Non-Resident Indians (NRIs) are allowed to participate in OFS, subject to compliance with the Foreign Exchange Management Act (FEMA) and SEBI regulations. Below are the key eligibility criteria and considerations: - Investment Through NRE or NRO Accounts: NRIs can invest in OFS using funds from either their NRE (non-resident external) or NRO (non-resident ordinary) accounts.
- The choice of account impacts the repatriability of funds.
- NRE account: Investment and proceeds are fully repatriable.
- NRO account: Proceeds are non-repatriable, meaning they must remain in India.
- Regulatory Compliance: Transactions must be carried out under the Portfolio Investment Scheme (PIS) framework. NRIs must adhere to sectoral caps and foreign investment limits set by SEBI. Custodian banks typically facilitate these transactions and ensure regulatory reporting.
RELATED FACTS: - Shares purchased using an NRE account allow both investment and sale proceeds to be freely repatriated.
- Shares purchased using an NRO account are non-repatriable, meaning the funds cannot be transferred abroad.
- KYC and Compliance Requirements: NRIs must have a Demat account linked to their NRE or NRO account. Tax compliance must be ensured, including TDS deductions on capital gains.
- Gains from OFS transactions are subject to capital gains tax, depending on the holding period:
- Short-Term Capital Gains (STCG): Taxed at applicable rates.
- Long-Term Capital Gains (LTCG): Eligible for concessional tax rates if applicable.
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