Does an NRI require PIS permission to purchase shares in primary market (IPOs) on repatriable basis?
No, as an NRI you can purchase shares in primary market on repatriable basis and application money can be paid through regular NRE SB Account or through inward remittance.
Does an NRI require PIS permission to purchase shares in primary market (IPOs) on non - repatriable basis?
No, as an NRI you can purchase shares in primary market on non-repatriable basis and application money can be paid through regular NRE/ NRO SB Account or inward remittance.
Do NRIs require PIS permission to sell shares which were purchased in primary market (IPOs) on repatriable / non repatriable basis?
Do NRIs require PIS permission to sell shares which were allotted as rights / bonus basis, on the shares which were originally purchased in primary market (IPOs) on repatriable/ non repatriable basis?
Can NRIs receive shares in inheritance?
Yes, as an NRI you can receive shares in inheritance. RBI permission is not required to be obtained and the shares will be held on non-repatriable basis.
What is the status of shares purchased in primary market/secondary market as a resident Indian, once the customer becomes a Non-Resident?
The shares purchased through primary / secondary market as a resident will be held on non-repatriation basis. Once the customer becomes an NRI, these shares can be credited to NRO DEMAT Account. These shares can be sold in secondary market without PIS permission. The sale proceeds can be credited to NRO SB Account after payment of capital gain taxes.
How is the capital gain computation done on sale of ESOP?
In case of Sale of ESOP shares, if the perquisite tax is not paid in INDIA then Fair Market Value (FMV) will not be considered as cost of acquisition for computation of capital gain instead Exercise price will be considered as cost of acquisition.
How is the capital gain tax effect would be given if the sales proceeds are credited to the PIS account in current Financial year for the sale trade date of last financial year?
In case sale proceeds is credited in next financial year for the trade executed in previous financial year, the tax will be computed as per previous financial year's tax rate and will be remitted to Tax authority with delayed interest rate. The penalized interest will be debited from customer's account separately.
E.g.:- Trade date of sale transaction- 15/03/2019 Sales proceeds getting credited to bank account – 02/05/2019 The Bank will deduct TDS on capital gain on 02/05/2019 and late payment interest @ 1% p.m will be applicable on the TDS amount for a period of 3 months, Bank will issue TDS certificate for the Financial year - 2018-2019."
What is the Bank's policy for allowing capital losses set off benefits against capital gains in subsequent financial year?
The Bank will allow set off of capital losses as per the provision of the Income Tax Act, 1961 against capital gains earned on securities within the same financial year in which capital losses are incurred. Any remaining capital losses at the year end will not be allowed to carry forward to the subsequent years and consequently set off the same shall not be allowed against the capital gains earned in the subsequent financial years.
What reporting should be done in case of IPO / RIGHT issue allotment on repatriation or Non repatriation basis by NRI PIS customer?
In case of in IPO/RIGHT issue allotted to NRIs , NRI customer to submit details of these shares with number of shares allotted, cost of shares , date of purchase by forwarding information to respective PIS officer in designated format before selling shares through any broker. This is applicable to customer who are holding NRE PIS /NRO special securities account with HDFC Bank. It is responsibility of the NRI customers to report IPO/Right issue allotted shares first, before reporting any fresh purchase done in secondary market for the same scrip. If the above process is not followed, it might lead to wrong computation of Capital gain tax as per FIFO basis.
What is the Bank’s policy on taxation on announcement of capital reduction scheme on any shares held by the NRI PIS Customers?
The Bank shall not provide any setoff of losses benefit on the announcement of Capital reduction Scheme. The Bank will provide the benefit of reduction in value at the time of crediting the sell proceeds of respective shares (in the computation of capital gain tax). Claiming such reduction in value as loss by the customer while filing their return of income shall lead to claiming of double benefit on a single transaction by the customer, which leads to adverse Tax consequences on the PIS customer. Hence, the NRI PIS customer can not claim any loss on reduction of value of shares on announcement of capital reduction scheme while filing their return of income.
Can NRIs get the benefit of DTAA (Double Tax Avoidance Agreement) for Capital Gain Tax on transactions done through PIS account ?
"Yes, Non resident individuals being resident of a country with whom India has signed Double tax avoidance agreement (DTAA) may claim benefit under DTAA on capital gain income earned in India if;- such capital gain income is taxable in both the countries and the capital gain article of the said agreement provides for relief from capital gain tax in India.(exemption/lower tax rate to be paid in India). PIS customer may contact his Relationship manager / branch manager where he holds the NRE/ NRO Bank account for submission of documents of DTAA . Branch will submit the same to PIS OPS dept. The benefit of DTAA will continue till validity of Tax Residency certificate ( TRC) It is the responsibility of NRI Customer to submit the said documents every year at the beginning of the Financial year or calendar year with valid Tax residency certificate.
Is NRI PIS customer need to report the call money paid for partly paid up shares acquired?
"Yes" NRI customer needs to report all partly paid up shares acquired in primary or secondary market which are list on stock market. Customer also needs to Intimate bank if further call money is paid/ not paid for updating cost of acquisition in Bank records.
Is the PIS Permission required to be taken for investment on stock market floor through NRO account on Non Repatriation basis?
“No” PIS permission is not required to for investment in stock market floor on non repatriation basis. In order to credit sale proceeds after payment of taxes in NRO account, for computing the capital gain tax for each sell trade under NRO category, bank will need the details of acquisition of such shares. Hence NRI customer needs to open the NRO special securities account with HDFC Bank to avail the facility of capital gain computation on each NRO sell transaction.
Can a NRI customer use the existing PIS account opened for HDFC Securities Ltd to deal with other stockbrokers through HDFC Bank PIS permission.
No, the existing PIS permission is issued only to deal with HDFC securities Ltd hence if any customer want to deal in shares with other stock broker simultaneously then he/ she needs to take the extension of PIS permission and needs to open the additional PIS SB account to deal with other broker
What is the surcharge rate considered for computing long term capital gain tax on PIS sale transactions ?
It would be difficult for the Bank to monitor all the individual client’s income/estimated income of client exceeds Rs. 1 crore or not. Hence Bank follows a practice of applying the highest rate of surcharge i.e. 15% alongwith applicable capital gain tax rate on TDS deducted on capital gains on each sale txn on deduction of tax.
Do NRIs need to link PAN and Aadhaar?
As per Section 139 AA of the Income Tax Act 1961, every individual including Non-Resident Indians (holding both PAN & Aadhaar number) were required to link their PAN with their Aadhaar by 30th June 2023. If you do not have an Aadhaar and your residential status is Non-Resident Indian, then please update your Residential Status as NRI on Income Tax Portal.
What are the implications on capital gain tax on sale of securities if PAN is not linked with Aadhaar by 30th June’23?
If your PAN is not linked with Aadhaar, the PAN will become inoperative and TDS deduction on income earned would be at Actual rate or 20% whichever is higher. Hence, Long-term and Short-term capital gain tax will be deducted at 20 % on sale of securities.