1. Qualified Foreign Investor (‘QFI’)
December 2012

2. Contents Background Investment Conditions Mechanics & Process Flow
Taxation & Repatriation

3. Background

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 route
Only NRIs were allowed till then
Up to August 2011
A new category of foreign investor introduced “Qualified Foreign Investors” (QFI)
Permitted to invest in Indian Mutual Funds
August 2011
QFIs are permitted to invest directly in Indian Listed Equity Companies
January 2012
QFI are permitted to invest directly in Indian corporate debt securities
July 2012
An 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 is
compliant with FATF standards;
Signatory to IOSCO’s multilateral MoU
Should Not Be
a person resident in India
registered with SEBI as FII or Sub-account
*Financial Action Task Force
International Organisation of Securities Commission
Memorandum of Understanding
QFIs to meet KYC norms prescribed by SEBI
No Need to obtain separate SEBI Registration !!

6. Investment Conditions

7. Permissible Transactions
QFIs can
Purchase/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 India
Purchase/Sale the units of mutual funds
QFIs cannot
Issue offshore derivative instruments / participatory notes

8. Investment Restrictions
Investment Limits as a % of paid up capital of the Company
by a single QFI - 5%
Aggregate by all QFIs – 10%
Investment limit for corporate debt is $ 1 bn for QFIs
Investment limit for Debt scheme of MF is $ 1 bn and for equity scheme is $ 10 bn
The investment limits are over and above the limits of FII & NRI investment ceilings. However, sectoral cap would need to be complied.

9. Mechanics & Process Flow

10. Mechanics
Open 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 remittances
Obtain
Permanent Account Number (‘PAN’)
QFI
QFI 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 shares
DP to instruct broker to purchase shares
DP will make payment to broker & credit shares in DMAT account of QFI
Reverse 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…
QFI
Overseas Bank
Account
Transfer of Funds
Foreign inward / outward remittance through normal banking channel
Outside India
Request DP to Purchase Shares
India DP
Single non-interest bearing Rupee Bank
Account
Dmat Account
Broker

13. Taxation & Repatriation Aspects

14. Taxation & Repatriation
DP will deduct appropriate taxes as may be applicable on the income earned by QFI
Taxation will be similar to any other foreign party
Indicative tax rates
Payment and Repatriation
QFI to make foreign inward remittance through normal banking channels in any freely convertible currency
Sale proceeds will be directly credited in single rupee bank account
Dividend 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 
France
Malta
South Africa
Alberta
Germany 
Mexico
Spain
Australia 
Greece
Montenegro 
Sri Lanka
Austria
Guernsey
Morocco
Srpska, Republic of
Bahrain
Hong Kong
Netherlands
Sweden
Belgium
Hungary 
New Zealand 
Switzerland
Bermuda
Iceland
Nigeria
Syrian Arab Republic
Brazil
India
Norway
Chinese Taipei
British Columbia
Isle of Man
Oman
Tanzania 
British Virgin Islands
Israel
Ontario
Thailand 
Bulgaria
Italy
Pakistan
Tunisia 
Cayman Islands
Japan
Poland
Turkey
Canada
Jersey 
Portugal
United Kingdom 
China
Jordan
Qatar
United States of America 
Croatia,
Kenya 
Québec
Uruguay
Cyprus,
Korea
Romania
West African Monetary Union
Czech Republic
Kuwait
Russia
Denmark 
Liechtenstein
Saudi Arabia
Dubai 
Lithuania
Serbia, Republic of
Estonia
Luxembourg
Singapore
Finland
Malaysia
Slovakia
Former Yugoslav Republic of Macedonia
Maldives
Slovenia

17. Indicative Tax Rates Nature of income Tax rate Dividend Income Nil
Long Term Capital Gain
Short Term Capital Gain
15% 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.