Frequently Asked Questions On NRI
1. Who is non-resident Indian (NRI)?
Answer :- An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons Posted in U.N. organisations and official deputed abroad by Central/State Governments and Public Sector undertakings on non-temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian Origin are treated on par with non- resident Indian citizen (NRIs). Indians going abroad for study, seminars, lectures, or research are not NRIs. No student can be an NRI until he/she finishes his/her studies and starts working abroad.
2. Who is a person of Indian Origin?
Answer:- For the purposes of Availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India: A foreign citizen (other than a citizen of Pakistan or Bangladesh)is deemed to be of Indian origin, if, he, at any time, held an Indian passport, or he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or citizenship Act, 1955 (57 of 1955).
Note : A spouse (non being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses.
For investments in immovable properties: A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Napal), is deemed to be of Indian origin if he held an Indian passport at any time or he or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
3. What is an OCB?
Answer :- Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include-overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of atleast 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which atleast 60% of the beneficial interest is irrevocable held by such persons.
Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs so long as the ownership/beneficial interest held in them by NRIs continues to be atleast 60%.
4. Are OCBs required to produce any certificate regarding ownership / beneficial interest in them by NRIs?
Answer :- Yes. In order to establish that the ownership/beneficial interest in any OCB held by NRIs is not less than 60%, the concerned body/ trust is required to furnish a certificate from an overseas auditor/chartered accountant/certified public accountant in form OAC where the ownership/ beneficial interest is directly held by NRIs. and in form OAC 1 where it is held indirectly by NRIs and further that such ownership interest is actually held by them and not in the capacity as nominees.
FAQS RELATED TO GENERAL FACILITIES
5. Are persons resident in India required to surrender foreign exchange acquired/held by them?
Answer :- Yes. Residents receiving foreign exchange from abroad by way of gift, inheritance, remuneration for services rendered, etc. are required to bring it to India within three months acquiring the foreign exchange and surrender it to an authorised dealer within seven days from its receipt in India. This rule also applies to non-residents who return to India for a purpose other than temporary visits.
6. Does this rule apply to other assets viz. foreign currency shares/securities or immovable property held abroad?
Answer :- Residents are required to declare such assets to the Reserve Bank within three months from acquiring them and obtain permission of the Reserve Bank for holding them.
7. Are Returning Indians permitted to acquire fresh foreign currency assets by remittance from India?
Answer :- Yes, provided the funds for the purpose are drawn out of their Resident Foreign Currency Accounts
8. Are any concessions available to Returning Indians in respect of assets acquired by them while they were resident outside India?
Answer :- Yes. Persons who have returned to India on or after April 18, 1992 and have stayed abroad for a continuous period of not less than one year have been granted general permission/exemption from the requirement of surrendering/declaring their foreign currency assets abroad. As a result they can continue to maintain their foreign currency accounts and other assets, viz., foreign currency shares/securities or immovable properties abroad.
Under the general permission/exemption, Returning Indians can retain their foreign currency accounts with banks abroad and hold, transfer or dispose of their foreign currency assets. This can be done provided these funds/assets were lawfully acquired by them out of foreign exchange earned through employment, business or vocation outside India taken up or commenced while they were resident outside India and not in contravention of the provisions of the Foreign Exchange Regulation Act (FERA), 1973.
9. Is such an exemption available to any other categories?
Answer :- Yes. Residents who had acquired foreign currency assets abroad before July 8, 1947 can continue to hold them abroad, provided they were held outside India with the general or special permission of the Reserve Bank as on 6th July 1994. This general permission/exemption has also been granted by the Government of India vide their Notification dated July 6, 1994.
10. Do resident donees or legal heirs require the Reserve Bank permission to receive or hold foreign currency assets by way of gift or inheritance from Returning Indians or from those holding assets since prior to July 8, 1947 with the permission of the Reserve Bank?
Answer :- No. Resident donees or legal heirs of the persons covered under the general permission/exemption granted by the Government of India can continue to maintain their foreign currency assets provided in the case of gift the resident donee is a relative, i.e., husband, wife, brother, sister or any lineal ascendant or descendant of the donor and the tax, if any, has been paid in India. Resident donees not eligible for the exemption should surrender the foreign exchange to an authorised dealer against payment in rupees.
11. Can such overseas assets covered by the general permission/exemption be utilised freely?
Answer :- Yes. The resident donees or legal heirs can freely utilise overseas assets covered by the general permission/exemption assets as well as income earned thereon or sale proceeds received subsequently, for bona fide payments in foreign currency.
12. What is the procedure for obtaining such permission?
Answer :- Applications for the purpose should be made in form FAD 1 to the Reserve Bank of India. The forms are available with the Exchange Control Department (Foreign Accounts Section), Amar Building, Bombay-400 001. Returning Indians are also offered the facility of keeping their foreign currency funds with a bank in India. This facility is known as the Resident Foreign Currency (RFC) Account Scheme.
13. What is the Resident Foreign Currency Account Scheme?
Answer :- This is a Scheme drawn up by the Reserve Bank permitting Returning Indians to open foreign currency accounts with banks in India for holding funds brought by them to India. This facility replaces the earlier (RIFEE) facility.
14. What funds can be credited to RFC accounts of Returning Indians?
Answer :- The Returning Indians can credit to RFC accounts, the entire amount of foreign exchange brought to India at the time of their return to India for permanent settlement as well as the balances standing to the credit of their Not Resident (External) (NRE) and Foreign Currency Non-Resident (FCNR) accounts.
15. Can funds in RFC accounts be remitted abroad?
Answer :- Yes. Funds in RFC accounts can be remitted abroad for any bona-fide purpose of the account holder or his dependents as well as withdrawn freely for local payments in rupees.
16. Can persons who have returned to India after a short assignment of less than one year open RFC accounts?
Answer :- Their applications for opening RFC accounts would be considered by the Reserve Bank. Persons who have gone abroad for studies, training, etc., are, however, not eligible for this facility.
17. Can Returning Indians continue to maintain their existing NRE/FCNR/NRO accounts in India?
Answer :- No. Returning Indians are required to redesignate immediately on their return to India their NRE/FCNR accounts as resident rupee accounts or transfer the balances held in their NRE/FCNR accounts to Resident Foreign Currency (RFC) Accounts (if eligible). The Non Resident (Ordinary) (NRO) accounts also have to be redesignated as resident rupee accounts. The funds held in NRO accounts cannot be credited to RFC accounts.
18. Are any tax concessions available to NRIs on balances/deposits held in NRE/FCNR accounts ?
Answer :- Yes. Income from interest on moneys standing to the credit of NRE/FCNR accounts is exempt from income tax. Gifts from such accounts are also free of Gift-tax.
19. What are the tax benefits to the NRNR deposit account holders ?
Answer :- They enjoy the following tax benefits :
Income from the deposits will be free from Indian Income Tax.
The deposit will also be exempt from Gift Tax for one-time gifting (in the case of NRIs only).
Exemption from Income Tax will not be available to resident donee and those residents, who being joint holders, become owners of the deposit as survivor of the non-resident depositor.
20. What about tax benefits on funds held in FCNR accounts?
Answer :- Tax Exemption on interest earned on deposit held in foreign currency is available to non-residents and persons who are not ordinarily resident in India as defined under Income Tax Act, 1961.
21. Can remittances be sent into India otherwise than through the medium of a bank in the country of residence of the remitter?
Answer :- Yes. Exchange Houses in the Gulf countries have been permitted to send remittances into India by means of DDs, MTs and TTs drawn on banks in India.
22. Can NRIs take out of India precious stones or jewellery purchased by them during their visit to India?
Answer :- Yes. NRIs can take out of India precious stones and jewellery (both gold and non-gold) purchased by them in India, without any limit, provided the purchase is made against payment in any convertible foreign currency.
23. Can NRIs take out of India household articles purchased out of funds in NRO accounts during their temporary visit to India?
Answer :- Yes. RBI permits on application such requests received from NRIs upto the value of Rs. 20,000 for articles other than those made of gold or silver or those banned for exports.
24. Can assets held in India by NRIs prior to their becoming non-resident be repatriated outside India?
Answer :- No.
FAQS RELATED TO BANKING
25. What are the different types of accounts that a NRI can open in India ?
Answer :- NRIs / OCBs are permitted to maintain accounts with authorized banks in India, wherein they can remit the funds from abroad. The following types of accounts can be opened by NRIs:
NRE (non resident external) - this account can be in the form of current / savings / fixed deposits and can be opened only by remittance from abroad or deposit of foreign currency, or by transfer of funds from existing NRE/FCNR accounts. The account is maintained in Indian Rupees. Funds standing in this account are FULLY REPATRIABLE.
FCNR (foreign currency deposit account - not in rupees) - This account is in the form of fixed deposit and is designated in specified currencies, which is pound sterling, US dollar, DM, and Japanese yen thereby insulating the deposits from depreciation in the value of Indian Rupee. The interest rates on these deposits are normally substantially lower than the Rupee accounts. Funds standing in this account are FULLY REPATRIABLE.
NRNR (non resident rupee deposits) - This account is in the form of Indian Rupee fixed deposit. Funds for the purpose of deposit can be remitted from abroad / transferred from existing NRE / FCNR accounts. Premature withdrawal from NRE / FCNR freely allowed for investment in NRNR deposit. Period of deposits from six months to three years. Interest earned is repatriable, but the principal is NON-REPATRIABLE.
RFC (resident foreign currency deposit account) - This account can be opened by NRI who has returned to India after his foreign stay of minimum one year and subsequently ceases to be NRI. Deposits in this account are made by foreign remittances as well as transfer from NRE / FCNR account. This account is maintained in any convertible currency and funds are FULLY REPATRIABLE.
26. What are the other salient features of NRE, FCNR, NRNR, and RFC accounts?
Answer :-
Interest on all above deposits is exempt from Indian income tax.
The total balance i.e. principal plus interest is exempt from wealth tax.
Gifts made out of the accounts to close relatives of the account holder in India are exempt from gift tax.
Loans and advances can be granted against the security of term deposits, subject to certain conditions.
Investments can be made by non-residents in permissible securities / shares / debentures / etc. subject to certain conditions.
NRO - This account can be in the form of current / savings / fixed deposits.
An existing account of an individual is converted into a NRO account on his/her attaining NRI status. Deposits in this account can be made by way of remittance from abroad or local deposits. Account is maintained in Indian Rupees. Funds standing in this account are NON-REPATRIABLE.
27. Can NRO / NRE accounts be maintained by NRIs jointly with a resident Indian?
Answer :- NRO account can be held jointly with resident Indians. NRE account cannot be held jointly with resident Indian, however a power of attorney to operate the account can be given by NRI in favour of a resident Indian.
28. Can the principal or the interest accrued on NRNR deposits be repatriated outside India at any time?
Answer :- The principal amount of the deposit is not eligible for repatriation. Interest earned upto 30th September 1994 is also not eligible for repatriation. Interest earned for the period beginning 1st October 1994 is, however, eligible for repatriation.
FAQS RELATED TO INVESTMENTS
29. What are the restrictions for NRIs while purchasing shares and Debentures quoted on the Stock Exchanges in India?
Answer :- NRIs can make portfolio investments in shares and Debentures quoted on the Stock Exchanges in India with full benefits of repatriation of capital and income thereon subject to the following conditions.
Portfolio investments in shares/debentures by NRIs/OCBs are permitted only through designated branches of authorised dealers preferably located at centres having stock exchanges.
Authorised dealers should inform the names of such branches to Central Office of Reserve Bank and obtain approval. The Code number allotted by Reserve Bank should be quoted in all correspondence undertaken with Reserve Bank in this regard. Non-resident investors can also authorise Indian residents or stock exchange brokers as their agents in India to purchase/sell shares on their behalf under the schemes but all transactions should be routed through the designated branch of authorised dealer.
The payment is received through an inward remittance in foreign exchange or by debit to the investor's NRE/FCNR account.
Investment made by any single NRI/OCB investor in equity/preference shares and convertible debentures of any listed Indian company does not exceed 5% of its total paid-up equity or preference capital or 5% of the total paid-up value of each series of convertible debentures issued by it.
NRIs/OCBs take delivery of the shares/convertible debentures purchased and give delivery of the shares/convertible debentures sold under the Scheme.
30. Can NRIs invest their funds in Government securities or Units of Unit Trust of India (UTI)?
Answer :- Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.
31. Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
Answer :- Yes. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.
32. Can Government securities/units be freely transferred or sold?
Answer :- Yes, provided the transfers/sales are arranged through an authorised dealer. Units can, however, be repurchased directly by UTI.
33. Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?
Answer :- If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO account s and cannot be remitted abroad. Interest earned during the financial year 1994-95 and onwards can, however, be remitted to the extent permitted by Reserve Bank.
34. Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?
Answer :- No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights/bonus issue provided the investee company does not carry on agricultural/plantation activity and/or real estate business (excluding real estate development i.e. development of property and construction of houses).
35. Can NRIs make investments in non-convertible debentures of Indian companies?
Answer :- Yes.
36. Can NRIs purchase existing shares/debentures of Indian companies by private arrangement?
Answer :- Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares/debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.
37. Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?
Answer :- Yes. Income/interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation as under:
(a) Up to U.S. $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95;
(b) Up to U.S. $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96;
(c) The entire income earned during the financial year 1996-97 and onwards.
Note : The investment/principal amount of deposits made/held on non-repatriation basis will, however, not be allowed to be repatriated abroad.
38. What is the procedure to be followed for seeking repatriation in such cases?
Answer :- NRIs should designate a branch of an authorised dealer through whom the remittance of income/interest is to be made and make an application in form RCI to Reserve Bank through the designated branch on consolidated basis giving details of income earned d during the previous financial year along with a Chartered Accountant's Certificate. Permission for remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant will be granted to the designated branch.
39. Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?
Answer :- Yes. Authorised dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis.
40. What is the validity period of Reserve Bank approval for the purchase of shares/debentures of Indian companies or units of domestic Mutual Funds?
Answer :- Reserve Bank approval is valid for a period of five years from the date of issue. This can be renewed further by making a request by means of a simple letter.
41. Is there any ceiling on the investment under the Portfolio Investment Scheme?
Answer :- There is an overall ceiling of 5% of paid-up share capital of the company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs (including shares/debentures acquired by FIIs). The overall ceiling can be raised to 24% if the company concerned passes a resolution to that effect in its general body meeting. Individually, NRIs/OCBs can make investment upto 1% of the paid-up share capital/each series of convertible debentures. However, there is no ceiling on investment in domestic Mutual Funds.
42. Can NRIs keep deposits with companies in India with repatriation benefits?
Answer :- Yes. NRIs are permitted to keep deposits with public limited companies in India for a minimum period of three years subject to certain ceilings/conditions. Application for the purpose is required to be made by the company receiving the deposits through an authorised dealer.
43. Do NRIs need permission of Reserve Bank for placing funds in fixed deposits with firms/companies on non-repatriation basis?
Answer :- Yes. Permission for placement of funds in fixed deposits with firms/companies in India is granted by Reserve Bank on application by the depositor or the deposit accepting firm/company, on non-repatriation basis, subject to certain ceilings/conditions.
44. Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies?
Answer :- Yes. General permission has been granted by Reserve Bank to Indian companies to issue CP to NRI individuals subject to the conditions that the amount invested will not be repatriated outside India and the CP will not be transferable.
45. Is permission of Reserve Bank required for sale/transfer of Government securities/units?
Answer :- No. Authorised dealers have been permitted to undertake sale of Government securities/units on behalf of NRIs without prior approval of Reserve Bank. Sale/maturity proceeds can be remitted abroad if the original investment was made out of funds remitted from abroad or funds in NRE/FCNR accounts. Otherwise, they will have to be credited to NRO account of the holder.
46. Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
Answer :- No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC 7.
47. Can NRIs transfer/sell their shares/debentures/bonds held on non-repatriation basis to residents freely?
Answer :- General exemption has been granted by Reserve Bank for transfer/sale of shares/debentures/bonds by NRIs/OCBs through stock exchanges if such transfers are made in favour of an Indian citizen or a person of Indian origin or a company incorporated in India and sale proceeds thereof are credited to NRO account.
48. What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits?
Answer :- In the case of shares/debentures/bonds acquired by NRIs through stock exchanges under the Portfolio Investment Scheme, general exemption has been granted for transfer through stock exchanges provided the sale is arranged through the same designated b ranch through whom they were purchased. In other cases, applications for necessary permission are required to be made to Reserve Bank in form TS 4.
49. What is the procedure to be followed by NRIs for sale/transfer of shares /debentures to residents by private arrangements?
Answer :- NRIs are required to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.
50. Can shares/debentures be given away as gifts to relatives?
Answer :- Yes. Reserve Bank has granted general permission to NRIs to transfer, by way of gift, shares, bonds and debentures of Indian companies held by them with Reserve Bank's permission to their resident close relative/s.
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