Q. 1 Who is a non-resident Indian (NRI)?
Ans. 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 officials
deputed abroad by Central/State Governments and Public Sector
undertakings on temporary assignments are also treated as non-residents).
Non-resident foreign citizens of Indian Origin are treated on
par with non-resident Indian citizens (NRIs).
Q. 2 Who is a person of Indian Origin?
Ans. A. For the purposes of availing of the facilities of opening
and maintenance of bank accounts and investment in shares/securities
in India
A foreign citizen (other than a citizen of Pakistan or Bangladesh)
is deemed to be of Indian origin, if,
(i) he, at any time, held an Indian passport, or
(ii) he or either of his parents or any of his grand parents was
citizen of India by virtue of the Constitution of India or Citizenship
Act, 1955 (57 of 1955).
Note: A spouse (not 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.
B. For investments in immovable properties
A foreign citizen (other than a citizen of Pakistan, Bangladesh,
Afghanistan, Bhutan, Sri Lanka, or Nepal), is deemed to be of
Indian origin if,
(i) he held an Indian passport at any time, or
(ii) 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).
Q. 3 What is an OCB?
Ans. 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 irrevocably
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%.
Q. 4 Are OCBs required to produce any certificate regarding
ownership/beneficial interest in them by NRIs?
Ans. 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.
Q. 5 What are the various facilities available to NRIs/OCBs?
Ans. NRIs/OCBs are granted the following facilities : 1. Maintenance
of bank accounts in India. 2. Investments in securities/shares
of, and deposits with, Indian firms/companies. 3. Investments
in immovable properties in India. Details of these facilities
are given in Chapters II, III and IV.
BANK ACCOUNTS
Q. 6 Can accounts be maintained by NRIs with any bank in India?
Ans. Banks holding authorised dealers' licences (i.e. banks authorised
to deal in foreign exchange) or banks specifically authorised
in this behalf by Reserve Bank can only maintain accounts in the
names of NRIs. Certain co-operative/commercial banks (referred
to as authorised banks) have been specifically permitted to maintain
accounts of NRIs expressed in rupees even though they are not
authorised dealers.
Q. 7 Are NRIs permitted to maintain accounts in rupees and
in foreign currency?
Ans. Yes. Accounts can be maintained by NRIs in rupees as well
as in foreign currency. Accounts in foreign currencies can, however,
be maintained with authorised dealers only.
Q.8 Can NRIs maintain current / savings / fixed deposit rupee
accounts with authorised dealers/authorised banks in India?
Ans. NRO and NRE accounts can be maintained in current/savings/fixed
deposits form while NRNR account can be only in fixed term deposits.
Q.9 What are the different types of rupee accounts permitted
to be maintained?
Ans. Three types of rupee accounts viz. Non-resident (External)
Rupee Accounts (NRE accounts), Ordinary Non-resident Rupee Accounts
(NRO accounts) and Non-resident (Non-repatriable) Rupee deposit
accounts (NRNR) are permitted to be maintained.
Q.10 Can proceeds of foreign currency notes/travellers cheques
be credited to NRE accounts without any restriction?
Ans. Authorised dealers have been permitted to credit the proceeds
of foreign currency notes/travellers cheques brought by the account
holder from abroad during his visit to India provided they are
tendered in person. Where the amount of foreign currency notes
tendered exceeds U.S.$ 2,500 or its equivalent or the total amount
tendered i.e. currency notes and travellers cheques, are in excess
of U.S.$ 10,000 or its equivalent, it should have been declared
to the Customs on the Currency Declaration Form (CDF) at the time
of the account holder's arrival into India. Further, in the case
of travellers cheques, they should be presented by the account
holder himself and discharged by him in the presence of the official
of the concerned bank.
Q.11 Can NRE accounts be opened by the power of attorney holder
in India on behalf of a non-resident?
Ans. No.
Q.12 Can resident Power of Attorney holder operate on the
NRE accounts?
Ans. Yes, but only for local payments to be made on behalf of
the account holder. In cases where the account holder or a bank
designated by him has been granted permission by Reserve Bank
to make investments in India, the Power of Attorney holder (POA)
is permitted to operate the account to facilitate such investments.
POA holders cannot, however, make gifts from NRE accounts.
Q. 13 Can Power of Attorney holder credit proceeds of foreign
currency notes/bank notes and travellers cheques to the NRE accounts?
Ans. No.
Q. 14 What is the distinction between NRE account and NRO
account?
Ans. Balances held in NRE accounts can be repatriated abroad freely,
whereas funds in NRO account cannot be remitted abroad but used
only for local payments in rupees. Consequently, funds remitted
from abroad or local funds which can otherwise be remitted abroad
to the account holder can only be credited to NRE accounts. Funds
which do not qualify, under the Exchange Control regulations,
for remittance outside India are required to be credited to NRO
accounts.
Q. 15 Can NRO/NRE accounts be maintained by NRIs jointly with
residents?
Ans. NRO accounts can be held jointly with residents. However,
NRE accounts cannot be held jointly with residents.
Q. 16 What is the rate of interest payable on such accounts?
Ans. In the case of NRE accounts, the interest rates for deposits
up to one year should not exceed Bank Rate minus 2 percentage
points. Interest rates on term deposits of over one year are determined
by the banks themselves. Interest rates on NRO accounts are fixed
as in the case of domestic deposits.
Q. 17 Are debits and credits to NRO accounts allowed freely
by banks maintaining the accounts?
Ans. Yes. Debits for local payments are allowed freely. Funds
representing legitimate dues of the account holder or proceeds
of remittances received from abroad through banking channels are
permitted to be credited freely.
Q. 18 What are the admissible debits and credits to NRE accounts?
Ans. Debits for local payments/investments are allowed freely.
Credits to an account, of funds emanating from a local source
would be permissible only if the funds are of a repatriable nature
i.e. are eligible to be remitted abroad.
Q. 19 Can funds in NRE/NRO accounts be repatriated outside
India?
Ans. Funds held in NRE accounts can be repatriated abroad freely.
Funds held in NRO accounts which would generally be from a local
source cannot be repatriated outside India. Interest earned on
funds in NRO accounts during the financial year 1994-95 and onwards
can, however, be remitted to the extent permitted by Reserve Bank
(See Answers to Questions 59 and 60).
Q. 20 Can funds in NRE/NRO accounts be utilised for payment
of air fare to/from/in India of the account holder and/or his
dependents?
Ans. Yes. Banks maintaining the accounts have been authorised
to permit such payments. Airlines/shipping companies and their
agents have also been permitted to accept payments in rupees from
the funds held in NRO/NRE accounts for the purpose.
Q. 21 Are temporary overdrawings permitted in NRO Savings
Bank accounts?
Ans. Yes. Authorised dealers may allow such overdrawings up to
Rs. 1,000/- subject to the condition that the overdrawings together
with the interest payable thereon are cleared within a period
of two weeks.
Q. 22 Are NRO/NRE/NRNR account holders eligible for loans/overdrafts
against their fixed deposits?
Ans. Yes, except for the purpose of relending, carrying on agricultural/plantation
activities or for investment in real estate business. Loans against
NRE fixed deposits can, however, be utilised for investments in
India on non-repatriation basis, in certain specified areas and
for acquisition of flats/houses subject to prescribed conditions.
Q. 23 What are the rates of interest charged on such loans?
Ans. While interest on loans up to Rs.2 lakhs against NRO/NRE
fixed deposit accounts will be charged two percent above the rates
paid by banks for the concerned deposits, repayment of loans will
have to be made either by adjustment of the deposits or by fresh
remittances from abroad. Banks are free to charge interest on
loans above Rs.2 lakhs.
Q. 24 Can loans raised against NRE fixed deposits be repaid
out of funds in NRO accounts?
Ans. The loans raised against NRE deposits can be repaid out of
NRO funds but in such cases, the interest would be charged at
commercial rate as in force from time to time.
Q. 25 Is nomination allowed in NRO/NRE accounts?
Ans. Yes.
Q. 26 Is repatriation of funds belonging to non-resident nominees
permitted?
Ans. Funds held in NRO account will be allowed to be credited
to the non-resident nominee's NRO account only and no repatriation
is permitted. Repatriation of funds from the deceased person's
NRE account will be permitted by authorised dealers.
Q. 27 Is transfer of funds between NRE accounts maintained
by two different account holders permitted?
Ans. Yes. Authorised dealers can permit transfer of funds from
the NRE account of one person to the NRE account of another person
for bona fide personal purposes. Transfers by way of gifts are
permitted subject to payment of gift tax.
Q. 28 At what rates are remittances to India by NRIs for credit
to NRE/NRO/NRNR accounts converted into rupees?
Ans. Remittances made for credit to rupee accounts (i.e. NRE/NRO/NRNR
accounts) maintained by NRIs are converted at market rate.
Q. 29 Is there any scheme under which non-residents other
than NRIs can also keep rupee deposits with banks in India?
Ans. Yes, NRIs and other non-residents can maintain NRO rupee
accounts as well as keep deposits with banks in India under NRNR
Rupee Deposit Scheme.
Q. 30 How should an account under the Non-Resident Non-repatriable
(NRNR) Rupee Deposit Scheme be opened?
Ans. Such an account can be opened with an authorised dealer in
India by remitting funds from abroad in any convertible foreign
currency. Under the NRNR Scheme, deposits designated in rupees
can be kept for periods ranging from 6 months to 3 years. NRIs
can also open such accounts by transferring funds from their existing
NRE/FCNR accounts. No penal interest is chargeable for premature
withdrawal of NRE/FCNR deposits for the purpose of making investment
in the scheme if the deposit is to be kept with the same authorised
dealer.
Q. 31 What is the rate of interest payable on NRNR deposits?
Ans. Banks are free to determine the interest rates under this
Scheme.
Q. 32 Can the principal or the interest accrued on NRNR deposits
be repatriated outside India at any time?
Ans. The principal amount of the deposit is not eligible for repatriation.
Interest earned up to 30th September 1994 is also not eligible
for repatriation. Interest earned for the period beginning 1st
October 1994 is, however, eligible for repatriation or can be
utilised for opening fresh NRE/FCNR deposits, or can be credited
to existing NRE accounts.
Q. 33 Can the principal together with the interest accrued
on NRNR deposits be renewed, on maturity?
Ans. Only the principal amount of deposit could be renewed under
the scheme upto 30th September 1994. However, since interest accrued
for the period from 1st October 1994 is repatriable, the principal
amount together with interest accrued for the period from 1st
October 1994 can be renewed under the scheme.
Q. 34 Can loans/overdrafts be availed of against the security
of these deposits?
Ans. Yes. Authorised dealers are permitted to grant loans/overdrafts
for purposes other than investment.
Q.34A What is the status of NRO/NRE accounts on the return
of the account holder to India?
Ans. Banks have been advised to redesignate such accounts as resident
accounts on return of the account holder to India.
Q.34B Does the account holder suffer any loss of interest on
such redesignation of accounts?
Ans. No Banks have been advised to continue to pay interest at
the contracted rate till the maturity of the deposit if the deposit
is held for the full term even after conversion into resident
rupee account.
Q. 35 Can accounts be maintained by NRIs in foreign currencies?
Ans. Yes. Accounts in foreign currencies (FCNR accounts) can be
maintained by NRIs with authorised dealers in India.
Q. 36 What are the foreign currencies in which such accounts
can be maintained?
Ans. FCNR Accounts can be maintained in Pound Sterling, U.S. Dollar,
Deutsche Mark and Japanese Yen.
Q. 37 Are FCNR accounts permitted to be maintained in the
form of current/savings accounts?
Ans. No. FCNR accounts can be maintained only in the form of 'term
deposits', i.e. a deposit kept for fixed periods ranging from
6 months to 3 years.
Q. 38 What is the maximum period of maturity for a FCNR term
deposit account?
Ans. The maximum period of maturity is three years.
Q. 39 Is premature withdrawal of the FCNR term deposit allowed?
Ans. Yes. However, this is subject to the levy of a penalty.
Q. 40 What is the penalty for premature withdrawal of a FCNR
deposit?
Ans. Interest in such cases is paid at one per cent below the
interest rate payable for the period for which the deposit has
actually run. Interest on deposits is, however, payable only if
they are kept for a minimum period of six months.
Q. 41 If a FCNR deposit of 6 months maturity is withdrawn
prematurely, would any interest be payable?
Ans. No. While the premature withdrawal would be allowed, no interest
would be payable. For such premature withdrawals the bank may
levy penalty as per their discretion.
Q. 42 Are the interest rates on FCNR deposits liable for periodical
revision?
Ans. Yes. The Banks have been permitted to offer interest on such
deposits at rates not more than the LIBOR prevailing on the last
working day of the previous week for the relevant maturity and
currency. Subject to this guideline, banks can offer either fixed
or floating rate of interest on such deposits.
Q. 43 What about debits to FCNR accounts for local payments?
Ans. Debits for local payments in rupees are allowed freely. As
regards debits for investments in India, please see Chapters III
and IV.
Q. 44 Are funds in FCNR accounts freely repatriable abroad?
Ans. Yes. Authorised dealers maintaining these accounts would
allow repatriation abroad of these funds.
Q.44A Can FCNR deposits be held jointly with residents?
Ans. No.
Q. 45 Is nomination allowed in FCNR accounts?
Ans. Yes.
Q. 46 Is repatriation of FCNR funds to non-resident nominees
permitted?
Ans. Yes. (Also see answer to Q. 26 for repatriation of funds
in NRE account)
Q.46A What is the status of FCNR accounts on the return of
the account holder to India?
Ans. Banks would treat the deposits held in FCNR accounts as resident
deposits but would continue to pay interest at the contracted
rate till maturity of the deposit.
Q. 47 Can NRIs invest their funds in Government securities
or Units of Unit Trust of India (UTI)?
Ans. 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.
Q. 48 Can NRIs make investments in National Savings Certificates
issued by Post Offices in India?
Ans. 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.
Q. 49 Can Government securities/units be freely transferred
or sold?
Ans. Yes, provided the transfers/sales are arranged through an
authorised dealer. Units can, however, be repurchased directly
by UTI.
Q. 50 Are sale/maturity proceeds of Government securities/Units/National
Savings Certificates allowed to be repatriated abroad?
Ans. If such securities were purhased 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 accounts
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 (See Answers to Questions 59 and 60).
NRIs are permitted to make direct investments
in proprietary/partnership concerns in India as also in shares/debentures
of Indian companies. They are also permitted to make portfolio
investments i.e. purchase of shares/debentures of Indian companies
through stock exchange/s in India. These facilities are granted
both on repatriation and non-repatriation basis.
Direct Investment without Repatriation
benefits
Q. 51 Is permission of Reserve Bank required for NRIs to invest
in proprietary/partnership concerns on non-repatriation basis?
Ans No. Reserve Bank has granted general permission to non-resident
individuals of Indian nationality/origin to invest by way of capital
contribution in any proprietary or partnership concern in India
on non-repatriation basis provided the investee concern is not
engaged in any agricultural/plantation activity or real estate
business. This facility is, however, not available to OCBs.
Q. 52 Is permission of Reserve Bank required for making investments
in new issues of Indian companies on non-repatriation basis?
Ans. 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 is not engaged in agricultural/plantation activity or
real estate business (excluding real estate development i.e. development
of property and construction of house) or chit fund or is not
a Nidhi company.
Q. 53 Are any formalities required to be completed by NRIs
for getting the benefit of the above general permission?
Ans. No. However, the firms/companies concerned are required to
file declarations with Reserve Bank in form DIN giving particulars
of the investments made, within ninety days from the date of the
investment.
Q. 54 Can NRI individuals make investments in domestic public/private
sector Mutual Funds or Money Market Mutual Funds floated by commercial
banks and public/private sector financial institutions on non-repatriation
basis?
Ans. Yes.
Q. 55 Can Overseas Corporate Bodies make similar investments
in mutual funds on non-repatriation basis?
Ans. OCBs can make such investments only in domestic public/private
sector Mutual Funds. They can also make investments in Money Market
Mutual Funds.
Q. 56 Can NRIs make investments in non-convertible debentures
of Indian companies?
Ans. Yes. Applications for necessary permission should be made
to Reserve Bank (Central Office) by the concerned Indian company
in form ISD.
Q. 57 Can NRIs purchase existing shares/debentures of Indian
companies by private arrangement?
Ans. 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.
Q. 58 Is it necessary for a resident, holding securities in
Indian companies, to secure any approval from Reserve Bank on
his becoming a non-resident for holding such securities?
Ans. No. Reserve Bank has granted general permission to companies
in India to enter the overseas addresses of the shareholders in
their books in such cases provided the companies obtain undertakings
from the holders that they will not seek repatriation of any income
or sale proceeds of the security.
Q. 59 Is income/interest earned on investments/deposits held
in India by NRIs on non-repatriation basis allowed to be repatriated?
Ans. 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.
Q. 60 What is the procedure to be followed for seeking repatriation
in such cases?
Ans. NRIs should designate a branch of an authorised dealer through
whom the remittance of income is to be made and make an application
in form RCI to the designated branch giving details of incomes
earned during the previous financial year alongwith a Chartered
Accountant's Certificate. The designated branch will allow the
remittance of net amount (i.e. after payment of tax) or credit
it to NRE/FCNR account of the applicant.
Direct Investment with Repatriation
benefits
Q. 61 What are the schemes available to NRIs for direct investments
in India with repatriation benefits?
Ans. NRIs can make investments in new issues of shares/convertible
debentures of Indian companies under direct investment schemes
such as 24% scheme/40% scheme/100% scheme. They can also invest
in the schemes of domestic Mutual Funds floated by public/private
sector institutions/companies and bonds issued by public sector
undertakings. Non-resident investors are not required to apply
for permission to invest but the company concerned will have to
obtain permission from Reserve Bank.
Q. 62 What is 24% Scheme?
Ans. Under the 24% Scheme, Indian companies engaged or proposing
to engage in any activity including finance, hire purchase, leasing,
trading or other services, establishment of schools/colleges,
etc. (except agricultural/plantation activities) are allowed by
Reserve Bank to issue shares/debentures to NRIs with repatriation
benefits to the extent of 24% of the new issue.
Q. 63 What is 40% Scheme?
Ans. Under the 40% Scheme, Indian companies engaged or proposing
to engage in the following activities are allowed by Reserve Bank
to issue shares/debentures to NRIs with repatriation benefits
to the extent of 40% of the new issue.
(i) Industrial and manufacturing units
(ii) Hotels with 3, 4 or 5 star category
(iii) Hospitals and diagnostic centres
(iv) Shipping companies
(v) Development of computer software
(vi) Oil exploration services
Q. 64 Is remittance of interest/dividend to NRI investors
freely allowed under the 24%/40% Scheme?
Ans. Yes. There is no ceiling or restriction on the amount of
remittable dividend. Remittance of interest/dividend to NRI investors
will be allowed by authorised dealers under the powers delegated
to them.
Q. 65 What are the specified industries under the 100% Scheme?
Ans. Under 100% Scheme, NRIs are permitted to invest in high priority
industries listed in Annexure III to the Statement on Industrial
Policy dated 24th July 1991 of the Government of India up to 100%
of the new issue.
Q. 66 Is dividend/interest earned in respect of investments
made under the 100% Scheme freely remittable to the NRIs abroad?
Ans. Dividend/interest can be remitted freely except in the case
of consumer goods industries where the outflow on account of dividend
is required to be balanced by export earnings of the company either
in the year of declaration of dividend or in the years prior to
the declaration of dividend. This requirement is enforced for
a period of seven years from the commencement of commercial production.
Q. 67 How does an NRI obtain permission of Reserve Bank for
investment under the 24% or 40% or 100% Scheme?
Ans. The NRI investor need not apply to Reserve Bank. Application
for necessary permission under the schemes should be made by the
Indian company/firm to the Central Office of Reserve Bank in Mumbai
in form ISD/ISD(R).
Q. 68 Besides the 24%, 40% and 100% Schemes is there any other
scheme for investment by NRIs in the equity of Indian companies?
Ans. Yes. NRIs are permitted to undertake revival of sick industrial
units by making bulk investment in them to the extent of 100 per
cent either by way of purchase of existing equity shares or in
the form of subscription to new equity issues.
Q. 69 Is the capital brought into India for revival of a sick
industrial unit allowed to be repatriated?
Ans. Yes.
Q. 70 How can an NRI obtain permission of Reserve Bank for
investment in a sick industrial unit?
Ans. Application for necessary permission should be made by the
Indian company to the Central Office of Reserve Bank in Mumbai
in form RSU.
Q. 71 Under the existing Industrial Policy, investment by
foreign collaborators upto 50%/51%/74% of the equity is allowed
by Reserve Bank on repatriation basis in certain high priority
industries. Can NRIs take up the balance 50%/49%/26% equity in
such cases on repatriation basis?
Ans. Yes.
Q. 72 Can NRIs make investments in companies engaged in real
estate development in India?
Ans. Yes. Investment upto 100% in the new issue of equity shares/convertible
debentures of Indian companies engaged in the following areas
is allowed -
i) Development of serviced plots and construction of built up
residential premises;
ii) Real estate covering construction of residential and commercial
premises including business centres and offices;
iii) Development of township;
iv) City and region level urban infrastructure facilities including
roads and bridges;
v) Manufacture of building material;
vi) Financing of housing development.
Q. 73 What is the procedure for obtaining Reserve Bank permission
in this regard?
Ans. Applications for the purpose should be made by the concerned
Indian company to the Central Office of Reserve Bank in Mumbai
in form ISD(R).
Q. 74 Will repatriation of the origional investment and/or
dividend income be freely permitted?
Ans. Yes. Repatriation of original investment will be permitted
after a lock-in period of three years from the date of issue of
the equity shares/convertible debentures. In addition, OCBs will
be permitted to repatriate net profit (upto 16 per cent) arising
from the sale of such investment after the lock-in-period of three
years. Annual dividend/interest on equity shares/debentures can,
however, be freely remitted subject to payment of tax.
Q. 75 Are investments in Air Taxi operations permitted to
be made by NRIs?
Ans. Yes. Investments upto 100% equity participation for carrying
on Air Taxi operations are permitted in terms of the guidelines
issued by the Director General of Civil Aviation for Air Taxi
operations. Applications for the purpose should be made to Reserve
Bank (Central Office) in form ISD(R) by the concerned Indian company.
Q. 76 Are there any restrictions on repatriation of the investment
made under this scheme or income earned thereon?
Ans. No. However, repatriation of the investment and/or remittance
of dividend will be permitted only after the expiry of five years
of operation and only out of accumulated net foreign exchange
earnings.
Q. 77 Can NRIs invest in non-convertible debentures on repatriation
basis?
Ans. Yes. Application for necessary permission should be made
to Reserve Bank (Central Office) by the concerned Indian company
in form ISD(R).
Q. 78 What is the procedure to be followed for making investment
in the schemes of domestic Mutual Funds or public sector bonds
with repatriation benefits?
Ans. The concerned Fund/Public Sector Undertaking should obtain
necessary permission from Reserve Bank for issue of units/bonds
to NRIs. Applications for the purpose are required to be made
to the Central Office of Reserve Bank in form ISD(R).
Q. 79 Can NRIs invest in 100% Export Oriented Units on repatriation
basis?
Ans. Yes. NRIs will be permitted to invest up to 100% in 100%
Export Oriented Units subject to obtaining approval from the Government
of India, Ministry of Industries (SIA) for setting up the EOU.
In the case of units located in Export Processing Zones, approval
from the Development Commissioner of the concerned zone is required
to be obtained. Thereafter an application should be made to the
concerned regional office of Reserve Bank in form ISD alongwith
copy of Government approval for necessary clearance under FERA
1973.
Q. 80 Can NRIs acquire shares disinvested by Government of
India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Ans. Yes. Reserve Bank has granted general permission to NRIs
to acquire shares of PSEs on their bids being successful provided
the holding of a single NRI investor does not exceed one per cent
of the paid up capital of the PSE concerned, the purchase consideration/bid
money is paid by way of remittance from abroad or by debit to
his NRE/FCNR accounts.
Q. 81 What is the procedure for issue of rights entitlement
to NRIs?
Ans. The concerned company should approach Reserve Bank for issue
of rights entitlement to NRIs in the prescribed form if on repatriation
basis. However, rights entitlement on non-repatriation basis would
be covered by the general permission (Please see Answer to Question
No. 52 and 53).
Q. 82 What is the procedure required to be followed by NRIs
for renunciation of rights entitlement?
Ans. NRIs can make an application to Reserve Bank by a letter
detailing therein the folio number of the shares held and the
manner in which the rights are being sold.
Q. 83 What is the procedure for issue of bonus shares?
Ans. The concerned Indian company should approach Reserve Bank
for issue of bonus shares to NRIs if the original investment is
on repatriation basis. Issue of bonus shares in respect of investment
on non-repatriation basis is covered by general permission (Please
also see Answer to Question No. 52).
Q. 84 Can NRIs obtain loans abroad against the collateral
of shares/debentures of Indian companies?
Ans. 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.
Q. 85 Can sale proceeds of the shares/debentures be remitted
abroad for liquidation of outstandings against such loans/overdrafts?
Ans. Yes, subject to payment of Income tax, Capital Gains tax
etc. payable, if any.
Portfolio Investment Scheme
Q. 86 What is the Portfolio Investment Scheme?
Ans. Under this scheme, NRIs are permitted to acquire shares/debentures
of Indian companies or units of domestic Mutual Funds through
the stock exchange/s in India.
Q. 87 What is the procedure for making applications?
Ans. The application is to be submitted to Reserve Bank through
a designated branch of a bank in India in one of the prescribed
forms, i.e. NRC/NRI/RPC/RPI.
Q. 88 What is a designated branch?
Ans. Reserve Bank has authorised a few branches of each bank to
conduct the business under Portfolio Investment Scheme on behalf
of NRIs. These branches are the main branches of major commercial
banks located close to the stock exchange/s. NRIs will have to
route their applications through any of the designated bank branches
who have authorisation from Reserve Bank.
Q. 89 Whether NRI can apply through more than one designated
branch?
Ans. No. Each NRI has to select one branch for this purpose for
investment on repatriation/non-repatriation basis.
Q. 90 Is it necessary to maintain a bank account with the
designated branch through whom the application is made?
Ans. It is advisable to maintain a bank account with the designated
branch for administrative convenience.
Q. 91What is the validity period of Reserve Bank approval
for the purchase of shares/debentures of Indian companies or units
of domestic Mutual Funds?
Ans. 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.
Q. 92 Is there any ceiling on the investment under the Portfolio
Investment Scheme?
Ans. There is an overall ceiling of 5% of paid-up equity share
capital of the company/paid-up value of each series of convertible
debentures for purchase by NRIs/OCBs. The overall ceiling can
be raised to 30% if the company concerned passes a special resolution
to that effect in its general body meeting and a Board resolution.
Individually, NRIs/OCBs can make investment upto 1% of the paid-up
equity share capital/each series of convertible debentures. However,
there is no ceiling on investment in domestic Mutual Funds.
Company Deposits
Q. 93 Can NRIs keep deposits with companies in India with repatriation
benefits?
Ans. 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.
Q. 94 Do NRIs need permission of Reserve Bank for placing
funds in fixed deposits with firms/companies on non-repatriation
basis?
Ans. 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.
Q. 95 Are NRIs permitted to invest in Commercial Paper (CP)
issued by Indian companies?
Ans. 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
Sale/Transfer of Shares/Securities
Q. 96 Is permission of Reserve Bank required for sale/transfer
of Government securities/units?
Ans. 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.
Q. 97 Is permission of Reserve Bank required by NRIs for sale/transfer
of shares/debentures of Indian companies to other NRIs?
Ans. 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.
Q. 98 Can NRIs transfer/sell their shares/debentures/bonds
held on non-repatriation basis to residents freely?
Ans. Yes. 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.
Q. 99 What is the procedure for sale/transfer of shares/debentures/bonds
held by NRIs with repatriation benefits?
Ans. 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 branch
through whom they were purchased. In other cases, applications
for necessary permission is required to be made to Reserve Bank
in form TS 4.
Q. 100 What is the procedure to be followed by NRIs for sale/transfer
of shares/debentures to residents by private arrangements?
Ans. NRIs are required to submit application in form TS 1 to Reserve
Bank for sale of shares/debentures by private arrangements.
Q. 101 Can shares/debentures be given away as gifts to relatives?
Ans. 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.
Section 4: INVESTMENT IN IMMOVABLE PROPERTY
Q. 102 Do non-resident Indian citizens require permission of Reserve
Bank to acquire residential/commercial property in India?
Ans. No.
Q. 103 Do foreign citizens of Indian origin require permission
of Reserve Bank to purchase immovable property in India for their
residential use?
Ans. Yes. However, Reserve Bank has granted general permission
to foreign citizens of Indian origin, whether resident in India
or abroad, to purchase immovable property in India for their bona
fide residential purpose. They are, therefore, not required to
obtain separate permission of Reserve Bank.
Q. 104 In what manner the purchase consideration for the residential
immovable property should be paid by foreign citizens of Indian
origin under the general permission?
Ans. The purchase consideration should be met either out of inward
remittances in foreign exchange through normal banking channels
or out of funds from NRE/FCNR accounts maintained with banks in
India.
Q. 105 What are the formalities required to be completed by
foreign citizens of Indian origin for purchasing residential immovable
property in India under the general permission?
Ans. They are required to file a declaration in form IPI 7 with
the Central Office of Reserve Bank at Mumbai within a period of
90 days from the date of purchase of immovable property or final
payment of purchase consideration alongwith a certified copy of
the document evidencing the transaction and bank certificate regarding
the consideration paid.
Q. 106 Can such property be sold without the permission of
Reserve Bank?
Ans. Yes. Reserve Bank has granted general permission for sale
of such property. However, where the property is purchased by
another foreign citizen of Indian origin, funds towards the purchase
consideration should either be remitted to India or paid out of
balances in NRE/FCNR accounts.
Q. 107 Can sale proceeds of such property if and when sold
be remitted out of India?
Ans. In respect of residential properties purchased on or after
26th May 1993, Reserve Bank considers applications for repatriation
of sale proceeds up to the consideration amount remitted in foreign
exchange for the acquisition of the property for two such properties.
The balance amount of sale proceeds if any or sale proceeds in
respect of properties purchased prior to 26th May 1993, will have
to be credited to the oridinary non-resident rupee account of
the owner of the property.
Q. 108 Are any conditions required to be fulfilled if repatriation
of sale proceeds is desired?
Ans. Applications for repatriation of sale proceeds are considered
provided the sale takes place after three years from the date
of final purchase deed or from the date of payment of final instalment
of consideration amount, whichever is later.
Q. 109 What is the procedure for seeking such repatriation?
Ans. Applications for necessary permission for remittance of sale
proceeds should be made in form IPI 8 to the Central Office of
Reserve Bank at Mumbai within 90 days of the sale of the property.
Q. 110 Can foreign citizens of Indian origin acquire or dispose
of residential property by way of gift?
Ans. Yes. Reserve Bank has granted general permission to foreign
citizens of Indian origin to acquire or dispose of properties
up to two houses by way of gift from or to a relative who may
be an Indian citizen or a person of Indian origin whether resident
in India or not, provided gift tax has been paid.
Q. 111 Can foreign citizens of Indian origin acquire commercial
properties in India?
Ans. Yes. Under the general permission granted by Reserve Bank
properties other than agricultural land/farm house/plantation
property can be acquired by foreign citizens of Indian origin
provided the purchase consideration is met either out of inward
remittances in foreign exchange through normal banking channels
or out of funds from the purchasers' NRE/FCNR accounts maintained
with banks in India and a declaration is submitted to the Central
Office of Reserve Bank in form IPI 7 within a period of 90 days
from the date of purchase of the property/final payment of purchase
consideration.
Q. 112 Can they dispose of such properties?
Ans. Yes.
Q. 113 Can sale proceeds of such property be remitted out
of India?
Ans. Yes. Repatriation of original investment in respect of properties
purchased by foreign citizens of Indian origin on or after 26th
May 1993 will be allowed to be remitted up to the consideration
amount originally remitted from abroad provided the property is
sold after a period of three years from the date of the final
purchase deed or from the date of payment of final instalment
of consideration amount, whichever is later. Applications for
the purpose are required to be made to the Central Office of Reserve
Bank within 90 days of the sale of property in form IPI 8.
Q. 114 Can the properties (residential/commercial) be given
on rent if not required for immediate use?
Ans. Yes. Reserve Bank has granted general permission for letting
out any immovable property in India. The rental income or proceeds
of any investment of such income has to be credited to NRO account.
Q.115 Can NRIs obtain loans for acquisition of a house/flat
for residential purpose from financial institutions providing
housing finance?
Ans. Reserve Bank has granted general permission to certain financial
institutions providing housing finance e.g. HDFC, LIC Housing
Finance Ltd., etc., to grant housing loans to non-resident Indian
nationals for acquisition of a house/flat for self-occupation
subject to certain conditions.
Q. 116 Can authorised dealer grant loans to NRIs for acquisition
of a flat/house for residential purposes?
Ans. Authorised dealers have been granted permission to grant
loans to non-resident Indian nationals for acquisition of house/flat
for self-occupation on their return to India subject to certain
conditions. Repayment of the loan should be made within a period
not exceeding 15 years out of inward remittance through banking
channels or out of funds held in the investors' NRE/FCNR/NRO accounts.
Q. 117 Can Indian companies grant loans to their NRI staff?
Ans. Reserve Bank permits Indian firms/companies to grant housing
loans to their employees deputed abroad and holding Indian passport
subject to certain conditions.
FACILITIES TO RETURNING INDIANS
A. Overseas Assets
Q. 118 Are Returning Indians permitted to retain their assets
abroad even after return to India?
Ans. Effective 17th July 1992, the Central Government has granted
exemption from the surrender requirement to persons who return
to India after a continuous stay abroad of one year and above
in respect of funds/assets acquired by them abroad otherwise than
in contravention of FERA 1973 or out of foreign exchange earned
through employment, business or vocation outside India taken up
or commenced while they were resident outside India. Persons satisfying
the conditions of general exemption can retain their foreign currency
accounts with banks abroad and/or hold, transfer or dispose of
their other foreign currency assets such as shares, securities
or investments in business, etc. and immovable properties.
Q. 119 Are they required to obtain any permission from Reserve
Bank for holding these assets?
Ans. No.
Q. 120 Do they enjoy any freedom in regard to utilisation
of these overseas assets?
Ans. Yes. They would enjoy complete freedom for utilisation of
these assets as well as income earned or sale proceeds received
subsequently.
Q. 121 Can they bring back the overseas assets to India and
hold them with separate identity?
Ans. Yes. They can repatriate these assets to India and hold them
separately in India with authorised dealers under the Resident
Foreign Currency Accounts Scheme (See Part B below).
Resident Foreign Currency (RFC) Accounts
Scheme
Q. 122 What is the Resident Foreign Currency (RFC) Account
Scheme?
Ans. This is a Scheme approved by Reserve Bank permitting persons
of Indian nationality or origin, who have returned to India on
or after 18th April 1992 for permanent settlement (Returning Indians),
after being resident outside India for a continuous period of
not less than one year to open foreign currency accounts with
banks in India for holding funds brought by them to India. Persons
who have returned to India before 18th April 1992 can also open
RFC account if (a) they are holding foreign currency assets abroad
with Reserve Bank's permission or (b) are in receipt of pension
or other monetary benefits from their erstwhile employers abroad.
Q. 123 Is any permission from Reserve Bank required for opening
such accounts with authorised dealers?
Ans. No.
Q. 124 In which currencies can RFC accounts be maintained?
Ans. RFC accounts can be maintained in any convertible currency.
Q. 125 What funds can be credited to RFC accounts of Returning
Indians?
Ans. 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 NRE and FCNR
accounts at the time of return can be credited to RFC accounts.
However, the foreign exchange brought to India in the form of
foreign currency notes/bank notes/travellers cheques should have
been declared to Customs at the time of arrival on the Currency
Declaration Form (CDF) if it exceeded U.S. $ 10,000 or its equivalent.
In the case of foreign currency/bank notes, such a declaration
on form CDF is compulsory if the amount exceeds U.S. $ 2,500 or
its equivalent.
Q. 126 Can income received from their overseas assets in the
form of dividends etc., or sale proceeds of such assets be credited
to RFC accounts?
Ans. Yes. The entire income from such assets or sale proceeds
of such assets repatriated to India can be credited to RFC accounts.
Q. 127 Can pension received by the account holder from abroad
be credited to his RFC account?
Ans. Yes. The entire amount of pension received from abroad can
be credited to his RFC account.
Q. 128 NRIs returning to India for permanent settlement were
granted RIFEE facility. Is this facility still available?
Ans. No. RIFEE facility has been replaced by the RFC accounts
facility.
Q. 129 Can funds in RFC accounts be remitted abroad?
Ans. Yes. Funds in RFC accounts can be remitted abroad for any
bona fide purpose of the account holder or his dependents including
exchange required for travel and other personal purposes and investments.
Q. 130 Can funds in RFC accounts be utilised for local payments?
Ans. Yes. Funds in RFC accounts can be withdrawn freely for local
payments in rupees.
Q. 131 Can a Returning Indian desiring to go abroad again
for employment, business or vocation transfer his funds in RFC
account to NRE/FCNR account?
Ans. Yes.
Q. 132 Can persons who have returned to India after a short
assignment of less than one year open RFC accounts?
Ans. Their applications for opening such accounts would be considered
by Reserve Bank. Persons who have gone abroad for studies, training,
etc. are, however, not eligible for this facility.
C. Import of Gold by NRIs
Q. 133 Can NRIs bring gold into India?
Ans. Yes. NRIs can bring into India gold upto 10,000 grams as
part of their baggage once in six months provided they have stayed
abroad for a continuous period of six months.
Q. 134 In what form can the gold be brought into India?
Ans. The gold may be brought into India in any form, including
ornaments (other than ornaments studded with stones and pearls).
Q. 135 Are NRIs required to pay customs duty on the gold brought
by them into India?
Ans. Yes. They are required to pay customs duty in any convertible
foreign currency at a rate equivalent to Rs. 220/- per 10 grams
of gold.
Q. 136 How often can a NRI bring gold into India?
Ans. A NRI can bring gold into India once in six months.
Q. 137 Is it necessary that the NRI should have stayed abroad
at least for a minimum period of six months prior to his return
to India for being eligible to bring gold?
Ans. Yes.
D. Import of Silver by NRIs
Q. 138 Can NRIs bring silver into India?
Ans. Yes. NRIs can bring to India silver upto 100 kilograms as
part of their personal baggage.
Q. 139 What is the rate of duty payable on such import?
Ans. The rate of duty on import of silver is Rs. 500 per kilogram
which is payable in foreign currency.
Q. 140 Can they bring both gold and silver?
Ans. Yes.
Q. 141 Can NRIs sell gold/silver imported by them to residents?
Ans. Yes. Gold/silver so brought by NRIs can be sold to residents
against payment in rupees. Reserve Bank has granted general permission
to persons resident in India to make payment to NRIs in Indian
rupees by means of a crossed cheque in India and that such rupees
are credited to Ordinary Non-resident Rupee (NRO) account of the
NRI seller.
MISCELLANEOUS
Q. 142 Are any tax concessions available to NRIs on balances/deposits
held in NRE/FCNR accounts?
Ans. Yes. Income from interest on moneys standing to the credit
of NRE/FCNR accounts is exempt from Income-tax. Gifts from such
accounts to close relatives are also free of Gift-tax.
Q. 143 Are similar concessions available in respect of balances
held in NRO accounts?
Ans. No.
Q. 144 What are the tax benefits to the NRNR deposit account
holders?
Ans.They enjoy the following tax benefits:
i) Income from the deposits will be free from Indian Income-tax.
ii) The deposit will also be exempt from Gift tax for one-time
gifting (in the cae of NRIs only).
iii) 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.
Q. 145 What about tax benefits on funds held in FCNR accounts?
Ans. Tax Exemption on interest earned on deposits 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.
Q. 146 What is the approved method of sending remittances
into India?
Ans. The approved method of sending remittances into India is
through normal banking channels.
Q. 147 At what rates are remittances in foreign currencies
made by NRIs converted by banks into rupees?
Ans. Such remittances will be converted by banks at the market
rate of exchange.
Q. 148 Can remittances be sent into India otherwise than through
the medium of a bank in the country of residence of the remitter?
Ans. 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.
Q. 149 Can Exchange Houses draw drafts in foreign currencies?
Ans. Yes. Exchanges House can draw drafts in U.S. dollar or Pound
sterling on a limited number of branches of the drawee bank in
India, if they have entered into such an arrangement with the
drawee bank.
Q. 150 Can NRIs remit funds through Exchange Houses for investment
in Government securities, National Savings Certificates and Units
of Unit Trust of India?
Ans. Yes.
Q. 151 Can NRIs remit funds through Exchange Houses for investment
in shares/debentures of Indian companies?
Ans. Yes, subject to general/specific permission of Reserve Bank
for such investment.
Q. 152 Can NRIs send drafts issued by Exchange Houses for acquisition
of residential flats in India?
Ans. Yes. NRIs can send drafts issued by Exchange Houses in favour
of co-operative housing societies/estate developers for acquisition
of residential flats in India in individual names.
Q. 153 Can NRIs remit premia on policies issued by the Life
Insurance Corporation of India by means of drafts issued by Exchange
Houses in favour of the Corporation?
Ans. Yes.
Q. 154 Can NRIs remit tution/boarding/examination fees of
their children studying in India by means of drafts issued by
Exchange Houses in favour of schools, colleges, universities,
technical and educational institutions in India?
Ans. Yes.
Q. 155 Can NRIs take out of India precious stones or jewellery
purchased by them during their visit to India?
Ans. 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.
Q. 156 Can assets held in India by NRIs prior to their becoming
non-resident be repatriated outside India?
Ans. No.
Q. 157 Can NRIs take out of India household articles such
as carpets, curios, etc., purchased out of funds in NRO accounts
during their temporary visit to India?
Ans. Yes. RBI permits on application such requests received from
NRIs up to the value of Rs. 20,000 for such articles (other than
those made of gold or silver or those banned for exports).
Q. 158 Can NRIs settle their hotel bills in India in
Indian rupees?
Ans. Yes.
