“Synopsis”
Initial Public Offerings (IPOs) in India continue to attract investor interest, and Non-Resident Indians (NRIs) are no exception. Many NRIs look to diversify their portfolios by participating in Indian equity markets. However, IPO investing as an NRI involves certain rules under FEMA, eligibility conditions, and repatriation guidelines. This blog will guide you through how NRIs can apply for IPOs in India, which accounts to use, and what limits exist on investing and repatriating proceeds.
Can NRIs Invest in Indian IPOs?
Yes, NRIs are allowed to invest in Indian IPOs, both on a repatriation and non-repatriation basis. This is regulated by the Foreign Exchange Management Act (FEMA) and the SEBI (ICDR) Regulations.
You must invest either:
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On repatriation basis: Using NRE account
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On non-repatriation basis: Using NRO account
Eligibility Criteria for NRIs
To invest in IPOs, an NRI must:
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Hold an NRE or NRO account
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Have a valid PAN card
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Be KYC-compliant with SEBI
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Apply through ASBA (Application Supported by Blocked Amount) mechanism
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Use self-funding from an Indian bank account (no third-party funding allowed)
IPO Application Process for NRIs
Here’s how NRIs can invest in Indian IPOs step-by-step:
1. Open a Demat and Trading Account
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You’ll need a Demat account with a registered Indian depository participant (like Zerodha, ICICI Direct, etc.)
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Most brokers offer NRI-specific trading accounts
2. Link Your NRE/NRO Account
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The Demat account must be linked to your NRE (for repatriation) or NRO (for non-repatriation) bank account.
3. Apply via ASBA Process
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ASBA is mandatory. It blocks the IPO amount in your NRE/NRO account until the allotment is complete.
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Most banks allow online ASBA for NRIs.
4. Wait for Allotment
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If shares are allotted, the amount is debited from your account, and shares are credited to your Demat.
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If not, funds are released.
5. Selling and Repatriation
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If bought via NRE account, sale proceeds are repatriable.
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If bought via NRO account, repatriation is allowed up to $1 million per financial year after tax compliance.
FEMA & RBI Rules for NRI IPO Investing
FEMA-Compliant Funding
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Funds used must come through normal banking channels.
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You cannot use funds held abroad to apply directly.
Sectoral Caps
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IPO investments must comply with FDI sectoral limits.
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Certain sectors have restrictions (e.g., defense, telecom, insurance).
Repatriation Limits
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NRE account allows full repatriation.
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NRO account allows limited repatriation with proper documentation.
Important Documents Required
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Valid Indian PAN
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Overseas address proof (passport, visa, OCI/PIO card)
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NRE/NRO account details
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KYC compliance proof
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Demat & trading account details
Taxation on IPO Investments for NRIs
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Short-term capital gains (STCG): Taxed at 15% if sold within 12 months.
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Long-term capital gains (LTCG): Taxed at 10% above ₹1 lakh.
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TDS is applicable on gains—can be reduced by filing Form 13 or claiming DTAA relief using TRC and Form 10F.
Advantages of Investing in Indian IPOs as an NRI
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Access to high-growth companies before listing
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Ability to invest in Indian equities without active trading
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Full repatriation if invested via NRE account
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Transparent online ASBA system for hassle-free application
Limitations and Points of Caution
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IPO allotment is not guaranteed
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Currency conversion charges may apply
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Repatriation from NRO is subject to limits
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Need to ensure tax compliance in India and country of residence
Conclusion
For NRIs, Indian IPOs offer a rewarding yet regulated opportunity to participate in the country’s economic growth. By using the right bank account (NRE or NRO), following ASBA procedures, and ensuring FEMA and tax compliance, you can invest in IPOs safely and profitably. It’s essential to work with a broker familiar with NRI investing norms and consult a tax advisor to make the most of repatriation and DTAA benefits.
