What is Overseas Portfolio Investment (OPI) ?
As per the Foreign Exchange Management (Overseas Investment) Rule, 2022, “Overseas Portfolio Investment” or “OPI” means investment, other than ODI, in foreign securities, but not in any unlisted debt instruments or any security issued by a person resident in India who is not in an IFSC.
Provided that OPI by a person resident in India in the equity capital of a listed entity, even after its delisting shall continue to be treated as OPI until any further investment is made in the entity.
- What is the manner of making Overseas Investment by resident individual of India?
A resident individual may make Overseas Investment in the manner and subject to the terms and conditions prescribed in Schedule III to OI rules.
As per sub paragraph (1) of paragraph 3 of Schedule III, A resident individual, who is an employee or a director of an office in India or branch of an overseas entity or a subsidiary in India of an overseas entity or of an Indian entity in which the overseas entity has direct or indirect equity holding, may acquire, without limit, shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme or sweat equity shares offered by such overseas entity, provided that the issue of Employee Stock Ownership Plan or Employee Benefits Scheme are offered by the issuing overseas entity globally on a uniform basis.
- Whether ESOP proceeds can be considered as OPI proceeds?
As per clause (h) of sub paragraph (2) of Paragraph 1 of Schedule III, A resident individual may make or hold Overseas Investment by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme.
As per the proviso to Schedule III, the acquisition of less than 10% of the equity capital, whether listed or unlisted, of a foreign entity without control under clauses (f), (g) and (h), shall be treated as OPI.
Therefore, Acquisition of shares under ESOP less than 10% of the equity capital of a foreign entity and without control, shall be treated as OPI.
- What is the meaning of the term ‘Control’?
As per the Foreign Exchange Management (Overseas Investment) Rules, 2022, “Control” means the right to appoint majority of the directors or to control management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders’ agreements or voting agreements that entitle them to 10%. or more of voting rights or in any other manner in the entity.
- What is the meaning of the term ‘Reinvestment’?
‘Reinvestment’ means that the OPI proceeds are exempted from repatriation provisions as long as such proceeds are reinvested within the time specified for realisation and repatriation as per Notification No. FEMA 9(R)/2015-RB namely, Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015.
The time specified for realization and repatriation are:
a. – within 7 days from the date of its receipt;
Where the amount due or accrued as remuneration for services rendered, whether in or outside India, or in settlement of any lawful obligation, or an income on assets held outside India, or as inheritance, settlement or gift
b. in all other cases within 90 days from the date of its receipt.
Disclaimer
Our views expressed herein are based on the facts and assumptions indicated by you. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. We do not assume responsibility to update the views consequent to such changes.
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