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NRI
INVESTMENT
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Shares, preference shares, convertible debentures to NRIs
As per the regulations/ guidelines issued by the Reserve Bank of India/ Government of India, investment can be made in unlisted shares of Indian companies. Only NRIs/PIOs are allowed to set up partnership/proprietorship concerns in India. Even for NRIs/PIOs, investment is allowed only on non-repatriation basis. There are no restrictions under FEMA for investment in Rights shares at a discount, provided the rights shares so issued are being offered at the same price to residents and non-residents.
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 Foreign Technical Collaboration
Payments for foreign technology collaboration by Indian companies are allowed under the automatic route subject to the following limits: Lump sum payments not exceeding $2 million. Royalty payable is being limited to 5 per cent for domestic sales and 8 per cent for exports, without any restriction on the duration of the royalty payments. The royalty limits are net of taxes and are calculated according to standard conditions. The royalty will be calculated on the basis of the net ex-factory sale price of the product, exclusive of excise duties, minus the cost of the standard bought-out components and the landed cost of imported components, irrespective of the source of procurement, including ocean freight, insurance, custom duties, etc. RBI has delegated the powers to ADs to make payment of royalty under such agreements. The requirement of registration of the agreement with the Regional Office of Reserve Bank of India has been done away with.
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 Repatriation of Earnings for NRI
A foreign national may open bank accounts in India and receive funds from abroad. A foreign national is allowed to repatriate 75 per cent of his net after-tax earnings after his employment is approved by the government and the exchange control authorities. If employment is for a short duration, such approvals are not necessary, provided the amount of remittance is within approved limits.
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 Taxation in India for NRIs
Since the onset of liberalisation in the country, tax structure of the country is also being rationalised, keeping in view the national priorities and practices followed in other countries. Foreign nationals working in India are generally taxed only on their Indian income. Income received from sources outside India is not taxable unless it is received in India. The Indian tax laws provide for exemption of tax on certain kinds of income earned for services rendered in India. Further, foreign nationals have the option of being taxed under the tax treaties that India may have signed with their country of residence. Remuneration for work done in India is taxable irrespective of the place of receipt, includes salaries and wages, pensions, fees, commissions, profits in lieu of or in addition to salary, advance salary and perquisites. Taxable payments include all allowances and tax equalisation payments unless specifically excluded. The stock options granted by the employer are taxable as capital gains at the time of sale of shares acquired due to exercise of options.
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 Portfolio Investments by FIIs
Investment by FIIs is regulated under SEBI (FII) Regulations, and FEMA Notification. FIIs include asset management companies; pension funds, mutual funds, and investment trusts as nominee companies, incorporated, institutional portfolio managers or their power of attorney holders, university funds, endowment foundations, charitable trusts and charitable societies. SEBI acts as the nodal point in the registration of FIIs. The RBI has granted general permission to SEBI registered FIIs to invest in India under the portfolio investment scheme (PIS).
Investment by individual FIIs cannot exceed 10% of paid up capital. Investment by foreign registered as sub accounts of FII cannot exceed 5% of paid up capital. All FIIs and their sub-accounts taken together cannot acquire more than 24% of the paid up capital of an Indian company. An Indian company can raise the 24% ceiling to the sectoral cap, statutory ceiling, as applicable, by passing a resolution by its board of directors followed by passing a special resolution to that effect by their general body.
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