NRI's IPO investment in India

Posted on 1st Oct 2018
by Team TopShareBrokers

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Investing in IPOs by NRIs is permissible without any approval from RBI. First thing NRI need to do is open the bank accounts, trading account and Demat Account. The easiest way for you as an NRI will be to invest online.

  1. First Step:

    let’s talk about the Bank Accounts.

    • NRO Saving Bank Account:

      Now if you are an NRI and like to do trading and investment at par with resident Indians then you have to follow the non-repatriation way which means you need to open NRO Bank Account. NRO stands for Ordinary Non Resident. NRO Bank Account is Indian Rupee Account and called NRO Bank Account. NRI investing through NRO Account are not required PIS Account. Any existing NRO PIS Account will be converted to NRO Saving Bank Account post-amendment in FEMA in Feb 2016. Sale proceeds of non-repatriable investment can be credited only to NRO accounts.

    • NRE (PIS) Account

      Another way by which NRIs can invest in the Indian stock market on repatriation basis is through PIS Portfolio Investment Scheme. Reserve bank of India has authorized few branches of each authorized dealer bank to conduct the business under portfolio investment scheme on behalf of NRIs. NRI can select only one authorized dealer bank for the purpose of investments under portfolio investment scheme and route the transactions through the branch designated by the authorized dealer bank. The account you have to open is called NRO (PIS) Account.

      This Bank account will then be linked with the NRE (PIS) trading Account which you open with the broker that offers NRI services.

  2. Second Step

    Look for the broker that offers NRI Services including IPO facility. You will need a NRI Trading and Demat Account to sell and take delivery of IPO shares that you receive. 3-in-1 brokers will be a good choice in such case since bank account and the trading account can be linked seamlessly. If you choose a broker that offers only NRI trading and demat account, then they will map your external bank account with your trading and demat account with them. You can open either NRE Trading Account or NRO Trading Account or both with your broker.

  3. Third Step:

    Now the third and important step. If you are an NRI want to apply in IPOs on repatriation basis, then you need to fill Non-Resident IPO Application Form. This will authorize your bank to block the bid amount from your NRE Bank Account.

    If you an NRI bidder want to apply in IPOs on non-repatriation basis, then it will be processed similarly to Indian bidders. You will need to fill Resident IPO Application Form and authorize your Bank to block bidding amount from your NRO Account.

Do I need an NRI Trading and Demat Account for applying in IPOs?

    Yes, You need NRI Trading and Demat account to invest in IPOs, however applying in IPOs is now a direct process through ASBA ( application supported by blocked amount). You can apply online in IPOs through your net banking account. You don’t have to go through a broker. However, to sell the IPO shares in your holdings after IPO allotment process, you will need a trading account. You will also need an NRI Demat Account to hold the shares in electronic form allocated to you.

How would I know if my bank is an SCSB ( Self Certified Syndicate Bank) supporting ASBA Applications for NRI IPO Investment?

    Go to the NSE, BSE or SEBI website and check if your bank is the SCSB participating in ASBA process for IPO Applications. All major banks of India are part of it. You can also check here.

Which Brokers in India offers NRI services including IPO facility?

    Most of the 3-in-1 brokers like ICICI Direct, HDFC Securities, Axis Direct, SBI Securities, Kotak Securities offer NRI Services. With them, you get all three accounts ( Bank + Trading + Demat Account) under one roof for easy and hassle-free IPO investment. Their charges will be high.

    2-in-1 traditional brokers like Sharekhan, IIFL, Motilal Oswal, Ventura, Angel Broking, Reliance Securities, Edelweiss offers NRI Trading and Demat Account and they map your NRE or NRO bank account with it.

    Discount Brokers like Prostocks, Zerodha, Finvasia, 5 Paisa, TradeSmartOnline offers NRI Trading and Demat Account at very low charges.

    Please go through this article to know more about Brokers offering NRI Services.

How can I convert a Resident Bank Account to NRI Account?

    As an NRI to know the answers to all these questions is very important and critical for you. First thing to know here is that as per FEMA (Foreign Exchange Management Act, 1999) regulations, it is illegal for an NRI (stayed outside India for more than 182 days in preceding financial year) to hold resident savings account in India.

    Most of the NRIs are not aware of any such laws and continue to send money to their saving accounts in India. Technically it is not wrong but it is advisable to convert your saving account into NRO or NRE account or open a new NRO/NRE Account to save yourself from any issues at later point of time.

    Do remember that if you continue the resident savings account and it comes to the notice you will be penalized for the same. Once you become an NRI, you can no longer keep a resident bank account and are required by law to convert your resident savings account to NRO or NRE.

    Now, changing your Indian saving account into NRO Account only requires abroad address proof which you can provide through your visa status, or employment letter, utility bills etc. In such case your account no. and other details will remain the same only your current address will be updated.

    This question also answer for following frequently asked question.

    I have recently moved out of India, can I still continue my Indian Saving Bank Account for Investment purpose?

    or

    Can I send money to my Saving Bank Account in India even after moving abroad?

    or

    Is there any penalty for not changing Resident Saving Account to NRO Account after getting NRI status?

Which account should I open NRE or NRO?

    NRE and NRO account both can be used for inward remittance which means you can send money in any of these two accounts that you earn overseas.

    NRE Account (Non-Resident (External) Account) can be maintained in the form of current, savings, recurring or fixed deposit account. NRE Account can be credited by transfers from other NRE/FCNR accounts, Interest earn on the funds held in the account, interest on investment, maturity proceeds of investments (if such investments were made from this account or through inward remittance). Money in NRE Account can be remitted back to the country where you live.

    NRO Account (Non-Resident Ordinary Rupee Account) can be maintained in the form of current, savings, recurring or fixed deposit account. NRO accounts cannot be credited by other NRE/ FCNR Account. Permissible credit for NRO Account is legitimate dues in India and transfers from other NRO accounts. With an NRO account, you can remit only current income in India net of applicable taxes. You can repatriate balances up to an equivalent of 1 Million USD per financial year from India to your resident country abroad, given you fulfill the required formalities. Like, you need to get a certification from a CA for taxes paid on your income in India.

    So if you want to repatriate all your money without any limit then you should go for NRE Account. NRO Account is not repatriable except for all current income. NRO account is to deposit your INR income in India. If you have any income in India like from rental property, the stock market, dividend or any other investments, you need an NRO account. Otherwise, NRE Account is a good option to repatriate the money back to the country where you live without any restrictions if you need.

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