vestments by NRIs, PIOs & Foreign Nationals (including

eposits); Permitted Remittances for various purposes

A Presentation by R.V.Seckar , M.COM, FCS ,ICSA (UK) , LLB in the

“BEYOND THE BOUNDARY” - Two Day Workshop on FEMA

On 23rd December 2014 at SIRC Chennai
Investments by NRIs, PIOs &
Foreign Nationals (including
Deposits); Permitted
Remittances for various
purposes
FACILITIES FOR NON RESIDENT INDIANS (NRIS) AND PERSONS OF INDIAN
ORIGIN (PIOS) (UPDATED
UPDATED UP TO SEPTEMBER 19, 2014)
 ypes of Bank Accounts that can
opened by NRIs

No Prior Approval is needed for NRIs to open NRO Account , NRE
Account, FCNR (B) Account , NRO Savings account with a post- post
0ffice with an Authorised dealer in India i.e. a bank authorised to
deal in foreign exchange

NRO Account- it may be current,, savings, recurring or fixed deposit
accounts.

NRO earnings / income such as dividends, interest etc can be
remitted into this account. Banks are free to determine the interest
rates.

Term Deposits –Interest
Interest rates cannot be more than resident term
deposits. All Account should be denominated in Indian Rupees.
NRO Account -Conti

Permissible credits to NRO account are transfers from rupee

accounts of non-resident
resident banks, remittances received in permitted
currency from outside India through normal banking channels,
permitted currency tendered by account holder during his
temporary visit to India

sale proceeds of assets including immovable property acquired out
of rupee/ foreign currency funds or by way of legacy/ inheritance.
inheritance

Eligible debits such as all local payments in rupees including
payments for investments as specified by the Reserve Bank and
remittance outside India of current income like rent, dividend,
pension, interest, etc., net of applicable taxes, of the account
holder.
NRO Account -Conti

NRI/PIO may remit from the balances held in NRO account an amount not
exceeding USD one million per financial year,, subject to payment of applicable
taxes.

The limit of USD 1 million per financial year includes sale proceeds of immovable
properties held by NRIs/ PIOs.

Other than current income and the limit of USD 1 Mn per financial year applicable to
NRIs/PIOs, balances in NRO accounts cannot be repatriated without the prior
approval of RBI.

The accounts may be held jointly with residents and / or with non-resident
non Indian.

NRO (current/savings) account can also be opened by a foreign national of non-
Indian origin visiting India,, with funds remitted from outside India through banking
channel or by sale of foreign exchange brought by him to India.India

resident account holders and to third parties may be granted in Rupees
Loans to non-resident
by Authorized Dealer / bank against the security of fixed deposits subject to certain
terms and conditions.
Non-Resident
Resident (External) Rupee
Account (NRE Account)

NRE account may be in the form of savings, current, recurring or
fixed deposit accounts (with maturity of minimum one year).
year

NRE accounts can be opened only by the NRI himself and not
through the holder of the power of attorney.
attorney

NRIs may be permitted to open NRE account with their resident
close relatives. The resident close relative shall be eligible to operate
the account as a Power of Attorney holder

Account will be maintained in Indian Rupees. Balances held in the
NRE account are freely repatriable.

Accrued interest income and balances held in NRE accounts are
exempt from Income tax and Wealth tax,
tax respectively.
NRE ACCOUNT -CONTD
CONTD

Overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000

subject to the condition that such overdrawings together with the
interest payable thereon are cleared/repaid within a period of two
weeks, out of inward remittances through normal banking channels or
by transfer of funds from other NRE/FCNR accounts.
accounts

Savings - Banks are free to determine the interest rates.
rates

Permissible credits to NRE account are inward remittance to India in
permitted currency, transfers from other NRE / FCNR accounts, sale
proceeds of FDI investments

interest accruing on the funds held in such accounts, interest on
Government securities/dividends on units of mutual funds purchased by
debit to the NRE/FCNR(B) account of the holder, certain types of
refunds, etc.
NRE ACCOUNT -CONTD
CONTD

Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of
person eligible to open such accounts, remittance outside India, investments in
shares / securities/commercial paper of an Indian company, etc

● Loans can be extended against security of funds held in NRE Account either to
the depositors or third parties without any ceiling subject to usual margin
requirements.

NRE accounts can be operated through power of attorney in favour of residents
for the limited purpose of withdrawal of local payments or remittances through
normal banking channels to the account holder himself.

Such accounts can be operated through power of attorney in favour of
residents for the limited purpose of withdrawal of local payments or
remittances through normal banking channels to the account holder
himself.
oreign Currency Non Resident
Bank) Account – FCNR (B) Account

NRIs are eligible to open and maintain these account. FCNR (B)
accounts are only in the form of term deposits of 1 to 5 years

Account can be held in any freely convertible currency.
currency Loans can be
extended against security of funds held in FCNR (B) deposit either to the
depositors or third parties without any ceiling subject to usual margin
requirements.

When an account holder becomes a person resident in India, deposits
may be allowed to continue till maturity at the contracted rate of
interest, if so desired by him

Terms and conditions as applicable to NRE accounts in respect of joint
accounts, repatriation of funds, opening account during temporary
visit, operation by power of attorney, loans/overdrafts against security
of funds held in accounts, shall apply mutatis mutandis to FCNR (B).
 an an individual resident Indian borrow
money from his close relatives outside India?

Yes, an individual resident Indian can borrow a sum not exceeding

USD 250,000 or its equivalent from his close relatives3 staying outside
India, subject to the conditions that:

the minimum maturity period of the loan is one year;
year

the loan is free of interest; and

the amount of loan is received by inward remittance in free foreign
exchange through normal banking channels or by debit to the
NRE/FCNR(B) account of the NRI.
What are the other facilities
available to NRIs/PIO?

Investment facilities for NRIs

NRI may, without limit, purchase on repatriation basis:
basis

Government dated securities / Treasury bills● Perpetual

● Units of domestic mutual funds;

● Bonds issued by a public sector undertaking (PSU) in India.

● Non-convertible
convertible debentures of a company incorporated in India.

debt instruments and debt capital instruments issued by banks in
India.

Shares in Public Sector Enterprises being dis-invested
dis by the
Government of India,
What are the other facilities
available to NRIs/PIO?(Contd)
NRIs/PIO?(

Shares and convertible debentures of Indian companies through
stock exchange under Portfolio Investment Scheme

Exchange traded derivative contracts approved by the SEBI, from
time to time, out of INR funds held in India on non--repatriable
non basis,
subject to the limits prescribed by the SEBI.
SEBI

NRIs are not permitted to invest in small savings or Public Provident
Fund (PPF).
nvestment in Immovable Property
by NRI

NRI / PIO may acquire/transfer immovable property in India other
than agricultural land/ plantation property or a farm house out of
repatriable and / or non-repatriable
repatriable funds.
funds

Foreign national of non Indian origin resident outside India shall not
acquire/transfer any immovable property in India other than on
lease not exceeding five years, without prior approval of Reserve
Bank of India.

funds received in India through normal banking channels by way of
inward remittance from any place outside India or funds held in any
non-resident account

No payment of purchase price for acquisition of immovable
property shall be made either by traveller’s cheque or by foreign
for
currency notes or by other mode
nvestment in Immovable Property
by NRI

NRI may acquire any immovable property in India other than
agricultural land / farm house plantation property, by way of gift
from a person resident in India or from a person resident outside
India who is a citizen of India or from a person of Indian origin
resident outside India

NRI may acquire any immovable property in India by way of
inheritance from a person resident outside India who had acquired
such property in accordance with the provisions of the foreign
exchange law in force at the time of acquisition

An NRI may transfer any immovable property in India to a person
resident in India or to a person resident outside India who is a citizen
of India or to a person of Indian origin resident outside India.
nvestment in Immovable Property
by NRI

The sale proceeds of immovable property in India if the property was
acquired out of foreign exchange sources i.e. remitted through normal
banking channels / by debit to NRE / FCNR (B) account.
account

The amount to be repatriated should not exceed the amount paid for
the property in foreign exchange received through normal banking
channel or by debit to NRE account (foreign currency equivalent, as on
the date of payment) or debit to FCNR (B) account.
account

The repatriation of sale proceeds is restricted to not more than two
residential properties subject to certain conditions.
conditions

The property was acquired out of Rupee sources, NRI or PIO may remit
an amount up to USD one million per financial year out of the balances
held in the NRO account (inclusive of sale proceeds of assets acquired
by way of inheritance or settlement), for all the bonafide purposes to
the satisfaction of the Authorized Dealer bank and subject to tax
compliance.
acilities to returning NRIs/PIOs
Facilities to returning NRIs/PIOs

Returning NRIs/PIOs may continue
to hold, own, transfer or invest in
foreign currency, foreign security
or any immovable property
situated outside India, if such
currency, security or property was
acquired, held or owned when
resident outside India

The income and sale proceeds of
assets held abroad need not be
repatriated.
Can a resident individual
giftshares
giftshares/securities/convertible debentures etc
to NRI close relative

Yes, a resident individual is permitted
to gift shares/securities/convertible
debentures etc to NRI close relative up
to USD 50,000 per financial year subject
to certain conditions

A resident individual can give rupee
gifts to his visiting NRI/PIO close
relatives by way of crossed
cheque/electronic transfer within the
overall limit prescribed under
Liberalised Remittance Scheme for the
resident individual and the gifted
amount should be credited to the
beneficiary’s NRO account
nvestment by a Foreign national in
ndia ( Non-Resident)
Resident)

Indian companies can issue to a person resident outside India-
equity shares, fully and mandatorily convertible debentures, fully
and mandatorily convertible preference shares and warrants
subject to the pricing guidelines / valuation norms and reporting
requirements.

There is a minimum lock-in
in period of one year or a minimum lock-in
lock
period as prescribed under FDI Regulations,
Regulations

Foreign investors can also invest in Indian companies by purchasing
/ acquiring existing shares from Indian shareholders or from other
non-resident shareholders. General permission has been granted to
non-residents
residents / NRIs for acquisition of shares
nvestment by a Foreign national in
ndia ( Non-Resident)
Resident)

A person resident outside India can invest in Micro and Small
Enterprise (MSE) , export Oriented Unit or a Unit in Free Trade Zone or
in Export Processing Zone or in a Software Technology Park or in an
Electronic Hardware Technology Park, subject to the prescribed
limits as per FDI Policy.

Any FDI by non-resident in a LLP shall require prior Government/FIPB
approval.
nvestment in Partnership Firm /
roprietary Concern by NRIs & PIOs

Amount is invested by inward remittance or out of NRE / FCNR(B) / NRO
account

The firm or proprietary in any agricultural / plantation or real estate concern
is not engaged in the above business (i.e. dealing in land and immovable
property with a view to earning profit or earning income there from) or print
media sector.

Amount invested shall not be eligible for repatriation outside India

NRIs / PIO may seek prior permission of Reserve Bank for investment in sole
proprietorship concerns / partnership firms with repatriation benefits

ia other than NRIs / PIO may make an
A person resident outside India
application and seek prior approval of Reserve Bank, for making investment
by way of contribution to the capital of a firm or a proprietorship concern
emittance Facilities for Non-Resident
Non Indians /
ersons of Indian Origin / Foreign Nationals

Remittance outside India of current income like rent, dividend, pension,

interest, etc. in India of the account holder is a permissible debit to the
NRO account.

NRIs/ PIO have the option to credit the current income to their Non
Resident (External) Rupee account.

Foreign nationals who come to India on employment and become
residents and are eligible to open/ hold a resident savings bank
account, are permitted to re-designate
designate their resident account
maintained in India as NRO account on leaving the country

A foreign national of non-Indian
Indian origin who has retired from an
employment in India or who has inherited assets from a person resident
in India or who is a widow of an Indian citizen who was resident in India,
may remit an amount not exceeding USD one million, per financial year
(April-March),
emittance Facilities for Non-Resident
Non Indians /
ersons of Indian Origin / Foreign Nationals

When a non-resident or a foreigner in India leaves India, his/her

existing account is re-designated
designated as NRO account in order to
facilitate foreign nationals to collect their pending dues in India

A non-resident
resident being in employment in India, receive/ remit the
whole salary payable to him for the services rendered in India, by
credit to his foreign bank account,, provided that income tax
chargeable under the Income Tax Act, 1961 is paid
emittance of assets by NRI/PIO

A Non-Resident
Resident Indian (NRI) or a Person of Indian Origin (PIO) may
remit an amount up to USD one million, per financial year, out of the
balances held in his Non- Resident (Ordinary) Rupee (NRO) account
/ sale proceeds of assets (inclusive of assets acquired by way of
inheritance or settlement), for all bona fide purposes, subject to
payment of applicable taxes in India,,

Repatriation of sale proceeds of residential property purchased by
NRI / PIO is permitted to the extent of the amount paid for
acquisition of immovable property in foreign exchange received
r
through banking channels. The facility is restricted to not more than
two such properties. The balance amount can be credited to the
NRO account and can be remitted under USD one million facility as
mentioned i
emittance Facilities for students

Students going abroad for studies are treated as Non- Non Resident
Indians (NRIs) and are eligible for all the facilities available to NRIs
under FEMA.

As non-residents,
residents, they will be eligible to receive remittances from
India (i) up to USD 100,000 from close relatives in India, on self
declaration, towards maintenance, which could include
remittances towards their studies also

Up to USD 1 million per financial year, out of sale proceeds of assets
/ balances in their NRO account maintained with an Authorised
Dealer bank in India

All other facilities available to NRIs under FEMA are equally
applicable to the students
nvestments in Real Estates in India
by NRIs and PIOs

There is no restriction on the residential or commercial properties
NRIs can invest in.

But they cannot invest in agricultural land, farm house and
plantations in India.

There are restrictions while repatriating such funds out of India

For instance, if the property was purchased by funds in the FCNR
account, the repatriation cannot exceed the amount paid through
FCNR , NRE or NRO Account.

The sale proceeds must be credited to NRO account of an NRI and
NRI can repatriate to the extent of $1 million per financial year