4 Introduction… Up to August 2011 August 2011 January 2012 July 2012 Foreign investment in Indian listed securities were permitted only under FII / Sub-account routeOnly NRIs were allowed till thenUp to August 2011A new category of foreign investor introduced “Qualified Foreign Investors” (QFI)Permitted to invest in Indian Mutual FundsAugust 2011QFIs are permitted to invest directly in Indian Listed Equity CompaniesJanuary 2012QFI are permitted to invest directly in Indian corporate debt securitiesJuly 2012An Opportunity for the Foreign Investors to invest directly in Indian listed companies
5 Who is a QFI ? Should Not Be Should Be a person resident in a country that iscompliant with FATF standards;Signatory to IOSCO’s multilateral MoUShould Not Bea person resident in Indiaregistered with SEBI as FII or Sub-account*Financial Action Task ForceInternational Organisation of Securities CommissionMemorandum of UnderstandingQFIs to meet KYC norms prescribed by SEBINo Need to obtain separate SEBI Registration !!
7 Permissible Transactions QFIs canPurchase/Sale equity shares; Listed or To be Listed on recognized stock exchange in India (including right shares, bonus shares etc.)Purchase/Sale corporate debt; Listed or To be Listed on recognized stock exchange of IndiaPurchase/Sale the units of mutual fundsQFIs cannotIssue offshore derivative instruments / participatory notes
8 Investment Restrictions Investment Limits as a % of paid up capital of the Companyby a single QFI - 5%Aggregate by all QFIs – 10%Investment limit for corporate debt is $ 1 bn for QFIsInvestment limit for Debt scheme of MF is $ 1 bn and for equity scheme is $ 10 bnThe investment limits are over and above the limits of FII & NRI investment ceilings. However, sectoral cap would need to be complied.
10 MechanicsOpen DMAT account for holding shares(Only One Permitted)Open trading a/c with recognised stock brokers(Multiple a/c permitted)Designate one overseas bank account for remittancesObtainPermanent Account Number (‘PAN’)QFIQFI shall open a single non- interest bearing Rupee account with an AD-category-I bank in India for routing the receipt and payments for transactions.
11 Process Flow…QFI to transfer funds to Bank account and instruct DP to purchase sharesDP to instruct broker to purchase sharesDP will make payment to broker & credit shares in DMAT account of QFIReverse process at the time of sale & DP to remit the money to designated overseas bank account
12 Single non-interest bearing Rupee Bank …Process Flow…QFIOverseas BankAccountTransfer of FundsForeign inward / outward remittance through normal banking channelOutside IndiaRequest DP to Purchase SharesIndiaDPSingle non-interest bearing Rupee BankAccountDmat AccountBroker
14 Taxation & Repatriation DP will deduct appropriate taxes as may be applicable on the income earned by QFITaxation will be similar to any other foreign partyIndicative tax ratesPayment and RepatriationQFI to make foreign inward remittance through normal banking channels in any freely convertible currencySale proceeds will be directly credited in single rupee bank accountDividend can either be credited directly to designated overseas bank or to the domestic bank account
15 Care Portfolio Managers Pvt. Ltd. Queries?Care Portfolio Managers Pvt. Ltd.201, Silver Heights, TPS III, 51st Road,Borivli(w), Mumbai – 92, India|SEBI Regn. No.: INP |Disclaimer: Care Portfolio Managers Limited or any of its associates does not accept any liability for any errors or omissions in the contents of this document, and shall have no liability for any loss or damage suffered by the user, which may arise as a result of this document. This document should not be construed as any professional advice if it is received without any agreement with the addressee.
16 Signatory to IOSCO’s Multilateral MoU Albania FranceMaltaSouth AfricaAlbertaGermany MexicoSpainAustralia GreeceMontenegro Sri LankaAustriaGuernseyMoroccoSrpska, Republic ofBahrainHong KongNetherlandsSwedenBelgiumHungary New Zealand SwitzerlandBermudaIcelandNigeriaSyrian Arab RepublicBrazilIndiaNorwayChinese TaipeiBritish ColumbiaIsle of ManOmanTanzania British Virgin IslandsIsraelOntarioThailand BulgariaItalyPakistanTunisia Cayman IslandsJapanPolandTurkeyCanadaJersey PortugalUnited Kingdom ChinaJordanQatarUnited States of America Croatia,Kenya QuébecUruguayCyprus,KoreaRomaniaWest African Monetary UnionCzech RepublicKuwaitRussiaDenmark LiechtensteinSaudi ArabiaDubai LithuaniaSerbia, Republic ofEstoniaLuxembourgSingaporeFinlandMalaysiaSlovakiaFormer Yugoslav Republic of MacedoniaMaldivesSlovenia
17 Indicative Tax Rates Nature of income Tax rate Dividend Income Nil Long Term Capital GainShort Term Capital Gain15% of the gain amount(excluding Surcharge & Cess)Notes:An equity share would be considered as long term capital asset if held for a period of more than 12 months.It is assumed that the asset will be held as capital asset and the gain would be regarded as in the nature of capital gains.These are the tax rates as per Indian tax laws. The benefit under tax treaty of the investor’s jurisdiction will need to be considered separately.It will be advisable for the investor to seek an advice from the tax consultant for the tax rates applicable to the specific QFI.