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Direct Equity

Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India.

The ceiling for overall investment for FIIs is 24% of the paid up capital of the Indian company and 10% for NRIs/PIOs. The limit is 20% of the paid up capital in the case of public sector banks, including the State Bank of India.

The ceiling of 24% for FII investment can be raised up to sectoral cap/statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect. And the ceiling of 10% for NRIs/PIOs can be raised to 24% subject to the approval of the general body of the company passing a resolution to that effect. The ceiling for FIIs is independent of the ceiling of 10/24 per cent for NRIs/PIOs.

The investment made on repatriation basis by any single NRI/PIO in the equity shares and convertible debentures not exceeding five per cent of the paid up equity capital of the company or five per cent of the total paid up value of each series of convertible debentures issued by the company.

The Reserve Bank of India monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. Whenever any of the above categories reaches 2% lower than actual ceiling, RBI cautions all designated bank branches so as not to purchase any more equity shares of the respective company on behalf of FIIs/NRIs/PIOs without prior approval of the Reserve Bank and once it comes to the overall ceiling it will come under the ban list so none of the designated bank branches can purchase on behalf of FIIs/NRIs/PIOs.

Mutual Funds

No special approval is required to invest in Mutual Funds. NRIs/FIIs have been granted a general permission by RBI [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] for investing in/redeeming units of the schemes subject to conditions set out in the aforesaid regulations.

To invest on a repatriable basis, NRI investor must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions :

The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.

The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.

Tax Treatment:-

• Dividend from Mutual fund specified under section 10 (23D) is exempt from income tax and there is no TDS since Mutual Funds pay Dividend Distribution Tax
• Long term capital gain is exempt from tax where STT is paid
• Short term capital gain is chargeable to tax
• Indexation benefit available to NRIs
• Units issued to investors (including NRIs) etc. will not be treated as assets under Wealth-Tax Act, 1957.

Real Estate

• NRI’s can buy real estate property in India without any approval
• NRIs cannot buy agricultural land or a farm house
• The payment for acquiring property should come only from NRO/NRE/FCNR account, payment cannot be made in foreign currency.
• NRI’s generally invest in real estate to take advantage of capital appreciation. They invest in project-launch stage and within 3 years they book profits.
• NRI’s cannot take away profit to their residing country. If payment for property is made using FCNR account, then money equal to paid amount from FCNR can be repatriated.
• If payment is made through NRE account then case is different. Suppose an NRI had $70,000 in NRE account. The NRI paid $60,000 (in equivalent Indian Rupee) to buy a real estate property. After that he maintained $10,000 in NRE account till sale of property. He sold property after 3 years for $1000,000. After the sale, NRI can repatriate only $10,000 (balance) + $60,000 (paid earlier).
• NRI can repatriate full amount subjected to limit of $1 million for transaction done through NRO account
• Foreign national of non Indian origin resident outside India shall not acquire/transfer any immovable property in India other than on lease not exceeding five years, without prior approval of Reserve Bank of India.
• No payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by foreign currency notes
• NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India
• NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India
• NRI may transfer any immovable property in India to a person resident in India
• In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

 National Pension Scheme (NPS)

• NRIs can invest in NPS without any restrictions.
• It’s the contributory pension scheme and regulated by Regulated by PFRDA (Pension Fund Regulatory and Development Authority)
• Valid age-group lies between 18 years to 60 years and for Individuals only
• Citizenship of India is essential
• Giving-up citizenship compels for closure of this a/c
• Flexibility in investment options
• Tax benefits under Section 80C
• Investment limit for 1 yr: Minimum is INR 6,000

Bonds

• Long-term investment
• These are redeemable.
• Fixed rate of interest
• Tier-1 capital’s banks are issuer
• Lock principal amount for some time
• Various type of Bonds available to invest:
  • PSU Bonds, Corporate Bonds, NCDs, Government Bonds, Treasury Bonds, Infrastructure Bonds etc.
• Taxable unless it is tax free

 Fixed Deposits

• Most preferred source of investment by NRIs
• NRE fixed deposit or an FCNR account is preferable as interest is high and it is tax free in India.
• Interest earned on NRO fixed deposit is taxable and not repatriable.
• NRIs can invest in Company Fixed Deposits provided Company confirms the investment limit from RBI before accepting the funds.

For regulations and other details visit http://www.nriinvestments.in/

Unless it is extended July 31 is the last day of filling income tax return for previous Financial Year (2015-16) for individuals in India.  This is for salaried class individuals and those who do not require their accounts audited. Those who require to get their accounts audited the last date is September 30^th.

The following individual assesses have to get their accounts audited:-

1. An individual carrying on business and his/her sales turnover exceeds Rs. 10 million.
2. An individual carrying on profession and his/her gross receipt exceeds Rs. 5 million.
3. A person covered under presumptive income scheme section 44AD, 44AE, 44AF, 44BB, 44BBB and income from said business is lower than the deemed profit and gain computed under relevant section.

Who has to file tax returns in India?

Any individual whose income exceeds Rs.250,000 (Rs. 300,000 for senior citizen) in previous Financial Year is required to file an income tax return in India. Those who don’t have income exceeding Rs. 250,000 but wants to carry forward losses under any heads is also required to file tax returns.

What is the rule for NRI (Non Resident Indian)?

NRI has to file income tax returns in India:-

• If TDS has been deducted on some income and NRI wants to claim refund of the same.
• Taxable income in India during the previous financial year was above the basic exemption limit of Rs. 250,000.
• NRI has short-term or long-term capital gains from sale of certain investments and assets, even if the gains are less than the basic exemption limit.

What is the requirement to file tax returns in India for NRI:-

1. PAN (Permanent Account Number)
2. Form 26AQ for the tax credit (This can be access either through internet banking or income tax site login)
3. For online filling active account at income tax site with PAN no as a default id.
4. Bank Account details. (NRO, NRE or FCNR)
5. Income earned and accrued in India is taxable in India.
6. Income from any property or investment transaction in India is taxable in India.
7. Rent or deemed rent income in India.

Please visit http://www.nriinvestments.in/ for FAQ and regulations in India.

Pharma, Telecommunication and IT the defensives have given negative year to date return. What would be the expected trend in the second half?

IT sector is predominantly has the brexit impact and still there is uncertain environment. The pharma sector would provide lots of interesting opportunities.

Will the dream run of Cement and Contraction sector will continue? As the expectation and the actual outcome of the monsoon are very positive, this sector will continue to provide larger opportunities and consolidation in this sector is bound to happen.

The second half is very promising and expected to be better than first half.

Rajiv Gandhi Equity Savings Scheme (RGESS)

This scheme is introduced in the union budget 2012-13 to encourage small investors to put their money in equity market. This scheme is only for the person resident in India and non-resident cannot take benefit of this scheme.

RGESS offers rebate to first time retail investors with annual income blow Rs. 12 lakhs.

The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount invested during the year, upto a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.

For FAQ kindly refer http://finmin.nic.in/rgess/FAQ_RGESS_Revised_05022014.pdf

The due date for filling income tax return for Individual for FY 2015-16 was extended up to August 5, 2016, there will be still few people who would have not filled their income tax return.

Individuals have to file their income tax return if their income in a financial year exceeds more than the exempted limit of Rs 2.5 lakh even if tax is deducted at source.

So if you missed the deadline, you can file a belated return. It can be filed by an assessee within two years from the end of the financial year to which this return pertains to. For example, for filing return for the year 2015-16, the next year - 2016-17- is the assessment year. Therefore, you can file return till March 2018.

The rule for filing belated return has been reduced to one year in this year's Budget. So for the financial year 2016-17, belated return could only be filed till March 2018.

In case of belated return where tax is due, the assessee has to pay interest @ 1% per month. If the assessee even fails to file a belated return within the stipulated time, the tax officer can levy penalty of Rs 5,000 on his discretion.

An assessee forgoes following benefits in case of late filing of return:-

1.      You can't carry forward your capital losses to set off with future capital gains.

2.      In case belated return where refund is due, interest will only be paid from the date of filing of tax return, till the refund is paid to you. You will not get any interest for the period of delay.

Please contact http://www.nriinvestments.in/ if you need any assistance in income tax return filling in India.

Post 8^th November 2016 everyone is speculating about the equity markets. The event of demonetisation got bigger from the stock market perspective, since it came after Donald Trump’s victory in the US elections. Most of the emerging equity markets are down post the victory of Donald Trump, in India we had double event and market is reacting to that.

Most of the analysts were initially negative about the situation now slowly moving into the positive territory each passing day. All the fundamental or technical analyst who are on TV shows always follow the market; they have been changing their stance now and recommending going long strategies.  So no one is sure and there is an uncertainty in the market place. Without any doubt there is a slowdown in terms of business and cash cycle, with cash crunch people are buying only essential items and it will defiantly have an impact on the growth. So the question is whether demonetisation is short term pain for a long term gain? Which company/sector will be impacted by this positively or negatively?

What one should do in these times:-

1. One should not take leveraged position and should stick to the basic rules of investing which is “Invest in companies which have proven track record of stable earning with sound management.”

2. SIP is the best strategy all the time and even time like these.

3. Interest rates are going to go down further, so one need to find avenues to invest is higher yield securities for longer time or invests in the equity market through SIP.

4. Always refrain from rumours and do your own homework before taking any action.

5. Focus on accounting and tax compliance more as this will be required in future if you get any questions from tax authorities.

6. History has shown that whoever has take calculated risk during these uncertain times got a better rewards, so ready to take some calculated risks.

7. Always do your own analysis and follow your gut rather than relying on someone blindly.

8. Increase the cash holding ratio, this will be beneficial to take the advantage of any market movement downwards.

9. Take close watch at currency movement and see which industry/ sector will be impacted by that.

10. Update the buy list with target price and whenever target is achieved, just grab the opportunity and buy the stock.

Markets are at all time high, retail investors are skeptical whether to put money or withdraw. What are the next big triggers for the markets, which industry, sectors to focus on?

Yes markets are at almost all time highs and one need to follow a cautious approach but there are still plenty of stocks available which can give 15-20% kind of returns which is better than any other assets class. I will put my discussion by highlighting near term triggers for the markets and what should retail investor look for.

Near Term Triggers for the markets:-

1.     GST: It is almost certain that GST will be implemented from July 1, 2017 onwards, Sectors like FMCG, auto, cement, light electrical, multiplexes, retail and logistics could be some of the key beneficiaries of India’s biggest tax reform.

 2.      Q4 corporate results: This is most important trigger as it will show real impact of demonetization. The expectation is that the Banks especially private sector will do well, also other sectors will do better than previous quarter and overall recovery in earning is expected.

3.      Domestic flow: Retail investors are continuing putting money in equities through SIP, so even FIIs are seller domestic institutions are buyers. The options for investing in other assets classes are very limited and the similar or higher flow is expected to continue from domestic institutions in equity, this will drive the markets further high and by Diwali Nifty is expected to cross 10000 mark.

What should retail investors do?:

1.      Revisit the portfolio and continue to hold good quality companies, this is the time to have large caps and good potential midcaps in the portfolio. SIP is the best way either through Mutual Fund or direct equity.

2.      Government focus on affordable housing is there so all the stocks connected with housing will perform better in the coming year which includes cement, tiles, building material, paints, Housing Finance, ceramics etc.

3.      Avoid buying based on tips or market rumors, do proper homework before taking investment decision. If one does not understand direct equity the best way to go is through mutual fund through SIP. The below will give you a SIP return performance of few funds:-

Few potential midcap Stocks to watch out for:

Somany Ceramics, Future Consumer, NBCC, Indiabulls Housing Finance, Pidilite  Industries, Maruti, Westlife Devlopment & GSFC.

Source: Money Control

The above are the list of few companies specially PSU giving 10% or more dividend yield as on today’s price.  Some of them have been giving dividends in this ratio consistently, we understand that in the last year there was higher dividend payout but if you see the 5 years average they have given more than Bank FD interest rate.

I am not recommending these stocks but it’s worth look at the statistics and looking forwards for your comment why you should and should not buy these scripts.

PSUs have always been available at lower valuations because of government interventions and various other factors. Dividend yield is always a criterion for the investors, if one thinks that these companies will be able to deliver dividend at last 5 year’s average rate, it is worth a consideration.

http://www.nriinvestments.in/