Foreign national trading

General
1

  1. I have a lot of friends who’re US citizens. I’d like to start an investment company in the US to invest in the Indian markets. Can I do it?

  2. Can I trade in all stocks?

  3. Is the money convertible to dollars at any given point of time?

  4. What are the tax implications for short term and long term gains?

2

1. You'll have to register the entity as an FPI. Since the entity you'd be forming would be a corporate, you'd fall under Category III of the FPI regulations. The registration will have to be done through a designated DP.  There are only a few designated DP's in India.

Do note that the majority ownership in the FPI should be held by Foreign citizens (i.e NRI/PIO/OCI should not own more than 50% beneficial interest)

2. There are certain restrictions to purchasing stocks in the sense that FII's aren't allowed to hold more a certain percentage of holdings in a company. RBI populates this list here: https://rbi.org.in/Scripts/BS_FiiUSer.aspx Investment by RFPIs cannot exceed 10 per cent of the paid up capital of the Indian company. All RFPI/FII/QFI taken together cannot acquire more than 24 per cent of the paid up capital of an Indian Company.

Short term trades are allowed but no Intraday trades/shorting of scrips allowed.

3. Yes, 100% repatriation is allowed.

4.  15% for short term capital gains and 0 for long term capital gains


 

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