Can an NRI invest in preference shares of an unlisted company in India from his NRE account? - Can an NRI invest in preference shares of an unlisted company in India from his NRE account? - Ask the Expert - Fee Only Investment Advisers

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Can an NRI invest in preference shares of an unlisted company in India from his NRE account?

Whether dividend received on such shares will be tax free or taxable? Will it be fully repatriable?

  • An NRI can invest in compulsorily convertible preference shares of unlisted company. Payment can be made from NRE account.
  • It shall be subject to pricing guidelines under FEMA and income tax act.
  • Dividend distributed will now be taxed with effect from financial year 2020-21 onwards. He can however take the benefit of relevant Double Taxation Avoidance Agreement between India and the country of his residence.
  • Since the initial investment is from NRE account, dividend can be credited to NRE account and is fully repatriable.
  • Investment in non-convertible / optionally or partly convertible  preference shares will be treated as debt and shall have to conform to ECB guidelines under FEMA.