Government of India, through the Securities and Exchange Board of India

(‘SEBI’), has been taking measures to liberalise and boost foreign investment

into India by Foreign Portfolio Investors through simplified operational andIndore Stock

compliance requirements.

Foreign

Portfolio Investment entails offshore investors buying into Indian financial

assets. All the investments are passively held by the investors. The different

types of securities into which such investment is funneled include but are not

limited to stocks, bonds, and other financial assets.

are three main agents in the chain of an FPI fund, which are briefly discussed

below:

Foreign

Portfolio Investor –

A person who has been granted certification by the Securities Exchange Board of

India (SEBI) authorizing him to buy, sell, or otherwise deal in securities in

IndiaLucknow Stock. This certificate is issued by a Designated Depository Participant on

behalf of SEBI.Kanpur Stock

Designated

Depository Participant –

This entity acts as an intermediary between the Foreign Portfolio Investor and

the FPI Fund, acting as a custodian to the investments made by the Foreign

Portfolio Investor in the securities operative under the FPI fund.

Foreign

Portfolio Investment fund –

Such funds are floated to provide investment options that are beyond the

domestic securities network to diversify the investment portfolio.

NRI’s/OCIs in individual capacity are not permitted to apply for Registration. However,

an NRI control offshore entity/fund may apply for

such registration provided shareholding of NRI in such offshore

entity should not be more than 25% (individually) and 50% (aggregate).

Considering

the complexity involved and regulatory changes introduced from time to time, it

is advised to seek help and guidance in advance from a professional or a broker

who assist in setting up FPIs.

The SEBI (FPI)

Regulations of 2019 further provide the categorization of FPIs, under which the

Foreign Portfolio Investor can apply for registration. The two categories are

as follows:

Category I is an exhaustive category that includes the

following:

o Government and government-related investors such as

central banks, sovereign wealth funds, international or multilateral

organizations; entities controlled or at least 75% directly or indirectly owned

by such Government and Government related investor(s)

o Pension funds and university funds

o Appropriately regulated entities such as insurance or

reinsurance entities, banks, asset management companies, Investment Managers

(‘IMs’), investment advisors, portfolio managers, broker-dealers, and swap

dealers

o Entities from the Financial Action Task Force (‘FATF’)

member countries, or from any country specified by the Central Government by an

order or by way of an agreement or treaty with other sovereign Governments,

which are: - appropriately regulated funds - unregulated funds whose IM is

appropriately regulated and registered as a Category I FPI - university related

endowment funds of universities that are in existence for more than five years

o An entity whose IM is from a FATF member country, and

such IM is registered as a Category I FPI; or an entity which is at least 75%

owned, directly or indirectly, by another entity, eligible under the heads

above and from a FATF member country.

Category II includes registration for investors who are notMumbai Investment

eligible under Category I, such as:

o Endowments and foundations

o Charitable organizations

o Corporate bodies

o Family offices Individuals

o Appropriately regulated entities investing on behalf of

their client, subject to prescribed conditions

o Unregulated funds in the form of limited partnerships

and trusts

In simple terms, a

foreign direct investment (FDI) is an investment made by foreign person/entity

of one country directly into the business interests i.e. Company or LLP located

in another country. On the other hand, foreign portfolio investment (FPI)

refers to investments made in different kinds of securities and financial

assets like shares, bonds etc. issued in another country.

Schedule II to FEM (Non-Debt

Instruments) Rules, 2019 “hereinafter referred as NDI Rules” prescribes the

permissible limit of investment by Foreign Portfolio Investors (‘FPI’),

individually and in aggregate, in an Indian company as under:

1. Obtain PAN in India

2. Advance Tax Computation, if applicable (Quarterly compliance).

3. File Return of Income in India (annual compliance),

subject to any relief under Double Tax Avoidance Agreement between India and

resident country of FPI

4. Obtain remittance certificate (i.e.,

Form 15CA /CB) from a Chartered Accountant for repatriation of fundsPune Investment

Repatriation of sale

proceeds by FPI:

The sale proceeds are freely repatriable for investments made

by FPIs, subject to payment of applicable taxes in India and fulfillment of

compliances for repatriation.