Foreign national trading

  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?

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: 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