Indian citizen or a foreign citizen of Indian origin who stays abroad for employment/carrying on business or vocation or under circumstances indicating an intention for an uncertain duration of stay abroad is a NONRESIDENT INDIAN ( NRI ).

Those who stay abroad on business visit, medical treatment, study or such other purposes which do not indicate an intention to stay there for an indefinite period will not be considered as NRIs. Students who go abroad for studies with an intention to stay there for an uncertain period and who stayed abroad for more than 180 days in the preceding financial year will be treated as Non Resident Indians.

A foreign national, who was eligible to become a citizen of India on 26.01.1950 or was a citizen of India on or at any time after 26.01.1950 or belonged to a territory that became a part of India after15.08.1947 and his/her children and grand children, is eligible for registration as an Overseas Citizen of India (OCI). Minor children of such person are also eligible for OCI. However, if the applicant had ever been a citizen of Pakistan or Bangladesh he/she will not be eligible for OCI.

"Person of Indian Origin" means a foreign citizen [not being a citizen of Pakistan,Bangladesh and other Countries as may be specified by the central government from time to time] if, He/she at any time held an Indian passport; He/she or either of his/he parents or grand parents or great grand parents was born in and Permanently resident in India as defined in Government of India Act, 1935 and other territories that became part of India thereafter provided neither was to any time a citizen of any of the specified countries; or He/she is a spouse of a citizen of India or a Person of Indian Origin covered under (i) or (ii) above.

There are several good reasons for investing in India. One of the largest economies in the world( 3rd largest economy). Strategic location - access to the vast domestic and South Asian market. A large and rapidly growing consumer market up to 300 million people, constitute the market for branded consumer goods - estimated to be growing at 8% per annum. Demand for several consumer products is growing at over 12% per annum. Foreign investment is welcome, approval is required but is automatic in sixty categories of Industries. Skilled man-power and professional managers are available at competitive cost. One of the largest manufacturing sectors in the world, spanning almost all areas of manufacturing activities. One of the largest pools of scientists, engineers, technicians and managers in the world. Rich base of mineral and agricultural resources. Long history of market economy infrastructure. Sophisticated financial sector. Vibrant capital market with over 9,000 listed companies and market capitalization of US$ 154 billion (March,1996) Well developed R&D infrastructure and technical and marketing services. Policy environment that provides freedom of entry, investment, location, choice of technology, production, import and export. Well balanced package of fiscal incentives. A sophisticated legal and accounting system. English is widely spoken and understood. Rupee is convertible on Current Account at market determined rate. Free and full repatriation of capital, technical fee, royalty and dividends. Foreign brand names are freely used. No income tax on profits derived from export of goods. Complete exemption from Customs Duty on industrial inputs and Corporate Tax Holiday for five years for 100 per cent Export Oriented units and units in Export Processing Zones. Corporate Tax applicable to the foreign companies of a country with which agreement for avoidance of Double Taxation exists, can be one which is lower between the rates prevailing in any one of the two countries and the treaty rate. A long history of stable parliamentary democracy.

There are 4 different types of market participants when it comes to investing in any country or stock market. Resident Indian Individuals: They can, directly or through stock market, invest/trade in India without much restrictions. So a citizen of India who lives in India, has no restrictions to invest/trade in Indian stocks Domestic Institutions: Subject to the Articles of Association and MoA of the charter and subject to SEBI's rules and regulations, a domestic company (including mutual funds, financial institutions) can also freely invest, directly or through stock market, in Indian securities. People who are not resident of India. Let us divide them in two subgroups Nonresident Indians (NRIs) and institutions controlled by them: Subject to certain special provisions, more or less, NRIs can also, directly or thro Indian stock exchanges, invest/trade in Indian stocks. Foreign Individual Investors: if the person is a citizen of any other country (other than Nepal, Bhutan, Pakistan) and their parents or grandparents, had no ties with India at any point in time, then it is not possible to invest directly or through Indian Stock Exchanges in India. However there are some indirect ways to invest in India. Two most prominent ways are through ADRs (American Depository Receipts) issued by Indian companies in foreign markets or through mutual funds floated by foreign or domestic Institutional Investors Foreign Institutional Investors (FIIs): Subject to certain regulations by India's central bank, Reserve Bank of India, and India's security markets watchdog, SEC like entity- Securities and Exchange Board of India (SEBI), foreign institutions investors can invest/trade almost in any Indian securities.

Government Securities/Units/ National Savings Certificates: NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorized dealers. Units can also be purchased directly from UTI. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra. These investments can be freely transferred or sold, provided the transfers/sales are arranged through an authorized dealer. Units can, however, be repurchased directly by UTI. If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad.

Company Shares/Debentures :

NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.

Investment in Immovable Property :

Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bonafide residential purpose. They are, therefore, not required to obtain any prior permission of Reserve Bank.

First of all, you have to open 3 Accounts to buy / sell Equity shares from the Indian Stock Market.

• Savings Bank Account (Preferably with HDFC Bank / ICICI Bank / Axis Bank / IDBI Bank), • Demat Account and • Share Trading Account.

Savings Bank Account:

Savings Bank accounts are accounts maintained by banks that pay interest but cannot be used directly as money (by, for example, writing a cheque). These accounts let customers set aside a portion of their liquid assets that could be used to make purchases while earning a monetary return. All savings accounts offer itemized lists of all financial transactions, traditionally through a bank passbook, but also through a bank statement.

Demat Account:

In India, a demat account, the abbreviation for dematerialized account, is a type of banking account which dematerializes paper-based physical stock (equity) shares. The dematerialized account is used to avoid holding physical equity shares: the equity shares are bought and sold through a stock broker.

This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for equity share trading even One equity share. As of April 2006, it became mandatory that any person holding a demat account should posses an Income Tax Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007.

Procedure:

1. Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).

2. Deface the equity share certificate(s) you want to dematerialize by writing across Surrendered for dematerialization.

3. Submit the DRF & equity share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent.

4. After dematerialization, your depository account with your DP would be credited with the dematerialized securities.

The benefits:

A safe and convenient way to hold securities; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical equity share certificates such as bad delivery, fake securities, delays, thefts etc; Reduction in paperwork involved in transfer of securities; Reduction in transaction cost; No odd lot problem, even one equity share can be sold; Nomination facility; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Automatic credit into demat account of equity shares, arising out of bonus/split/consolidation/merger etc. Holding investments in equity and debt instruments in a single account.

Required Documents:

The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings account holder has an edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list (you won’t need all of them though):Income tax PAN card / Voter’s ID / Passport / Ration card / Driver’s license / Photo credit card / Employee ID card / Bank attestation / Income Tax returns / Electricity bill / Landline phone bill. While they only ask for photocopies of the documents, they will need the originals for verification. Eight passport size photographs need to be submitted on which you sign across.

The Reserve Bank has granted general permission to NRIs/PIOs for undertaking direct investment in Indian companies under the automatic route, purchase of shares under Portfolio Investment Schemes, investment in companies and proprietorship/partnership concerns on non-repatriation basis and for remittances of current income. NRIs/PIOs do not have to seek specific permission for approved activities under these schemes.

The Reserve Bank of India has further simplified financial transactions by NRIs/PIOs by granting general permissions to:

Resident individuals ,partnership/proprietorship concerns to avail the interest of bearing rupee loans from NRIs/PIOs out of funds remitted from abroad or out of funds held in their bank accounts in India, on non-repatriation basis,subject to two conditions; one of them being that the rate of interest on such loans should not exceed Bank Rate plus two percentage points. NRIs/PIOs to transfer by way of gifts shares help by them in Indian companies and to transfer by way of gift immovable property held by them in India subject to compliance with other applicable rules/regulations including the provisions of Foreign Contributions Act,1976 by the charitable trust/organization concerned. All domestic public/private sector mutual funds for issue of units to NRIs/PIOs on both repatriation and non repatriation basis. NRIs/PIOs to place deposits with Indian firms, on non-repatriation basis and with Indian companies on non-repatriation basis out of domestic sources. NRIs/PIOs for sale of shares acquired under direct investment schemes on stock exchanges in India. NRIs/PIOs for transfer of shares, by way of sale under private arrangement to another NRI or to a resident. RBI permission is not required for drawal of foreign exchange for purpose of trade marks or franchise in India. NRIs/PIOs may remit the sale proceeds of immovable property without the lock in period of 10 years subject to a maximum of 1 million USD per calendar year.

NRIs/PIOs have been granted general permission to invest in Government Securities and Treasury bills.

Taking into accout the facilities that are already available, and the above new measures, NRIs/PIOs will not have to seek specific permission of Reserve Bank for a whole variety of approved financial/investments transactions. This should considerably reduce paper work and time taken for undertaking such transactions.