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Certain non-residents have legal means to acquire rights to growing asset base.
- By Sean Kelleher, Special to Gulf News
- Published: 01:26 February 17, 2008
It never used to matter, but the inexorable rise in the value of Indian assets has now changed my opportunity set. There I was, being of English birth, worried mainly about the FTSE and the Halifax UK House Index, when suddenly India, rarely a consideration in 'early life' presents an opportunity.
That opportunity revolves around my mother being Indian-born (potential biographers should note she married an Irish guy) which, it seems, turns me into a Person of Indian Origin (PIO).
This is a large, but rarely understood group. They can acquire rights to Indian assets above those of Non-PIOs. Not superior to the Indian resident and the Non-Resident Indian (NRI), but nevertheless, more than I was aware of.
To explore this opportunity for myself and like-minded PIOs I discussed these issues with lawyer Poorvi Chothani, founder of Lawquest (Mumbai), with legal credentials spreading across the UK, the US and India.
How can Gulf residents benefit from India's growing economy?
Poorvi Chothani: Indian Gulf-based residents include Indian nationals, foreign nationals (vis-a-vis India) and foreign nationals of Indian origin.
The law treats investments from each category differently. In addition, the rules pertaining to foreign direct investment and investment in the secondary markets differ.
Can you describe the ways in which foreign nationals can invest in India's secondary markets?
Foreign national individuals cannot directly invest in the secondary market. However, they can invest with eligible institutional investors, which include, pension, funds, mutual funds, investment trusts, insurance or reinsurance companies, and asset management companies that are registered as Foreign Institutional Investors (FIIs) in India.
These FIIs are permitted to invest in listed companies in India subject to certain shareholding caps.
How can 'Indians' in the Gulf Region invest in the secondary markets of India?
'Indians' in the Gulf comprise of broadly two groups: (1) Indian nationals and (2) foreign nationals of Indian origin.
Indian nationals who reside outside India for more than 182 days in a tax year are considered to be Non-Resident Indians (NRIs) for tax and certain other purposes.
NRIs can readily invest in the Indian secondary markets subject to certain conditions. NRI status also affects the size of the individual NRI's investment in the equity of companies listed on the Indian stock exchanges as there are restrictions on the number of shares that can be held by FIIs and NRIs in listed companies.
However, certain foreign nationals of Indian Origin can invest in the Indian secondary markets.
They qualify as Persons of Indian Origin (PIOs) or Overseas Citizens of India (OCIs) are allowed to invest in the Indian secondary markets subject to certain restrictions as to the cumulative shareholding of FIIs, NRIs, PIOs and OCIs in individual companies.
PIOs and OCIs are permitted similar rights pertaining to the maintenance of bank accounts in India, Investment in securities and shares of Indian companies and with regard to deposits with Indian firms/companies as well as investment in certain immovable properties in India.
Define the PIO?
The Indian Citizenship Act, 1955, provides that a person of Indian origin is an individual who was born in India or either of whose parents or any one of the individual's grand parent was born in India.
Who is eligible to obtain a PIO card?
A foreign national who can prove his/her Indian origin up to three previous generations or the spouse of an Indian citizen or the spouse of a PIO may register as a PIO and obtain a PIO Card. Citizens of Pakistan, Bangladesh and other countries as may be specified by the central government are not eligible to receive these cards.
What are the advantages of registering as a PIO?
In addition to other advantages listed in the accompanying section, PIO card holders can own immovable properties in India (except agricultural/ plantation properties), open Indian rupee bank accounts, and lend in India.
What do you mean by Overseas Citizens of India (OCI)?
OCI is often referred to as dual citizenship.
Who can qualify as an OCI?
Eligible foreign nationals include, among a few other categories, certain persons of Indian origin and individuals whose parents or grand parents migrated from India after January 26, 1950, and their minor children. This is subject to the applicant being a citizen of a country which allows dual citizenship in some form or the other.
What are the advantages of obtaining OCI status?Registration as an OCI is a one-time process that grants all the benefits that are available to PIOs, with some additional benefits. OCIs can acquire, hold, transfer or dispose of immovable properties in India (except agricultural/ plantation properties), open rupee bank accounts, lend rupees to Indian residents and invest in India.
Can a foreign national, not of Indian origin, acquire immovable property in India?
No, the individual cannot purchase or be gifted any immovable property in India. However, the individual can inherit from a person who is a resident in India and hold the inherited property.
However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan need specific approval from India's central bank to inherit and hold the property.
- The writer is chairman of Mondial Financial Partners.
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