, in which you will find all the details related
to your Trading Account. If you are having account in Internet Trading, than you
will receive an email from Internet Department regarding your trading account. |
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Q. How can I View my Trading Account Information? |
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Client can View Statement of Account, Bills, Profit & Loss, Demat Holding from our
Back office through their User Id and Password. |
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Q. How do I know whether my order is placed? |
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The Stock Exchanges assign a Unique Order Code Number to each transaction, which
is intimated by broker to his client and once the order is executed, this order
code number is printed on the contract note. At the end of day our representative
will email you and confirm your trade. |
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Q. What is a contract notes? |
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Contract note is a one type of Bill that shows your confirmed trades on particular
day for and on behalf of client. Contract note is issued in the prescribed format
of Rules and regulations of NSE and SEBI guidelines. Contact notes are helpful to
track your transaction and also for tax purpose. Clients can collect bills from
office on same day of transaction. The contract notes will be delivered to you by
post. |
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Q. Can I view my Contact note Online? |
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Yes, You can View your Bills Online through your user id and Password form our Back
office. You can also able to view your Previous bill and new bills from our back
office anytime and anywhere. You can verify your quantity, price, brokerage and
time through your Contact note.
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Q. What are the charges that can be levied on the investor by a stock broker/sub
broker in Contract note? |
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The trading member can charge: 1. Brokerage charged by member broker. 2. Penalties
arising on specific default on behalf of client (investor) 3. Service tax as stipulated.
– 12.36% charges will be applicable on brokerage, T.O. & O.C. 4. Securities Transaction
Tax (STT) as applicable.- 0.125% on market Rate for Delivery and 0.25% on speculation
from sell side. 5.Turn over Charges – NSE charges will be 0.05% and BSE charges
will be 0.01% 6.Stamp Duty Charges - 0.01% on Delivery and 0.02% on speculation
The brokerage, service tax and STT, Turn Over Charges, Stamp Duty charges are indicated
separately in the contract note
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Q. What is a Rolling Settlement? |
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In a Rolling Settlement trades executed during the day are settled based on the
net obligations for the day. Presently the trades pertaining to the rolling settlement
are settled on a T+2 day basis where T stands for the trade day. Hence, trades executed
on a Monday are typically settled on the following Wednesday (considering 2 working
days from the trade day). The funds and securities pay-in and payout are carried
out on T+2 day.
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Q. What is the pay-in day and pay- out day? |
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Pay in day is the day when the brokers shall make payment or delivery of securities
to the exchange. Pay out day is the day when the exchange makes payment or delivery
of securities to the broker. Settlement cycle is on T+2 rolling settlement basis
w.e.f. April 01, 2003. The exchanges have to ensure that the broker does the pay
out of funds and securities to the clients within 24 hours of the payout. The Exchanges
will have to issue press release immediately after pay out. |
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Q. What is a Short Delivery of Shares? |
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Short delivery refers to a situation where a client, who has sold certain shares
during a settlement cycle, fails to deliver the shares to the member either fully
or partly. It also happens in case of Purchasing a shares. If you have purchased
a shares and you will not receive fully or partly shares from exchange than it is
also called a Short delivery of purchased shares. |
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Q. When do I get delivery of my shares?
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As per T+2 Settlement, You will get delivery of your shares after T + 2 Days into
your Demat account. |
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Q. What is an Auction?
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When there is no specific company’s share in clients Demat account and by mistake
if he/ she sell the same than Auction happens. Auction Process: You sold the shares
and those shares has been bought buy some one in the market. As there are no shares
in your Demat Account exchange have to buy those shares from the market on behalf
of you and delivered the same to the buyer.
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Q. What is an Auction Charge? |
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The Exchange purchases the requisite quantity in the Auction Market and gives them
to the buying trading member. The shortages are met through auction process and
the difference in price indicated in contract note and member pays price received
through auction to the Exchange, which is then liable to be recovered from the client. |
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Q. NRI/PIO desires to make investments under different schemes, can he hold all
such securities in a single Demat account? |
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No. Securities received against investments under ‘Foreign Direct Investment scheme
(FDI)’, ‘Portfolio Investment scheme (PIS)’ and ‘Scheme for Investment’ on non –
repatriation basis have to be credited into separate Demat accounts. Investment
under PIS could be on repatriation or non – repatriation basis. Investment under
FDI scheme is on repatriation basis. |
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Q. In case a person who is resident in India becomes a non-resident, will he/she
be required to change the status of his/her holding from Resident to Non-Resident? |
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As per section 6(5) of FEMA, NRI can continue to hold the securities, which he/she
had purchased as a resident Indian, even after he/she has become a non-resident
Indian, on a non-repatriable basis.
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Q. In case a non-resident Indian becomes a resident in India; will he/she be required
to change the status of his/her holding from Non-Resident to Resident? |
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Yes. It is the responsibility of the NRI to inform the change of status to the designated
authorized dealer branch, through which the investor had made the investments in
Portfolio Investment Scheme and the DP with whom he/she has opened the Demat account.
Subsequently, a new Demat account in the resident status will have to be opened;
securities should be transferred from the NRI Demat account to resident account
and then close the NRI Demat account. |
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Q. Is there any limit for purchase of shares convertible debentures by NRIs under
the Portfolio Investment Scheme? |
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Yes. An NRI can purchase up to a maximum of 5% of the aggregate paid up capital
of the company (equity as well as preference capital) or the aggregate paid up value
of each series of convertible debentures as the case may be. For the purpose of
this ceiling, investment under the Portfolio Investment Scheme on repatriation as
well as non-repatriation basis will be clubbed together. There is an overall ceiling
of 10% of paid-up equity share capital of the company/paid-up value of each series
of convertible debentures for purchase by all NRIs/OCBs put together. The overall
ceiling can be raised to 30% if the company concerned passes a special resolution
to that effect in its general body meeting. Shares/convertible debentures acquired
through IPO/Private Placement are excluded for the purpose of above limits.
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Q. What happens if an NRI purchases a stock in excess of the prescribed limit? |
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An NRI will have to immediately off load such portion of the holding, which is in
excess of the prescribed limit. |
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Q. What are the permissions required for the transfer of securities by NRI/ PIO
through off-market trade? |
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The table given below summarizes the permissions required for the off-market transfer:
From To Transaction Permissions Required NRI NRI Sale or Gift General permission,
no specific permission to be taken* NRI Resident Indian Gift Prior approval of RBI
required. NRI Resident Indian Sale under private arrangement General permission
already available. Resident Indian NRI Gift Prior approval of RBI/FIPB should be
obtained. Resident Indian NRI Sale under private arrangement General permission
is already available provided the shares being transferred are not of the companies
engaged in financial service sectors, such transfer does not attract SEBI takeover
code and the activity of the company should be eligible for FDI. * Provided that
the person to whom the shares are being transferred has obtained prior permission
of Central Government to acquire the shares, if he has previous venture or tie up
in India through investment in shares or debentures or a technical collaboration
or a trade mark agreement or investment by whatever name called in the same field
or allied filed in which the Indian company whose shares are being transferred is
engaged.
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Q. What are the procedures to be followed with respect to investment in securities
in case person resident in India becomes NRI? |
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On becoming an NRI, a new depository account with appropriate NRI status is to be
opened and all the balances held in account with ‘Resident’ status should be transferred
to the account with NRI status & securities held under this account will be treated
on non-repatriable basis. Change of status should be informed by client to registrar
of Company mentioning a change of his/her status for each script he/she is holding
in resident account. |
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Q. Can NRIs receive shares in inheritance? |
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Yes, NRI can receive shares in inheritance. RBI permission is not required to be
obtained and the shares will be held on non-repatriable basis. |
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Q. Who monitors these ceilings on the holdings by NRIs? What is RBI’s Restrict List/Watch
List? |
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While the respective designated bank branch monitors limits of individual holdings
by NRIs, RBI monitors the holding limits by NRIs in aggregate. Once the aggregate
holding of NRIs builds up/ about to build up to the maximum prescribed ceiling,
RBI puts the concerned stock under the Restrict List/Watch List, which is published
by RBI from time to time. What happens if an NRI purchases a stock in excess of
the prescribed limit? An NRI will have to immediately off load such portion of the
holding, which is in excess of the prescribed limit. So if NRI gets profit from
it then that Profit will go into their NRO account.
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Q. What are the tax obligations applicable to NRIs? |
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Income on investments (capital gains) forming part of sales proceeds is subject
to Capital Gains tax. The rate of tax depends upon the period of holding. Currently
the tax rate applicable for short-term capital gains is 15% and there is no long-term
capital. |
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Q. How is amount of capital gain determined? |
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Capital gain is the calculated based on the difference between the net sale consideration
(sell price less brokerage) and the cost of acquisition (purchase price plus brokerage)
of the concerned holding. Value of holding is calculated on FIFO (First In First
Out) basis. |
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Q. What are the different taxes on NRI profits? |
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Short term Capital gain, Long term Capital gain & Speculative Gains Short term capital
gain: Any capital gain arising out of sell of shares/debentures held for a period
not more than 12 months from the date of its acquisition shall be a short term capital
gain. . Short Term Capital Gain (held for less than 12 months) from sale of shares
is taxable @ 15% + SC + EC (if STT is paid). Long-term capital gain: Any capital
gain arising out of sell of shares/debentures held for more than 12 months from
the date of its acquisition shall be a long term capital gain. Presently the long-term
capital gain is totally free of any Tax. The period of holding is defined as the
period from the date of purchase to the date of sale. Long Term Capital Gain (held
for more than 12 months) from Sale of Shares is exempt from Income Tax (if STT is
paid). For example if the sale transaction date is 01-01-2005, all those purchases,
which are affected up to 01-01-2004, are eligible as long term capital gain tax.
Purchase made on 02-01-2004 and thereafter will be subjected to short term capital
gain tax. Speculative Profits are not eligible for taxation under these special
provisions. Speculative profits are taxable at normal rates as applicable to any
resident individual. Speculative loss cannot be set off against any income including
speculative profits
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Q. How can NRIs, residing in any of these countries, take benefit of ‘Double Tax
Avoidance Treaty’? |
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To avail benefit of lower rates of tax as per double taxation avoidance treaty entered
in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities
of the country of his residence. These documents should be submitted to designated
bank branch at the time of opening the bank account or subsequently. New TDS rate
shall be applied only after the acceptance of the Residency Certificate by the designated
bank. |
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Q. What is "Tax Deduction at Source (TDS)" on capital gains arising out of sale
of holdings by NRIs? |
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As per Indian tax laws, all the capital gains arising out of sale transactions are
subject to tax. In the case of NRIs, the capital gain arising out of sale transaction
is subject to deduction of tax at source (TDS) i.e. at the time of crediting the
sale proceeds to the respective NRE account by the concerned bank branch. Accordingly,
the concerned bank shall determine the tax liability and tax will be deducted at
source. The concerned bank, which has deducted tax at source, shall issue a certificate
in this regard |
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Q. Is there any Gift tax on the Gift of shares? |
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There is no Gift Tax on Gift of Shares / Mutual Funds to any person. Gift of shares
/ Mutual Fund is also not considered as taxable income under the Income Tax Act.
Where as gift of money is considered as taxable income in the hands of donee in
excess of Rs. 50000 except gift is given to a close relative defined under the Act. |
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Q. What is a Demat Account? |
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In the advanced countries, depository systems and services have played a significant
role in not only facilitating smooth trading and settlement but also attracting
foreign investment in the capital market. The depository system evolved by the National
Securities Depositories Limited (NSDL) enables investors to overcome all problems
related to handling physical certificates. NSDL is an organization formed to provide
electronic depository facilities for securities traded. The securities of investors
are held in electronic form through the medium of Depository Participants. The depository
concept is similar to the Banking system with the exception that banks handle funds
whereas a depository handles securities of the investors. A depository can therefore
be conceived of as a "Bank" for securities. An investor wishing to utilize the services
offered by a depository has to open an account with the depository through the Depository
Participant. This is very similar to opening an account with any of the branches
of a bank in order to utilize the services of that bank.
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Q. If I already have a Demat account with some other DP, can I still open a Trading
Account with you? |
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As per SIHL rules and guidelines, all clients who open a Trading Account with Shah
Investors need to have a Demat Account with Shah Investors. A client can continue
to keep his/her Demat Account with another DP, but will have to open a new Demat
Account with Shah Investors. |
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Q. Can an NRI and person resident in India have a joint Demat account? |
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Yes. For the purpose of determining ownership of holding, the first holder is taken
into account. Hence, even though other joint holders may be persons resident in
India, the sale proceeds of such securities can be repatriated in case the first
holder is permitted to repatriate funds |
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Q. What is a Depository? Who is a Depository Participant?
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A depository holds the securities of investors in electronic form just like a bank
holds cash of its customers. As in a Bank, investors can deposit/withdraw and transfer
securities. The National Securities Depository Limited (NSDL) is the first depository
in India. The Securities and Exchange Board of India (SEBI) regulate the functions
of NSDL. The Depository Participants (DPs) are the link between the Shareholder,
the Company and NSDL. Banks, Financial Institutions, Custodians, Stock Brokers etc.
can become DPs subject to their meeting certain requirements prescribed by NSDL
and SEBI. NSDL publishes from time to time the list of DPs registered with them.
You can open your accounts with one DP, as you like. The procedure for opening an
account with the Depository Participant is similar to opening a Savings Bank Account
with the Bank. After opening the account, you can hold shares of any number of companies
in your account, provided all such companies have entered the depository system.
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Q. How do I check my transaction and Demat holding? |
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We can provide you your Demat A/c number and password and you have to open our website-www.shahinvestors.com
and click to Demat Holding Online than go to check your Online Demat Holding you
have to type your Demat A/c no and Password and able to view the Demat A/c holding
status and for check it out the Trading contract bills please click to back office
and go to individual login and type your trading code and password you can able
to check back dated trading bill in detail |
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Q. Can an NRI and person resident in India have a joint Demat account? |
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Yes. For the purpose of determining ownership of holding, the first holder is taken
into account. Hence, even though other joint holders may be persons resident in
India, the sale proceeds of such securities can be repatriated in case the first
holder is permitted to repatriate funds
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Q. How do I make payments and receive payments? |
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Whenever a client executes a Buy/Sell Trade in any of the exchanges, a bill for
the same is generated from our side (a copy of the bill is sent to the client by
email). This bill is then presented to the respective bank of the client by Shah
Investors. The bank verifies the clients account number and status and issues or
accepts the cheque for the amount of the bill.
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