Money Matters: All You Need To Know About NRI IPO Investment In India

Investing in Initial Public Offerings (IPOs) can be an exciting opportunity for Non-Resident Indians (NRIs) looking to diversify their investment portfolios and participate in India's growing economy. An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time through a new stock issuance. Non-resident Indians (NRIs) can participate in IPOs by using their NRE or NRO accounts. IPOs are a popular investment option among NRIs.

However, there are specific regulations and considerations that NRIs need to be aware of before diving into IPO investments in India.

Can NRIs Buy IPOs In India?

Yes, NRIs can invest in Indian IPOs, provided the issuing company allows them to subscribe. It is essential to check the Red Herring Prospectus (RHP) of the issuing company to determine if the Securities and Exchange Board of India (SEBI) has permitted IPO subscriptions for NRIs.

Investing In IPO In India

Investing in IPOs in India is easy and convenient if you have an NRI 3-in-1 account with a bank. Even if your demat account is with a broker who does not offer a 3-in-1 account, you can still apply for IPOs using the net banking facility of the bank where you hold your Non-PIS Savings Account.

Regulations and Eligibility

NRIs are allowed to invest in IPOs in India through the Portfolio Investment Scheme (PIS) route or the Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts. They need to have an NRI trading account and a demat account with a registered broker in India to invest in IPOs.

Documentation

NRIs need to submit certain documents such as a copy of their passport, overseas address proof, PAN card, and a Foreign Inward Remittance Certificate (FIRC) to invest in IPOs. Additionally, they must fulfil Know Your Customer (KYC) requirements as mandated by the Securities and Exchange Board of India (SEBI).

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Taxation

NRIs need to be aware of the tax implications of investing in IPOs in India. Investments by NRIs are subject to taxation in India. Regarding capital gains taxation, NRIs are treated the same as resident Indians. Taxes may vary based on the country of residence and any Double Taxation Avoidance Agreements (DTAAs) between India and the NRI's home country.

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Repatriation

NRIs can repatriate funds invested in Indian IPOs, along with any capital gains. If the investment was made through an NRE account, the full amount of the sale proceeds can be repatriated. For investments made using an NRO account, the proceeds can be repatriated up to USD 1 million per financial year (April–March), subject to the necessary documentation and tax compliance. This USD 1 million limit applies to capital income sources, according to ICICI Bank. For current income sources, there is no upper limit on the repatriation of funds, but it is subject to documentation and verification of the source of funds.

Note: NRIs are advised to seek professional advice from financial advisors before making any investment decisions who specialise in NRI investments and can provide valuable insights and guidance.

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