Saturday, June 26, 2010

IMMIGRATION HELP

NON RESIDENT INDIANS -
1 - IMMIGRATION
(1)-Concession Available to NRIs on their return to India
(2)-Baggage Rules and Transfer of Residence
(3)-Import of Gold and Silver by NRIs
(4)-Citizenship of India
1 - Concession Available to NRIs on their return to India -
NRIs, who return to India after 18th April,. 1992 after having been "a person resident outside India" for a continuous period of at least one year, have been granted the following general permissions on their return to India:
(1) To maintain and operate, their foreign currency accounts with banks abroad. Funds held in these accounts can be used by resident account holders for making any payments to persons resident outside India. There will be no restrictions on utilisation of the balances in these accounts for any bona fide payments in foreign currency. The funds can also be utilised for making further investments in shares/ securities or immovable properties etc. abroad provided the cost of such investment and/or any subsequent payments required therefore are met exclusively out of foreign currency held in these accounts.
(2) To hold, transfer or dispose of their other foreign currency assets like shares, securities, life insurance policies, and immovable properties, abroad . In case of the NRI who wants to retain his link abroad through business, vocation or employment, then his investments or interest in business abroad can continue as usual even after his return to India.
(3) To enjoy absolute freedom for utilisation of their foreign currency assets, including freedom to gift or settle their foreign currency assets to anybody, anywhere.
(4) To earn and retain abroad pension and retirement benefits, after return to India.
(5) To earn, hold or dispose off or invest, in any manner they deem fit, incomes on their foreign currency assets.
(6) To make any payments to or make any further investments abroad, provided that the payments and the cost of such fresh investments and any subsequent payments required thereof, are met exclusively out of the foreign currency assets.
However, to earn the above facilities, it is necessary that foreign currency assets should have been acquired by the returning NRI lawfully without any contravention of FERA when he was living abroad and carrying on employment, business or vacation outside India. This proviso prevents hawala dealers from taking advantage of this liberalisation.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


2 - The government announced the Baggage rules in 1998 given below for various categories
Rule 1 : Passengers returning from countries other than Nepal, Bhutan, Myanmar or China
An Indian resident or a foreigner residing in India, returning from any country other than Nepal, Bhutan, Myanmar or China, shall be allowed clearance free of duty articles in his bona fide baggage to the extent mentioned in column (2) of Appendix A.
APPENDIX A
(1)
Articles allowed free of duty
(2)
(a) All passengers of and above 12 years of age and returning after stay abroad of more than three days
Used personal effects, excluding jewellery, required for satisfying daily necessities of life
Articles other than those mentioned in Annexure 1 upto a value of Rs.12,000 if these are carried on the person or in the accompanied baggage of the passenger.
(b) All passengers of and above 12 years of age and returning after stay abroad of three days or less
Used personal effects, excluding jewellery, required for satisfying daily necessities of life
Articles other than those mentioned in Annexure 1 upto a value of Rs.6,000 if these are carried on the person or in the accompanied baggage of the passenger
(c) All passengers upto 12 years of age and returning after stay abroad of three days or less
Used personal effects, excluding jewellery, required for satisfying daily necessities of life
Articles other than those mentioned in Annexure 1 upto a value of Rs.3,000 if these are carried on the person or in the accompanied baggage of the passenger
(d) All passengers upto 12 years of age and returning after stay abroad of three days or less
Used personal effects, excluding jewellary, required for satisfying daily necessities of life .
Articles other than those mentioned in Annexure 1 upto a value of Rs.1500 if these are carried on the person or in the accompanied baggage of the passenger
Explanation.- The free allowance under this rule shall not be allowed to be pooled with the free allowance of any other passenger.
Rule 2 : Passengers Returning from Nepal, Bhutan, Myanmar or China
An Indian resident or a foreigner residing in India, returning from Nepal, Bhutan, Myanmar or China other than by land route, shall be allowed clearance free of duty articles in his bona fide baggage to the extent mentioned in column (2) of Appendix B.
APPENDIX B
(1)
Articles allowed free of duty
(2)
(a) passengers of and above 12 years of age and returning after stay abroad of more than three days
Used personal effects, excluding jewellery, required for satisfying daily necessities of life
Articles other than those mentioned in Annexure 1 upto a value of Rs.3,000 if these are carried on the person or in the accompanied baggage of the passenger.
(b) passengers upto 12 years of age and returning after stay abroad of more than three days
Used personal effects, excluding jewellery, required for satisfying daily necessities of life
Articles other than those mentioned in Annexure 1 upto a value of Rs.750 if these are carried on the person or in the accompanied baggage of the passenger
Explanation.- The free allowance under this rule shall not be allowed to be pooled with the free allowance of any other passenger.
Rule 3 : Professionals returning to India
An Indian passenger who was engaged in his profession abroad shall on his return to India be allowed clearance free of duty, in addition to what he is allowed under rule 3, or as the case may be, under rule 4, articles in his bona fide baggage to the extent mentioned in column (2) of Appendix C.
APPENDIX C
(1)
Article allowed free of duty
(2)
(a) Indian passenger returning after atleast 3 months
(i) Used household articles upto an aggregate value of Rs.6,000.
(ii) Professional equipment upto a value of Rs. 10,000.
(b) Indian passenger returning after atleast 6 months
(i) Used household articles upto an aggregate value of Rs. 6,000.
(ii) Professional equipment upto a value of Rs.20,000
(c) Indian passenger returning after a stay of minimum 365 days during the preceding 2 yeas on termination of his work, and who has not availed this concession in the preceding three years.
(i) Used household articles and personal effects, (which have been in the possessions and use abroad of the passenger or his family for at least six months), and which are not mentioned in Annexure I or Annexure II upto an aggregate value of Rs. 30,000.
Rule 4 : Jewellery
A passenger returning to India shall be allowed clearance free of duty jewellery in his bona fide baggage to the extent mentioned in column (2) of Appendix D.
APPENDIX D
(1)
Jewellery
(2)
Indian passenger who has been residing abroad for over one year.
(i) Jewellery upto an aggregate value of Rs. 10,000 by a gentlemen passenger, or
(ii) Upto an aggregate value of Rs. 20,000 by a lady passenger
Rule 5 : Tourist
A tourist arriving in India shall be allowed clearance free of duty articles in his bona fide baggage to the extent mentioned in column (2) of Appendix E.
APPEENDIX E
(1)
Article allowed free of duty
(2)
(a) Tourist of Indian origin (i) Used personal effects and travel souvenirs, if-
(a) these goods are for personal use of the tourist, and
(b) these goods, other than those consumed during the stay in India, are re-exported when the tourist leaves India for a foreign destination.
(ii) articles as allowed to be cleared under rule 1 or rule 2.
(b) Tourist of foreign origin other than those of Nepalese origin coming from Nepal or of Bhutanese origin coming from Bhutan. (i) used personal effects and travel souvenirs, if-
(a) these goods are for personal use of the tourist, and
(b) these goods, other than those consumed during the stay in India, are re-exported when the tourist leaves India for a foreign destination.
(ii) articles other than those mentioned in Annexure I upto a value of Rs. 4,000 for making gifts.
( c) Tourists of Nepalese origin coming from Nepal or of Bhutanese origin coming from Bhutan. No free allowance
Rule 6 : Transfer of residence
(1) A person who is transferring his residence to India shall be allowed clearance free of duty, in addition to what he is allowed under rule 1, as the case may be, under rule 2, articles in his bona fide baggage to the extent mentioned in column (1) of Appendix F., subject to the conditions, if any, mentioned in the corresponding entry in column (2) of the said Appendix.
(2) The conditions may be relaxed to the extent mentioned in column (3) of the said Appendix.
APPENDIX F
Article allowed free of duty
Conditions
Relaxation that may be considered
(a) Used personal and household articles, other than those listed at Annexure I or Annexure II, but including jewellery upto ten thousand rupees by a gentleman passenger or rupees twenty thousand by a lady passenger. (1) Minimum stay of two years abroad, immediately preceding the date of his arrival on TR.
(2) Total stay in India on short visit during the 2 preceding years should not exceed the 6 months, and
(3) passenger has not availed this concession in the preceding three years.
(a) For conditions (1) Shortfall of upto 2 months in stay abroad can be condoned by Assitant Commissioner of Customs if the early return is on account of:
(i) terminal leave or vacation being availed of by the passenger, or
(ii) any other special circumstances.
(b) For conditions (2) Commissioner of Customs may condone short visits in excess in deserving cases.
( c) For conditions (3) No relaxation.
(b) Jewellery taken out earlier by the passenger or by a member of his family from India . Satisfaction of the Assistant Commissioner of Customs regarding the jewellery having been taken out earlier from India
Provisions regarding unaccompanied baggage
(1) Provisions of these rules are also extended to unaccompanied baggage except where they have been specifically excluded.
(2) The unaccompanied baggage had been in the possession abroad of the passenger and is despatched within one month of his arrival in India or within such further period as the Assistant Commissioner of Customs may allow.
(3) The unaccompanied baggage may land in India up to 2 months before the arrival of the passenger or within such period, not exceeding one year, as the Assistant Commissioner of Customs may allow, for reasons to be recorded, if he is satisfied that the passenger was prevented to circumstances beyond his control, such as sudden illness of the passenger or a member of his family, or natural calamities or disturbed conditions or disruption of the transport or travel arrangements in the country or countries concerned or any other reason, which necessitated a change in the travel schedule of the passenger.
Application of these Rules to members of the crew
The provisions of these Rules shall apply in respect of members of the crew engaged in a Foreign going vessel for importation of their baggage at the time of final pay off on termination of their engagement.
Annexure I
1. Fire arms.
2. Catridges of fire arms exceeding 50.
3. Cigarettes. Exceeding 200 or cigars exceeding 50 or tobacoo exceeding 250 grmas.
4. Alcoholic liquor and wines in excess of one litre each.
5. gold or silver, in any form, other than ornaments.
Annexure II
1. Colour Televisions/Monochrome Television.
2. Video Cassette Recorder/ Video Cassettes Player/ Video Televisions Receiver.
3. Washing Machine.
4. Electrical/Liquefied Petroleum Gas Cooking Range (other than Electrical/Liquefied Petroleum Gas stoves with not more than two burners and without any extra attachment.
5. Dish Washer.
6. Music System.
7. Personal Computer.
8. Air-conditioner
9. Refrigerator.
10. Deep Freezer.
11. Microwave Oven.
12. Video camera or the combination of such video camera with one or more of the following goods, namely:
(a) Television Receiver
(b) Sound recording or reproducing apparatus.
(c ) Video reproducing apparatus.
13. Word Processing Machine .
14. Fax Machine.
15. Vessels.
16. Aircrafts.
17. Cinematographic films of 35mm and above.
18. Gold or silver, in any from, other than ornaments.
Definitions
In these rules, unless the context otherwise requires-
(i) "appendix" means an Appendix to these rules;
(ii) "resident" means a person holding a valid passport issued under the Passport Act, 1967 and normally residing in India;
(iii) "tourist" means a person not normally resident in India, who enters India for a stay of not more than six months in the course of any twelve months period for legitimate non-immigrant purposes, such as touring, recreation, sports, health, family reasons, study, religious pilgrimage or business;
(iv) "family" includes all person who are residing in the same house and from part of the same domestic establishment;
(v) "professional equipment" means such portable equipment., instruments, apparatus and appliances as are required in his profession, by a carpenter, a plumber, a welder, as mason and the like and shall not include items of common use such as cameras, cassette recorders,
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Import of Gold and Silver by NRIs -
The Government has permitted NRI’s to legally import gold (Maximum 5 kgs. w.e.f. 1-1-97, duty of Rs. 220 per 10 grams increased to Rs. 250 from June, 1998 and Rs. 400 from 5th January, 1999) and silver (100 Kgs. Per passenger, duty of Rs. 500 per Kg.). The NRI should be coming to India, after a period of not less than six months stay abroad and the duty has to be paid in convertible foreign exchange. Gold or Silver, in any form, including ornaments (excluding studded with stones or pearls) is allowed to be imported. Octroi duty will also be payable, outside the airports, as per the municipal rule.
When gold is sold in India, the profit is liable to tax as business income or capital gains, depending on the facts of each case i.e., the intention of the NRI. If his intention was to take advantage of the business opportunity and sell gold/ silver, it will be treated as business profit. If his intention was to hold it as a capital asset, it will be treated as capital gains.
Most NRIs want to take advantage of the business opportunity and buy gold/silver before coming to India and sell it soon. In such circumstances, it will be treated as business income. From the sale proceeds of the metal, the cost and expenses incurred for the sale can be deducted and profits worked out.
In a majority of the cases, the NRI would have purchased the precious metal just prior to his return to India and sold it within short time after his arrival in India, such a transaction would constitute an "adventure in the nature of trade" and the income from the sale would be taxable as business income. It is a well settled principle that income from a single transaction could also constitute business income. Hence the profit on sale of gold/silver would be treated as business income.
If the NRI has acquired the precious metal as a capital assets, the income will be treated as short-term or long-term capital gains depending on the period of holding.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4- Citizenship in India
Foreign National of Indian origin
Foreign Nationals of Indian Origin, after their settling in India may intend to acquire citizenship of India, which provisions are contained in the Citizenship Act, 1955. Citizenship of India can be acquired by (a) birth, (b) descent, (c) registration and (d) naturalization.
Foreigners of India origin, can apply for citizenship by registration after their residence for five years in India. Prior to 1st July, 1987, this period was six months. Foreigners of Indian Origin who are ordinarily resident in Commonwealth countries may also apply for registration. Person who are married to Citizens of India and are resident in India for five years can also apply for registration. Minor children can be registered as citizens, when their parents apply for registration. Application should be made in the prescribed form in triplicate, to the collector within whose jurisdiction the applicant is ordinarily resident. The oath of allegiance shall be affirmed before the registration.
Foreign Citizens of Non Commonwealth Countries
Foreign citizens of non-commonwealth countries, may be granted a certificate of naturalization by the Central Government, where the person has rendered distinguished service to the course of science, philosophy, art, literature, world peace and human progress. The person to whom this certificate is granted, on taking the oath of allegiance, becomes a citizen of India by naturalization.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 - Investment - For the purpose of making investments in India, the following categories of entities are relevant

(1)-Classification of Non-Resident Indians
(2)-Investment Opportunities for Nonresident Indians
(3)-Remittance of dividend/Interest and other income
(4)-Sale/Transfer of Shares/Bonds/Debentures
(5)-Investment by FIIs

(1) Non Resident Indian (NRI)
Non-Resident Indian nationals generally fall under the following broad categories:
(a) Indian citizens who stay abroad for employment or for carrying on any business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.
(b) Indian citizens working abroad on assignments with foreign Government, Government agencies or inteenational/multinational agencies like United Nations Organisation (UNO), International Monetary Fund (IMF), World Bank (IBRD), etc.
(c) Officials of Central and State Government and public sector undertaking deputed abroad on assignments with foreign Governments/agencies/ organisations or posted to their own offices (including Indian Diplomatic Missions ) abroad.
Note:
Non-resident Indians become resident in India only when they come back to India for employment or for carrying on in India any business or vocation or for any other purpose indicating an indefinite period of stay in India . They are not regarded as persons resident in India during their short visits to India, say, on holiday, leave, etc.
2. Persons of Indian Origin (PIO)
For the purpose of the facility of opening and maintenance of various types of bank accounts and making investments in shares and securities in India , a foreign citizen ( not being a citizen of Pakistan or Bangladesh ) is deemed to be a person of Indian origin if
(i) he at any time held an Indian passpost, or (ii) 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 . (iii) A spouse 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.
3. Overseas Corporate Bodies
Overseas corporate bodies predominantly owned by individuals of Indian nationality or origin resident outside India (OCBs) include Overseas companies, partnership firms, societies and other corporate bodies which are owned directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. 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 persons of Indian nationality/ origin resident outside India continues to be at or above the level of 60% . In order to establish that the ownership interest of or beneficial interest in any OCB held by individuals of Indian nationality/ origin resident outside India is not less than 60% the concerned corporate body / trust should obtain and furnish, at the time of applying for the facility for the first time and thereafter as and when required by Reserve Bank/ authorised dealer , a certificate from an overseas auditor/ chartered accountant/ certified with public accountant in Form OAC where the ownership/ beneficial interest is directly held by NRIs, and in Form OAC1 where it is held indirectly by NRIs.
Authorised dealers maintaining bank accounts or making investments in the names or OCBs should obtain an undertaking from each such corporate body / trust stating that it will promptly intimate to the authorised dealer, if the ownership interest or the irrevocable beneficial interest held by BRIs in the OCB falls below the level of 60% at any time . The corporate body/ trust should also submit a certificate in Form OAC or Form OAC1 , as appropriate to the authorised dealer on an annual basis and the authorised dealer should satisfy himself that the ownership/ beneficial interest held by NRIs continues to be at or above the level of 60% . If such ownership/ beneficial interest is reduced to a level below 60% , the authorised dealer should report the matter to Reserve Bank immediately for instructions together with full particulars of the investments made by the corporate body / trust in its name.
In the case of closely held OCBs i.e. where shareholders belong to the same family or are closely related to each other, certificate in Form OAC/ Form OAC1 may be submitted in the first instance along with documentary evidence to the effect that the shareholders belong to the same family or are closely related to each other, Annual submission of OAC/ OACI thereafter is not necessary and it will suffice if a certificate signed by the Managing Director/ Chief Executive Officer of the OCB is submitted stating that there is no change in the shareholding pattern since submission of the last certificate .
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 - Investment Opportunities for Non-Resident Indians
(1)-Introduction
(2)-Investment by Foreign citizens of Indian Origin
(3)-Investment by Foreign citizens of non Indian Origin
(4)-Investment by Non Resident Indian Citizens
(5)-Sale of immovable property by Non residents
(6)-Acquisition of immovable property by Inheritance
(7)-Acquisition of immovable property through gifts
(8)-Letting out immovable property
(9)-Investment by partnership firms, trusts, associations
(10)-Investment by foreign companies
(11)-Loans for housing
(12)-Summary Table -

RIs can make direct investments in proprietary / partnership concerns in India as also in the primary issues of shares / debentures of Indian companies. They can also make portfolio investments, i.e. purchase of shares / debentures of Indian companies through stock exchanges in India. These facilities are available on both repatriation and non-repatriation basis.
In order to facilitate NRIs to set up new companies in India, Reserve Bank vide its Notification NO. FERA 143/93 RB dated 26th April 1993, has granted general permission to NRIs to subscribe to the Memorandum and Articles of Association and to take up the shares of Indian companies for their incorporation. The general permission empowers such Indian companies to issue shares to NRIs provided the total face value of the shares to be issued does not exceed Rs. 10,000/- and the company is not engaged into activity relating to agricultural and plantation.
A. DIRECT INVESTMENT
NRIs are permitted to make direct investment in partnership/ proprietorship concerns in India as also by way of subscription to shares/ debentures of Indian companies. They are also permitted to place funds in company deposits. Similar facilities are also available to OCBs with certain exceptions. Investments made will either be on repatriation or on non repatriation basis depending on the terms and conditions applicable under the existing schemes for NRI investment Wherever the investments are allowed with repatriation benefits, the funds for the purpose should be received by inward remittances from abroad or from the investor’s NRE/ FCNR Accounts. However, in respect of investment on non repatriation basis, funds in NRO Accounts could also be used.
Non resident Indians resident in Nepal will be permitted to make investments in India provided the funds for the purpose are remitted in free foreign exchange through proper banking channels.
I. Investments Without Repatriation Benefits [Summary Table]
NRIs / OCBs who undertake not to seek at any time repatriation of the capital invested in India and the income earned thereon are permitted to invest on non repatriation basis. The income earned on these investments as and when accrued are required to be credited to the Ordinary Non Resident Rupee (NRO) account of the investor. Reserve Bank would, however, permit repatriation of the net (i.e. after payment of tax) income / interest earned during the financial year 1994/95 and onwards on such investments/ deposits in accordance with the procedure laid down. The categories of investment under this head are the following
(A) Investment in Partnership/ Proprietorship Concerns
Reserve Bank has granted general permission to NRIs to invest by way of capital contribution in any proprietary or partnership concern in India engaged in any industrial, trading or commercial activity on non – repatriation basis subject to the following conditions:
(a) The amount invested should be remitted from abroad through normal banking channels or by transfer of funds held in investor’s bank accounts in India .
(b) The concern or the NRI does not engage in any agricultural/ plantation activity or real estate business i.e. dealing in land and immovable property with a view to earning profit or income there from .
(c) The amount invested and income accruing thereon are not eligible for repatriation outside India and are payable only in non convertible Indian rupees.
Consequently, it will not be necessary for such partnership/ proprietorship concerns in India to obtain permission of Reserve Bank for receiving capital contribution from NRIs provided the conditions mentioned in the Notification are satisfied. The firm should, however, submit the declaration in Form DIN to the concerned Regional Office or the Reserve Bank in whose jurisdiction it is situated within a period of 90 days from the receipt of investment . The profits due to the NRI investor may be credited to his ordinary Non Resident Account maintained within a bank in India.

(2) Investment in New Issues of Shares/ debentures of Indian Companies
Reserve Bank has granted general permission to NRIs/ OCBs to subscribe to the shares/ convertible debentures of an Indian company on non repatriation basis, and to an Indian company to subscribe to issue shares or convertible debentures by way of new / rights / bonus issue to NRIs/ OCBs on non repatriation basis provided that the invested company is not engaged in agricultural/ plantation activities or real estate business (excluding real estate development i.e. development of property or construction of houses) or chit fund or is not a Nidhi company . The payment for these shares should, however, be received from the NRIs/ OCBs by inward remittance or by debit to their NRE / FCNR/ NRO accounts maintained with an authorised dealer or an authorised bank in India. Consequently, it will be in order for companies in India to issue shares/ convertible debentures to NRIs / OCBs on non repatriation basis by way of new, rights or bonus issues without the prior approval of Reserve Bank provided the condition mentioned in the Notification are satisfied. The company should, however, file a declaration in
Form DIN within 90 days from the date of receipt of the investment to the concerned Regional Office of the Reserve Bank in whose jurisdiction its registered office is situated. The company may also credit the dividend/ interest in respect of the shares/ convertible debentures to the investor’s NRO account with a bank in India.
(3) Investment in Non Convertible Debentures of Indian companies
Reserve Bank of India has granted general permission to Indian companies to issue, by way of public issue, non convertible debentures (NCDs) to NRIs / PIOs/ OCBs on non repatriation basis subject to the following conditions:
(i) The amount of subscription should be received by inward remittance from abroad through normal banking channels or by debit to the non resident’s NRE / FCNR / NRO / NRSR account, as the case may be, with an authorised dealer in India. The principal amount representing the investment is not repatriable. If the investment is made out of funds held in NRSR account , the principal as well as interest earned are not repatriable.
(ii) the rate of interest on such NCDs shall not exceed prime lending rate of State Bank of India, plus 300 basis points.
(iii) The minimum period for redemption of such NCDs should be three years.
(iv) the company raising funds through NCDs should not be engaged in agricultural / plantation activity , real estate, business, trading in Transferable Development Rights (TDRs) or act as Nidhi / Chit Fund company.
(v) the issuer company files with the Regional Officer of Reserve bank, not later than thirty days from the date of receipt of remittance, a report containing the stipulated information within the time frame as required by the Reserve Bank
(4) Purchase of Shares of Indian Companies by Private Arrangement
NRIs/OCBs require permission of Reserve Bank for purchasing shares of Indian companies by private arrangement. For this purpose, application in Form FNC 7 together with the non-repatriation undertaking in Form NRU may be submitted by the non-resident investor to the office of the Reserve Bank in whose jurisdiction the company’s Head/Registered Office is situated.
(5) Investment in Domestic Public Sector and Private Sector Mutual Funds
NRIs/OCBs will be permitted to invest in Mutual Funds by domestic public sector and private sector mutual funds on non-repatriation basis. Applications for the purpose should be made to Reserve Bank in Form ISD by the concerned bank/institution. The non-resident investors do not need separate approval from Reserve Bank for the purpose.
(6) Investment in Money Market Mutual Funds (MMMFs)
NRIs/OCBs will be permitted to invest , on non-repatriation basis, in Money Market Mutual Funds (MMMFs) floated by commercial banks and public sector /private sector financial institutions, with authorisation from Reserve Bank of India/Securities and Exchange Board of India (SEBI). Application for the purpose should be made to the Reserve Bank in Form ISD ( R) by the concerned bank/institution. The NRI/OCB investors do not need separate permission from Reserve Bank for the purpose.
(7) Acceptance of deposits by proprietary concerns/firms/companies in India on Non-repatriation basis.
NRIs/OCBs will be permitted to place funds in deposits with firms/companies in India on non-repatriation basis. The application for this purpose may be made by the depositor or the deposit accepting firm/company to the office of Reserve Bank under whose jurisdiction its Head/Registered Office is situated. In case of acceptance of deposits from NRIs/OCBs under the public deposit scheme, the application for permission should be made by the deposit accepting firm/company through an authorised dealer to the concerned office of Reserve Bank under whose jurisdiction the registered office of the firm/company is situate. No separate application from the non-resident depositor is necessary in such cases.
II. Investment with Repatriation Benefits. [Summary Table]
NRIs/OCBs are also permitted to make investments in Indian firms/ companies with repatriation benefits i.e. capital invested and dividend/income earned thereon are allowed to be repatriated outside India. NRIs/OCBS can make investments with foreign exchange funds in new issues of shares / convertible debentures of Indian companies on repatriation basis 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. Since the issuing companies would be obtaining the necessary permissions from RBI, the NRI investor does not have to obtain RBI's permission for investing in such shares/debentures.
(1)Investment in new issues of Indian Companies under 40% Scheme.
NRIs/OCBs are permitted to subscribed to new issues of shares (both equity and preference) and convertible debentures of any new or existing company, with the right of repatriation of capital invest and income earned thereon subject to payment of applicable taxes, provided :
(a) The issue of equity/preference shares and convertible debentures of NRIs/ OCBs with repatriation facility does not exceed 51 percent of the face value of each new issue of the company concerned, and
(b) The shares of the company are not listed on any stock exchange, and
(c) The company is engaged in manufacturing activity not being an activity specified in Annexure III to the Statement of Industrial Policy 1991 of Government of India, amended from time to time.
Indian companies engaged in the following activities are allowed by Reserve Bank of India to issue shares/debentures to NRIs with repatriation benefits to the extent of 40% of the new issue.
1. Industrial and manufacturing units.
2. Hotels with 3, 4, or 5 star category.
3. Hospitals and diagnostic centres.
4. Shipping companies.
5. Development of computer software.
6. Oil exploration services.
Investment under this scheme, can be made for setting up new manufacturing projects or for expansion/diversification of their existing manufacturing activities. The issuer company needs to take permission from the RBI but NRIs/OCBs who have been issued shares/convertible debentures would not need any specific approval.
(2) Investment in New Issues of Indian Companies under 24% Scheme
NRIs/OCBs are permitted to subscribe to new issue of equity shares/convertible debentures of existing or new companies (both private and public limited) engaged/proposing to engage in any activity including finance, hire purchase, leasing, trading or other services etc. (except agricultural/plantation activities and real esate business) with repatriation benefits upto 24% of the new issue of the concerned Indian company. Indian companies seeking investment from NRIs/OCBs under the scheme and satisfying the conditions laid down by the RBI may issue equity share/convertible debentures to NRIs/OCBs without prior approval of Reserve Bank and file a declaration in Form ISD together with the required documents with the concerned Regional Office is situated, within 30 days form the date of issue of shares / convertible debentures. Accordingly, NRIs/OCBs who have been issued shares / convertible debentures would not need any specific approval .
(3) Investment in Priority Industries under 100% Scheme.
NRIs/OCBs are permitted to invest in priority industries and in Indian Companies primarily engaged in export trading activity, with full repatriation benefits upto 100% of the new issue of shares. Indian Companies seeking investment from NRSs/OCBs, without prior approval of Reserve Bank and file a declaration in Form ISD(R ) together with the required documents with the concerned Regional Office of Reserve Bank, under whose jurisdiction their Registered Office is situated, within 30 days from the date of issue of shares. The scheme is open to new industries as well as for expansion / diversification of existing industrial undertakings.
(4) Investment in Housing and Real Estate Development
NRIs/OBCs will be permitted to invest upto 100% in the new issue of equity shares/convertible debentures of Indian companies engaged in the following areas:
(i) Development of serviced plots and construction of built up residential premises;
(ii) Real estate covering construction of residential and commercial premises including business centers and offices;
(iii) Development of township;
(iv) City and region level urban infrastructure facilities including roads and bridges;
(v) Manufacturing of building materials;
(vi) Financing of housing development.
Repatriation of original investment in this case will be permitted by Reserve Bank only after a lock in period of three years from the date of issue of the equity shares/convertible debentures.
(5) Investment in Air Taxi Operations
NRIs/OCBs will be allowed to set up Indian Companies with 100% equity participation for carrying on Air Taxi Operations in terms of the guidelines issued by the Director General of Civil Aviation for Air Taxi Operation. Applications for the purpose should be made to Reserve Bank (Central Office) in Form ISD. Repatriation of the investment and/or remittance of dividend will be permitted only after the expiry of five years of operations of the Air Taxi Scheme and only out of accumulated net foreign exchange earnings.
(6) Investment in Non-Convertible Debentures of Indian Companies
Reserve Bank of India vide its Notification No. F.E.R.A. 213/99-RB dated 1st November 1999, has granted general permission to Indian companies to issue, by way of public issue, non-convertible debentures (NCDs) to NRIs/PIOs/OBCs on repatriation basis subject to the following conditions:
(i) The amount of subscription should be received by inward remittance from abroad through normal banking channels or by debit to the non-resident’s NRE/FCNR account, as the case may be, with an authorised dealer in India. Further, the percentage of such NCDs issued to NRIs/OCBs to the total paid-up value of each series of NCDs issued should not exceed the ceiling applicable for issue of equity shares/convertible debentures as prescribed by the Reserve Bank from time to time, under the respective schemes viz. 24% 51% 100% etc. for investment by NRIs/OCBs on repatriation basis in the capital of the issuer company.
(ii) The rate of interest of such NCDs shall not exceed prime lending rate of State Bank of India, plus 3000 basis points.
(iii) The minimum period for redemption of such NCDs should be three years.
(iv) The company raising funds through NCDs should not be engaged in agricultural/plantation activity, real estate business, trading in transferable development rights (TDRs) or act as Nidhi/Chit Fund company.
(v) The issuer company files with the Regional Office of Reserve Bank, not later than thirty days from the date of receipt of remittance, a report containing the required information and douments as stipulated by the RBI
(7) Investment in Sick Industrial Units
NRIs/OCBs will be permitted by Reserve Bank to undertake revival of sick industrial units by making bulk investment in them either by way of purchase of equity shares from existing shareholders or in the form of subscription of new equity issues of the sick units on the following basis:
(a) The bulk investment can be made on private placement basis upto 100% of the equity capital of the sick company with full benefits of repatriation of capital invested and income earned thereon.
(b) Issue/transfer of equity shares should be approved by the existing shareholders of the company through a Special Resolution
For the purpose of investment under the scheme, as company should be declared a sick or there should be declared a sick or there should be a rehabilitation programmed approved by the public financial institution/commercial bank or a consortium of banks or by the Board for Industrial and Financial Reconstruction (BIFR)
Application for permissions for issue/transfer of equity shares to non-residents should be made by the concerned Indian company in Form RSU to the Central Office of Reserve Bank together with the particulars/documents specified in the application form.
(8) Investment in the schemes of Domestic Mutual Funds
Reserve Bank has granted general permission to domestic mutual funds:
(a) to issue units or any other similar instrument, on repatriation basis, to NRIs/OCBs/PIOs/FIIs under the scheme floated by them with the approval of the Securities and Exchange Board of India, subject to the conditions mentioned below.
(b) to send such units/instruments out of India to the place of residence of location, as the case may be, of the non-resident investor, or to their global custodians in the case of FIIs.
(c) to repurchase units or similar instruments issued to NRIs/OCBs/PIOs/FIIs and to make payment therefore to them;
The general permission to issue units is however subject to the following conditions:
(a) The mutual fund should comply with the terms and conditions stipulated by the Securities and Exchange Board of India.
(b) The amount representing investment should be received by inward remittance through normal banking channels or by debit to the NRE/FCNR account to the non-resident investor or Special Non-Resident Rupee account of the FII maintained with an authorised dealer/designated bank in India.
The net amount representing the dividend/interest and maturity proceeds may be remitted through banking channel or credited to NRE/FCNR/NRO/NRSR account of the non-resident investor or Special Non-Resident Rupee Account of the FII.
(9) Investment in Bonds issued by Public Sector Undertakings (PSUs)
NRIs/OCBs will be permitted to invest in the Bonds issued by Public Sector Undertakings (PSUs) in India with repatriation benefits. The concerned PSU should obtain the necessary approval from the Government of India for raising funds through issue of Bonds and adhere to the guidelines issued by the Government of India, Ministry of Finance, in this regard.
(10) Purchase of shares of Public Sector Enterprises (PSEs) by NRIs / OCBs
Reserve Bank has granted permission to NRIs/OCBs to purchase the shares on repatriation basis disinvested by Government of India in certain Public Sector Enterprises (PSEs) and to PSEs to register in their books the overseas address of such NRIs/OCBs, subject to the conditions that (a) the holding of shares by a NRI or by an OCB, at any time does not exceed one percent of the paid up capital of the PSE concerned, (b) the purchase consideration / bid money is received by way of remittance from abroad through normal banking channels or by transfer of funds held in investor’s NRE/FCNR accounts, and (c ) the application is submitted along with deposit of bid money/purchase consideration at the branch of State Bank of India designated by the Government of India for that purpose in the notice inviting the bids.
(11) Deposits with Companies
NRIs and OCBs will be permitted to place funds in fixed deposits with public limited companies in India (including Government undertakings with limited liability) with full repatriation benefits for a period of three years. The total amount of fixed deposits permitted to be accepted will be stipulated by Reserve Bank in individual cases. The application for permission to accept deposits from non-residents with repatriation rights may be made by the Indian company through its bankers to the concerned office of Reserve Bank under whose jurisdiction its Head/Registered Office is situate, giving details of the deposit scheme. It is not necessary for non-resident depositors to seek separate permission from Reserve Bank in this regard. Reserve Bank will grant permission to the bank branch nominated by the company for accepting deposits. While granting permission, Reserve Bank will authorise the branch to allow remittance of interest and maturity proceeds of deposits or credit thereof to the depositor’s NRE/FCNR account.
B. PORTFOLIO INVESTMENT
General Regulations
NRIs/OCBs have to obtain prior permission of RBI to acquire shares / debentures of Indian Companies and units of domestic mutual funds on both repatriation and non-repatriation basis through stock exchanges in India. The application for permission is to be submitted to RBI through a designated Bank branch in one of the prescribed forms. RBI approval is valid for a period of 5 years from the date of issue Regulations regarding Portfolio Investment (i.e. investment through Stock Exchange) in shares/debentures by NRIs /OCBs have been explained below
1. Portfolio investment in shares/debentures by NRIs/OCBs are permitted only though 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.
2. NRIs/OCBs will be permitted to make portfolio investment in shares/debentures (convertible and non-convertible) of Indian companies, with or without repatriation benefits provided the purchase is made through a stock exchange and also through designated branch of an authorised dealer. NRIs/OCBs are required to designate only one branch authorised by Reserve Bank for this purpose.
Investment in equity shares and convertible debentures will be permitted subject to an overall ceiling of (a) 10 percent of the total paid-up equity capital of the company concerned and (b) 10 percent of the total paid-up value of each series of the convertible debentures issued by the company concerned for all NRIs/OBCs taken together both on repatriation and on non-repatriation basis.
4. The purchase of shares and debentures under the scheme is required to be made at the ruling market price.
5. NRIs/ OCBs intending to invest on non-repatriation basis should submit their applications in Form NRI and Form NRC respectively, through a designated branch of an authorised dealer to purchase shares/debentures of Indian companies, securities (other than bearer securities) of the Central or State Government and Treasury Bills on behalf of the NRI/OCB subject to the condition that the payment of such investment is received through inward remittance or from the investor’s NRE/FCNR/NRO/NRSR account. The general permission granted by Reserve Bank would be initially valid for a period of five years. Authorised dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a period of five years at a time.
6. NRIs and OCBs intending to invest with repatriation benefits should submit their application through a designated branch of an authorised dealer in Form RPI and Form RPC respectively. Reserve Bank will grant general permission to the designated branch for purpose of shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any other State Government and Treasury Bills subject to the conditions that-
a) the payment is received through an inward remittance in foreign exchange or by debit to the investor’s NRE/FCNR account.
b) 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.
c) NRIs/OCBs take delivery of the shares/convertible debentures purchased and give delivery of the shares/convertible debentures sold under the scheme.
The general permission granted by Reserve Bank will be valid initially for a period of five years. Authorised dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a further period of five years at a time.
7. Shares/debentrues purchased by NRIs/OCBs should be held and registered in the name of either the investor himself or an authorised dealer or the latter’s nominee/s. Shares/debentures can be purchased by NRIs in joint names with other NRIs with permission of Reserve Bank. In such cases, if the investment is with repatriation benefits, the first holder is to be treated as investor for the purpose of 5% ceiling. The second or third holder will be eligible to invest separately in the same company, in his own name as the first holder in joint holdings upto the limit of 5%. Reserve Bank will also permit investment jointly with residents. However, if the resident joint holder inherits the shares/debentures, he/she will not be entitled to repatriation benefits.
C. Investment in Government Securities, National Plan/Saving Certificates and Units of UTI
General Regulations
NRIs are permitted to invest freely in securities (other than bearer securities) of the Central or any State Government and National Plan/Savings Certificates by making remittances form abroad or out of funds held in their NRE/FCNR accounts, provided the purchase/subscription is arranged through the authorised dealer maintaining the account. Authorised dealers may also makes such investments on behalf of NRIs out of funds held in their NRO accounts subject to the condition that the funds invested and any income earned thereon will not be eligible for repatriation out of India at any time in future. Likewise, OCBs can also invest in Government securities and National Plan/Saving Certificates if permitted under the terms and conditions applicable to the sale/issue of such securities and the purchase/subscription is arranged through an authorised dealer.
NRIs/OCBs are permitted to invest in units of UTI subject to the terms and conditions applicable for the issue/sale thereof, against remittance from abroad or out of funds held in their NRE/FCNR account, through the authorised dealer maintaining the account. Funds held in their NRO accounts may also be utilized for the purpose subject to the condition that the funds invested and any income earned on such investment will not be eligible for repatriation out of India at any time in future. UTI has also been granted general permission by Reserve Bank for issue of units to NRIs/OCBs provided the funds towards the purchase price are remitted by the investors from abroad in an approved manner of the price is paid out of the investor’s NRE/FCNR accounts maintained with authorised dealers in India. Where funds held in NRO accounts are utilized for purchase of Units, UTI will issue units to NRIs/OCBs on the conditions that the funds invested and income earned thereon will not quality for repatriation out of India at any time in future. Units can thus be bought by NRIs/ OCBs directly from UTI also.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Remittance of Dividend/Interest and other Income
I. Remittance of Dividend/Interest on Shares/Bonds/Debentures held by NRIs/OCBs on repatriation basis
1. In cases where the dividend/interest is to be credited to the non-residents holder’s NRE account with a bank in India, it may be paid by issuing individual dividend/interest warrants to the shareholder’s mandate banks for credit to NRE account. The following particulars/documents should be furnished by Indian companies alongwith the dividend/interest warrant.
(a) Nationality and origin of the non-resident share/bond/debenture holder and place/country of permanent residence;
(b) A certified statement from the company, under the signature of an authorised official, showing the number of shares/bonds/debentures held by the non-resident, face value, number and date of Reserve Bank’s approval under Section 19(1)/ 29(1)(b)/29(4) (a) of the Act for issue/purchase holding of the shares/bonds/debentures, rate of dividend declared or interest payable, year/period to which it relates, gross dividend/interest, tax deducted at source and net remittable amount;
(c) A certified statement from the company, under the signature of an authorised official, that in terms of permission granted by Reserve Bank for acquisition of the shares/bonds/debentures there is no prohibition for the remittance of dividend/ interest.
On receipt of the above particulars/documents and after verifying documents evidence that the permission granted by Reserve Bank to the non-resident share/bond/debenture holder for purchase/holding/issue of shares/bonds/debentures under Section 29(1) (b)/29(4)(a)/19(1) of FERA 1973 does not prohibit the remittance of dividend/interest, authorised dealers may credit the amount of the dividend/interest warrant to the NRE account of the non-resident share/bond/debenture holder.
2. While granting permission to bank branches of authorised dealer to purchase shares/debentures on behalf of NRIs, under the Portfolio Investment Scheme, Reserve Bank also authorises the bank branch concerned to remit or to credit the dividend/interest to the non-resident investor’s NRO/NRE/FCNR account as the case may be. Dividend/interest due to the non-residents may accordingly by credited to the respective accounts for ensuring that the conditions laid down in this regard are satisfied.
Dividend/interest due to non-resident share/bond/debenture holders who are not eligible for having them remitted abroad should be paid to their mandate bankers in India for credit to their NRO accounts. Reserve Bank would permit repatriation of the net (i.e. after payment of tax) income/interest earned during the financial year 1994-95 and onwards on such investment in accordance with the procedure laid down.
4. Before allowing remittance of dividend/interest to an OCB, authorised dealers should ensure that it has submitted the required annual certificate in Form OAC Or Form OAC1 as the case may be, and that the ownership/beneficial interest of non-resident individuals of Indian nationality/origin had remained at or above the level of 60% upto the end of the period for which dividend is to be remitted.
II Remittance of Income on Investment on non repatriation basis
Non- resident of Indian/origin (NRIs) and overseas corporate bodies (OCBs) predominantly owned by NRIs have been permitted to make investment with Indian companies/ banks unit of Unit Trust of India, etc. on non-repatriation basis. NRIs are also permitted by Reserve Bank to grant loans to resident persons/firms/companies on non-repatriation basis. Further the investment/deposits held in India by Indian national who have become non-residents on account of their going abroad on employment/emigration, as well as income/interest earned on such investments/deposit/loan is also not allowed to be repatriated abroad. Investment made by NRIs out of rupee loans from banks in India against the security of NRE/FCNE account, sale proceeds of the house/flat acquired/ constructed out of loans obtained in India against the security of NRE/FCNR accounts, if sold, continue to be non-repatriable Authorised dealers may allow repatriation of net income/interest earned (i.e. after payment of tax) on these investments/deposits/loans as also of net income by way of rent earned on house/ flat acquired/constructed, in phased manner as under:
Income earned Amount eligible for repatriation During financial year 1995-95 Upto US $ 1,000 (U.S. dollars one thousand) in full and one third of the balance amount of income.
1995-96 Upto US $ 1,000( U.S. dollars one thousand) in full and two third of the balance amount of income.
1996-97 onwards Entire income.
Since the entire income will be repatriable from 1996-97 onwards, remittance.
Pertaining to the period 1996-97 and onwards will be permitted to be made either in One lumpsum or suitable instalments, if so desired by the applicants.
(ii) For the purpose of availing of this facility the concerned NRI/OCB Should designate a branch of an authorised dealer through whom the remittance on income is sought to be made and submit an application to it in Form RCI duly completed, together with the documents specified therein and details of income earned on investments/deposits as also any other income like pension earned. Authorised dealer on satisfying himself with reference to the particulars /documents and the Chartered Accountants certificate furnished that the income/interest etc. sought to be repatriated is eligible for remittance, may allow the remittance out of the relevant funds held in the applicants NRO account or credit the same to the NRE/FCNR account of the applicant after ensuring that the Income-Tax has been paid as per the provisions of Income-Tax Act and an undertaking/ certificate regarding payment of Income –Tax has been produced from the Income tax Authorities.
III. Repatriation of Interest/Dividend/Maturity Proceeds of Government Securities/National Plan and Savings Certificates/Units
Interest and maturity proceeds of Government securities including National Plan/Savings Certificate, sale proceeds of Government securities sold on Stock Exchange as well as dividend on Units of UTI and repurchase proceeds thereof may be credited by authorised dealers to the NRO accounts of non-resident investors without reference to Reserve Bank. As far as credits of such funds to NRE/FCNR accounts are concerned powers of authorised dealers are restricted to cases where the original investment was made by remittance from abroad or by debit to the NRE/FCNR account to make remittance to the investor abroad only if the payment is received from UTI with a confirmation that the investment in those units was made out of funds received from abroad in an approved manner or by debit to NRE/FCNR account of the unit holder. In all other cases, dividend/repurchase proceeds should be credited to NRO accounts.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4 - Sale and Transfer of Shares/Bonds/Debentures
I. Sale/Transfer of Shares/Bonds/Debentures by NRIs to Residents
In order to facilitate quick transfer of shares/bonds/debentures held by NRIs to residents, Reserve Bank has granted general exemptions for sale/transfer of shares/bonds/debentures through stock exchanges in India subject to fulfillment of certain conditions.
Applications for sale/transfer of shares/bonds/debentures held by NRIs/OCBs by private arrangement i.e. other than through stock exchange should be made to Reserve Bank in TS 1 either by the transferor or the transferee, attaching therewith the letter of consent of the other party irrespective of whether the shares/bonds/debentures are listed on a stock exchange or not. While conveying its approval, Reserve Bank will stipulate the conditions subject to which the sale/transfer should be effected. In case of sale/transfer of shares/bonds/debentures acquired on repatriation basis, repatriation of such proceeds of bulk holding (i.e. shares/bonds/debentures exceeding Rupee one lakh in face value or 5% of the company’s paidnup capital whichever is lower) will be permittted only on production of a certificate from a Chartered Accountant or the concerned company’s secretary stating that shares with necessary transfer form duly signed have been received/lodged with the company for registration in favour of the transferee.
II. Sale/Transfer of Shares/Bonds/ Debentures of Indian companies through a Stock Exchange acquired without repatriation benefit.
Reserve Bank has exempted the transfer of shares, bonds or debentures of Indian companies made by NRIs through stock exchange in India in case where (a) such transfers are made in favour of an Indian citizen or person of Indian origin resident in India or in favour of a company or other body corporate incorporated in India and (b) sale proceeds of shares are credited to the NRO account of the transferor with no right of repatriation outside India. In such cases, authorised dealers may credit the sale proceeds to the seller’s NRO account after verifying the contract notes issued by recognised stock exchange brokers through whom the sale was effected. This exemption is available in respect of shares, bonds, or debentures acquired by NRIs under the Portfolio Investment Scheme as well as under any Direct Investment Scheme.
(ii) For sale/transfer of shares, bonds or debentures by OCBs acquired on non-repatriation basis through a stock exchange in India, a consolidated application giving full particulars may be submitted to the concerned office of Reserve Bank. Permission will be granted by Reserve Bank for a specific period subject to renewal.
III. Sale/Transfer of shares/Bonds/ Debentures of Indian companies through a Stock Exchange acquired without repatriation benefits under the Portfolio Investment Scheme.
Reserve Bank exempted transfer of shares, bonds, or debentures of Indian companies registered in India previously acquired by NRIs/OCBs with repatriation benefits under the Portfolio Investment Scheme to person residents in India or persons of Indian origin resident in India or in favour of companies or bodies corporate, incorporated under any lay in force in India on the following conditions:
(a)The transferor had purchased such shares, bonds or debentures from the stock market through a member of a recognised stock exchange in India and delivery of shares, bonds, or debentures so purchased has been taken by him or on his behalf by the concerned authorised dealers or its nominee.
(b) The shares, bonds or debentures are sold in the stock market through member of a recognised stock exchange in India and sale transaction is effected at the ruling market price as determined on the floor of the stock exchange by normal bid and offer method and through the same designated branch of the authorised dealer through which the shares, bonds or debentures were earlier purchased.
(c) The sale proceeds are paid to the said designated branch.
Consequently, it is not necessary for NRIs/OCBs to obtain Reserve Banks’ permission for sale of shares/bonds/debentures effected in the above manner. As regards the repatriation of sale proceeds received by the designated branches, Reserve Bank, will while granting approval for purchase of shares/bonds/debentures, also grant approval for repatriation of the sale proceeds if and when the shares/bonds/debentures are sold in the above manner. The actual repatriation of the same proceeds or credit thereof to the NRE/FCNR account of the beneficiary will be subject to payment of Indian taxes.
IV. Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefit under the Direct Investment Scheme
Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefit under the Direct Investment Scheme and sold through the Stock Exchange in India will require permission of Reserve Bank. Applications for necessary permission should be made by NRIs/OCBs to the Central Office of Reserve Bank in Form TS 4 through the designated bank branch of an authorised dealer.
In such cases, permission for sale/transfer of shares/bonds/debentures acquired with the right of repatriation will be granted by Reserve Bank to the branch designated by the seller to the authorised dealer, as the case may be, who may sell the holdings at the ruling market price, through a stock exchange at any time within the validity of the permission. While granting permission for sale/transfer, Reserve Bank will also authorise the designated branch/authorised dealer to credit the sale proceeds to the NRE or FCNR account of the seller or to remit them abroad subject to payment of taxes on capital gain if any. Where the amount of capital gains taxed is not immediately determinable, the designated branch/authorised dealer may allow repatriation of sale proceeds or credit thereof to he sellers NRS/FCNR account to the extent of the original cost of investment immediately on realisation of the sale proceeds. The excess amount, if any representing capital gain should be kept by the designated branch/authorised dealer in a separate NRO account of the seller or in a suspense account. The designated branch/authorised dealer may allow withdrawal of this amount for credit to the NRE/FCNR account of the seller or remit it abroad, on production of necessary tax clearance certificate.
V. Transfer of Rupee Securities by Non-residents as Gift
Reserve Bank has also exempted transfer, by way of gift, of any share, bond or debentures of company registered in India made by a non-resident Indian or person of Indian origin to a citizen of India or a person of Indian origin resident in India provided:
(a) such shares, bond or debenture was held by the transferor with the permission of the Reserve Bank, and
(b) such transfer is between relatives as defined in Section 6 of the Companies Act, 1956
Consequently, it is not necessary for NRIs to obtain Reserve Banks’ permission for transfer of shares/bonds/debentures effected in the above manner
VI. Transfer of Rupee Securities to Non-residents as Gifts
Transfer of rupees shares/securities by residents to non-residents by way of gift requires prior approval of Reserve Bank. Applications for such transfers should be made to the concerned office of Reserve Bank and should, inter alia, containing the following information:
(a) Name, address and permanent place of residence of both the transferor and the transferee.
(b) Relationship between the transfer or and the transferee.
Reason for making the gift
VII. Sale/Transfer of Government Securities/Units
NRIs/OCBs may freely sell/transfer Government securities through a Stock Exchange in India, provided the sale/transfer of such securities is arranged through an authorised dealer. Similarly NRIs/OCBs holding units of UTI may freely tender them for repurchase by the Trust.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5 - Investment by Foreign Institutional Investors
General Foreign Institutional Investors (FIIs )
Including pension funds, mutual funds, investment trusts, university funds, endowments, foundations or charitable trusts or charitable societies, etc. are permitted to invest in all securities i.e. equity shares/debentures/ PCDs/ FCDs/ Rights renunciations /warrants of Indian companies listed as well as unlisted, dated Government securities, Treasury Bills and units of domestic mutual fund schemes in the primary and secondary markets. Investments by Flls will be subject to a ceiling 24%or the total paid up equity capital of the company. The ceiling would apply to all holdings taken together along with conversion out of the fully and partially convertible debentures issued by the Company. The holding of a single FII or the concerned FII group in any company would also be subject to a ceiling of 10% of total paid up equity capital. Indian companies, however, would be permitted to raise the ceiling limit of 24% to 30% provided it has been approved by the Board of Directors of the company and a Special Resolution is passed to that effect by the General Body. The ceiling of 24% or 30% as the case may be, applicable for investment by FLLS will not include investment made by NRIs/ OCBs under the Portfolio. Investment Scheme. It will also not include direct foreign investment by a foreign collaborator and investment by FIIS through Off-shore Funds, Global Depository Receipts and Euro-Convertible Bonds.
The Reserve Bank has also granted general permission to mutual funds in India to issue units or similar instruments to FIIs under the scheme approved by Securities and Exchange Board of India and to send such units/instruments out of India to their global custodians, as also to repurchase units/instruments from FIIs .
Registration requirement
FIIs are required to register themselves with Securities and Exchange Board of India (SEBI) before they invest in the Indian capital. Application for registration should be made by FIIs to SEBI in the prescribed form in duplicate. One copy of the application will be forwarded by SEBI to Reserve Bank. Reserve Bank will grant permission under FERA 1973 to the bank branch designated by the applicant FII to buy/sell equity shares/debentures/warrants dated Government Securities/Treasury Bills/ units of domestic mutual funds. Reserve Bank’s permission will be initially valid for five years and will be operative only after obtaining registration form SEBI. This permission can be renewed for a further period of five years on request. Reserve Bank’s permission would enable the FIIs to buy/sell the securities and remit the income/dividend/sale proceeds after payment of applicable taxes through the designated bank branch. Reserve Bank’s permission will also cover investment in shares/debentures of Indian companies in primary market i.e. new issues provided the company has reserved certain quota out of its public issue in favour of FIIs. The designated bank branch is required to submit to Reserve Bank a statement in Form LEC on daily basis in respect of purchase/sales or shares/ debentures made for the purpose of monitoring by Reserve Bank the overall ceiling of 24% or 30%, as the case may be.
In order to facilitate making of investments in India and repatriation on income/sale proceeds of such investments, Reserve Bank will permit the designated Bank to open a foreign currency denominated account and a special Non-resident rupee account in the name of FII. The designated bank branch will also be permitted (a) to transfer funds from foreign currency account to rupee account and vice versa (b) to make it investments out of the balance in the rupee account, (c) to credit sale proceeds of shares and other investments as also dividend/interest earned on the investments to the rupee account and (d) to transfer the repatriable proceeds (net of taxes) from the rupee account to the foreign currency account.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Investment in Immovable Property
1 - Introduction
Section 31 of FERA governs matters regarding permission for purchase of immovable properties by NRIs and Foreign Citizen of Indian or non-Indian origin and investments from local funds or funds remitted from abroad.
Foreign Citizen (regardless of residence) are either (a) of Indian Origin, or (b) of Non-Indian Origin. For the purpose of FERA , a Foreign Citizen is of Indian Origin if (i) he held an Indian Passport at any time, or (ii) he or his father or paternal grandfather was/were a citizen (s) of India as per the Constitution of India or the Citizenship Act, 1955.
However, citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal are excluded from the definition of Indian Origin.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 - Investment By Foreign Citizens of Indian Origin
For the purpose of FERA , a Foreign Citizen is of Indian Origin if (i) he held an Indian Passport at any time, or (ii) he or his father or paternal grandfather was/were a citizen (s) of India as per the Constitution of India or the Citizenship Act, 1955. However, citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal are excluded from the definition of Indian Origin.
For Foreign Citizens of Indian Origin, different procedures have been laid down depending on:
(a) whether they invest their money in the form of foreign currency remitted from abroad through normal banking channels or from funds withdrawn from the NRE/FCNR accounts; or
(b) from local funds in Rupees.
Investment from Local Funds
Procedure
For foreign citizens of India origin, who wish to invest their local (Indian) funds in immovable properties, the procedure is different. These persons require permission from Reserve Bank of India prior to their making the investment in immovable property. Such person have to apply to Reserve Bank of India in Form IPI 1. Reserve Bank of India will grant its permission for foreign citizens to invest their local funds in immovable properties provided it is required only for their bonafide residential use. Properties not immediately required for use can be let out. Foreign citizens resident in Indian are generally permitted by Reserve Bank of India to acquire only one immovable property in India for their families’ own bonafide residential use if their local funds are to be invested in these properties.
Repatriation
If Indian rupees are used for investment, no repatriation is permitted except of Rental Income. Reserve Bank of India has to be satisfied about the reasonableness of the valuation of the property and further, the purchasers have to furnish an undertaking to Reserve Bank of India that they will not ask for repatriation outside India of the sale proceeds thereof.
Investment from Foreign Funds
Procedure
If foreign citizens invest in the immovable property out of Foreign Exchange remitted through normal banking channels or from funds withdrawn from their NRE/FCNR accounts, the Reserve Bank of India has given them general permission. For them no prior RBI formalities are necessary before purchasing immovable properties. It is necessary for such persons to submit to Reserve Bank of India , a declaration in Form IPI 7 within a period of 90 days from the date of purchase of the properties. Form IPI 7 must be accompanied by a certified copy of the property in the names of the purchasers and certificates from banks in India which would prove that the purchase consideration was paid either out of remittances received from abroad through normal banking channels or from funds held in the purchaser’s NRE/FCNR accounts maintained in India.
Repatriation
Reserve Bank of India permits repatriation of original investment in equivalent foreign exchange after obtaining their prior approval, and such repatriation is subject to the following conditions :
i) In case of residential properties, repatriation is subject to a maximum of 2 houses.
ii) The properties should have been purchased on or after 26th May, 1993.
iii) The properties have been held by the purchaser for a period of at least three years from the date of final purchase deed or from the date of payment of final instalment of the purchase consideration, if the purchase agreement so provides, whichever is later.
iv) Only the amount of sale proceeds equivalent to the original investment in foreign exchange will be allowed to be repatriated outside India. The balance amount of sale proceeds of the property should be credited to the seller’s NRO account or to the Resident Rupee Account (in case of resident foreign citizens), with an authorised bank in India. Thus, the balance sale proceeds over and above the original investment in foreign exchange in not repatriable.
iv) In case the seller intends to repatriate the original investment in the immovable property after 3 years, he should take permission from the RBI prior to approaching his banker to allow him the repatriation. The application for repatriation must be made within a period of 90 days of sale of the property in the prescribed Form IPI 8
If for any bona fide reasons beyond the control of the seller, the seller is prevented from filing the prescribed application for repatriation, within the above period, he can present the case before the Reserve Bank of India explaining the reasons for his failure to file the application for repatriation in time. The Reserve Bank of India, on merit, may permit such repatriation.
vi) The above policy covers both commercial and residential immovable property but they do no cover acquisition of agricultural land or farm house or plantation properties.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Investment By Foreign Citizens of Non-Indian Origin
Reserve Bank of India permits Foreign Citizens of Non-Indian Origin (whether resident in India or not) to acquire, hold, transfer, or dispose of immovable properties in India, provided the following conditions are satisfied
i) Property to be purchased should be for residential use only.
ii) The purchase consideration must be met from Foreign Exchange remitted from abroad through normal banking channels.
iii) Income arising from the property purchased or sale proceeds of such property or income arising out of investments made out of such sale proceeds at any future date, shall not be allowed to be repatriated outside India.
It is advisable for Foreign Citizens of Non-Indian Origin to take RBI’s prior permission before letting out of the residential premises acquired by them.
iv) Prior permission from Reserve Bank of India is to be obtained before purchase of the properties by submitting an application in Form IPI 1 together with the following documents:
a) An authenticated copy of the agreement to purchase or draft purchase deed.
b) A detailed valuation report from a Government approved valuer indicating the Fair Market Value of the property, as on the date nearer to the date of agreement, for its purchase.
c) Certified from a Bank in India confirming receipt of foreign exchange necessary to purchase the property.
d) An undertaking regarding non-repatriation of the s ale proceeds and income of or from the property.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4 - Investment By Non Resident Indian Citizens
Procedure
For Indian Citizens wishing to invest in immovable property, there are no restrictions under FERA to purchase any immovable property in India.
Repatriation
If the India Citizen is a non-resident and if he invests after 26th May, 1993, in either commercial or residential immovable property, either from funds remitted from abroad through normal banking channels or from his NRE/FCNR accounts with banks in India, he can avail of the benefits of repatriation of his original investment in foreign exchange, if he submits within a period of 90days from the date of purchase a declaration about the purchase in Form IPI 7. Thus, even though section 31 of FERA which deals with immovable property is only applicable to foreign citizens, Non-Resident Indians who are Indian Citizens are advised to file the declaration in Form IPI 7 if they are investing their foreign funds in immovable property after 26th May , 1993 and wish to avail of the repatriation facility at a later date. The terms and conditions on which the repatriation is allowed are similar to those applicable to foreign citizens of Indian origin. These are :
i) In case of residential properties, repatriation is subject to a maximum of 2 houses.
ii) The properties should have been purchased on or after 26th May, 1993.
iv) The properties have been held by the purchaser for a period of at least three years from the date of final purchase deed or from the date of payment of final instalment of the purchase consideration, if the purchase agreement so provides, whichever is later.
iv) Only the amount of sale proceeds equivalent to the original investment in foreign exchange will be allowed to be repatriated outside India. The balance amount of sale proceeds of the property should be credited to the seller’s NRO account or to the Resident Rupee Account (in case of resident foreign citizens), with an authorised bank in India. Thus, the balance sale proceeds over and above the original investment in foreign exchange in not repatriable.
iv) In case the seller intends to repatriate the original investment in the immovable property after 3 years, he should take permission from the RBI prior to approaching his banker to allow him the repatriation. The application for repatriation must be made within a period of 90 days of sale of the property in the prescribed Form IPI 8
If for any bona fide reasons beyond the control of the seller, the seller is prevented from filing the prescribed application for repatriation, within the above period, he can present the case before the Reserve Bank of India explaining the reasons for his failure to file the application for repatriation in time. The Reserve Bank of India, on merit, may permit such repatriation.
vi) The above policy covers both commercial and residential immovable property but they do no cover acquisition of agricultural land or farm house or plantation properties.
It is important to note that Reserve Bank of India has specifically excluded investment by NRIs in agricultural land, farm houses or plantations of any kind as in Reserve Bank of Indian view , purchase of these properties may tantamount to carrying on agricultural or plantation activities which are currently not permitted or Non-Resident Indians.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5 - Sale of Immovable property by Non-Residents
There are no formalities under FERA in case of a Non-Resident Indian who is an Indian Citizen and who wishes to sell his immovable property in India. Even if the non-resident is a foreign citizen (regardless of origin), he has been granted general permission by Reserve Bank of India to sell his immovable property situated in India.
However, while a Non-Resident Indian can sell his immovable property without Reserve Bank of India’s permission, as per FERA, a Resident Indian cannot make any payment including the purchase price for the property to a non-resident without RBI’s prior permission. Section 9 of FERA prohibits any payment by a resident to any non-resident except with prior general or special permission from Reserve Bank of India. For purchase and sale of a flat, while the non-resident is under no obligation to obtain any permission from Reserve Bank of India to sell his flat, the resident should seek prior permission to make payment (including the purchase consideration) to a non-resident. The resident should not pay without RBI’s permission, even the earnest or token money to the non-resident, as a mark of completion of the negotiations for the transaction.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6 - Acquisition of immovable property by Inheritance
The relatives of NRIs often wish to bequeath properties to non-residents in their wills. For such cases, Reserve Bank of India has granted general permission to non-residents of Indian Origin (irrespective of their citizenship) to acquire immovable properties by way of inheritance and also to hold and enjoy these properties acquired by them.
However, Reserve Bank of India has not granted any repatriation facilities for sale proceeds of such inherited properties. This is because there is no convertibility of the Indian Rupee on capital account.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
7 - Acquisition of immovable property through Gift
Non-residents have also been granted general permission to acquire such properties by way of gifts. However, the gift must be from/to a relative who may be either an Indian Citizen or a person of Indian Origin who may or may not be a Resident in India. "Relative" is to be construed as per definition given under section 6 of the Companies Act, 1956.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
8 - Letting out Immovable Property
Reserve Bank of India has granted general permission to Foreign Citizens of Indian Origin (whether resident in India or not) and Non-residents of Indian nationality and origin (except citizens of Pakistan, Bangladesh, Nepal, Bhutan, Afganistan and Sri Lanka ) to let out, either their commercial or residential premises, to persons in India, subject to the following conditions:
a) The rental income and the proceeds of any investment, out of such income, shall be repatriable (due to current account convertibility); otherwise
b) The rental income shall be credited in the owner’s Non-Resident (Ordinary) Rupees Account or to the Non-Citizen’s Resident Rupee Account maintained with a Bank in India.
Further, it must be noted that there seems to be no direct reference to Foreign Citizens of Non-Indian Origin, for the above relaxation. In their cases, therefore, it may be necessary to take Reserve bank of India’s prior approval before renting out their properties.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
9 - Investment by Partnership Firms, Trust & Associations
In the case of partnership firms, if even one of the partners is a foreign citizens, the firm would be required to take the permission from Reserve Bank of India, wherever necessary, for the acquisition or disposal of immovable properties in the name of the partnership firm.
In the case of any association or organisation or any trust, if any member or trustee is a foreign citizen, then the permissions from Reserve Bank of India, wherever necessary, would be required to be taken for acquisition or disposal of immovable properties.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
10 - Investment by Foreign Companies
Companies (other than banking companies), which are not incorporated under any law in India, are granted general permission by RBI to acquire or hold any immovable property which is necessary for, or incidental to, any activity permitted by RBI under section 28 or section 29 of FERA. A declaration is to be filed with RBI in Form IPI5 not later than 90 days from acquisition of immovable property .
Foreign companies which have been permitted to open liaison office or to post representatives in India, are allowed to acquire properties in India with prior permission of RBI. RBI may permit purchase of properties for their own use and not for earning income by way of rent. The purchase consideration is to be met out of foreign exchange remitted from abroad, through normal banking channels.
c) The acquisition, sale, etc. of immovable properties by foreign banks operating in India are governed by the relevant provisions of the Banking Regulation Act and the RBI’s policy in force. Foreign Banks are required to comply with directions of RBI’s Department of Banking Operations and Development (DBOD) in this regard.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
11 - Loans for Housing
RBI has granted general permission to certain financial institutions like HDFC, LIC Housing Ltd., etc. to grant housing loans to NRIs for acquisition of a house/flat for self-occupation, subject to certain conditions. Authorised dealers have also been granted permission to grant loans to NRIs for acquisition of house/flat on their return to India, subject to certain conditions. Repayment of the land should be made within 15 years out of inward remittance through banking channels or out of funds held in the investor's NRE/FCNR/NRO accounts.
Further, RBI permits Indian companies/firms to grant housing loans to their employees deputed abroad and holding Indian passport, subject to certain conditions.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
12 - Investment in ImmovableProperties
Category
Funds Invested
Permission Required
Repatriation
Type of property
Foreign Citizen of Indian Origin Foreign funds i.e. Foreign exchange remitted through normal banking channelsor funds withdrawn from NRE/FCNR A/Cs No prior permission from RBI required. Declaration
form IPI 7 to be submitted to the RBI within 90 days of purchase of the property Repatriation of original investment in equivalent foreign exchange is permitted after RBI's prior approval subject to certain conditions Property should have been purchased after 26thMay,1993 Residential or Commercial but not agricultural land or farm house or plantation properties
Foreign Citizen of Indian Origin Investment from local funds Prior permission from RBI required. Apply in
form IPI 1 No Repatriation of investment allowed. Repatriation of rental income if any is allowed. Residential and not commercial or farmhouse or agricultural land or plantation property
Foreign Citizens of Non Indian origin Can only invest through funds remitted from abroad Prior permission from RBI required. Apply in
form IPI 1
No repatriation allowed.
Residential and not commercial or farmhouse or agricultural land or plantation property
Indian citizens not resident in India Foreign funds ie. Foreign exchange remitted through normal banking channels or funds withdrawn from NRE/FCNR A/Cs No prior permission from RBI required. Declaration
form IPI 7 to be submitted to the RBI within 90 days of purchase of the property if they wish to avail of repatriation at a later date.
Repatriation of original investment in equivalent foreign exchange is permitted after RBI's prior approval subject to certain conditions. Property should have been purchased after 26th May, 1993
Residential or Commercial but not agricultural land or farm house or plantation properties
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NRI Bank Accounts -
(1)-Introduction
(2)-Non Resident Ordinary rupee Account (NRO)
(3)-Non-resident Non-Repatriable Term Deposit Account (NRNR)
(4)-Nonresident (Special) Rupee (NRSR) Accounts
(5)-Nonresident External Rupee Account
(6)-Foreign Currency (Nonresident) Accounts (Banks) Scheme FCNR-B Accounts
(7)-Nomination Facility for Bank Accounts in India
(8)-Summary of bank accounts for Non residents
1 - Introduction -
Authorised Dealers
Banks play an important role in all foreign exchange transactions in India. All receipts and payments in foreign exchange are require to be settled in almost all cases through a bank authorised to deal in foreign exchange. Section 6 of FERA requires the bank to obtain a licence from Reserve Bank of India (RBI) to deal in foreign exchange, and such banks are the "authorised dealers" in foreign exchange.
Indian national and persons of Indian origin resident abroad can open bank accounts in India freely, out of funds remitted from abroad in foreign exchange ,or out of funds legitimately due to them in India. RBI has granted general permission to "Authorised Dealers" to open such accounts freely, although in some cases the requests of Non-residents will have to be approved by RBI.
Besides authorised dealers the RBI has permitted certain State Co-operative Banks, Scheduled Commercial Banks and Urban Co-operative Banks, which do not hold licences as full-fledged Authorised Dealers, but which fulfil the eligibility criteria, prescribed by RBI, to maintain Non-resident Ordinary Rupee Accounts (NRO Accounts) and Non-resident External Accounts in rupees. They cannot maintain Foreign Currency (Non-Resident) Accounts (Bank) Scheme.
LIST OF BANKS AND OTHER INSTITUTIONS (AUTHORISED DEALERS) TO WHOM LICENCES HAVE BEEN ISSUED TO DEAL IN FOREIGN EXCHANGE
A. Banks and others holding full-fledged licences
1. ABN AMRO Bank N.V.
2. Abu Dhabi Commercial Bank Ltd.
3. Allahabad Bank
4. American Express Bank Ltd.
5. Andhra Bank.
6. ANZ Grindlays Bank Ltd.
8. Bank International Indonesia
9. Bank of America National Trust and Savings Association
10. Bank of Bahrain and Kuwait B.S.C.
11. Bank of Baroda
12. Bank of Ceylon
13. Bank of India
14. Bank of Madura ltd.
15. Bank of Maharashtra
16. Bank Muscat International S.A.O.G.
17. Bank of Nova Scotia
18. Bank of Punjab Ltd.
19. Bank of Rajasthan Ltd.
20. Bank of Tokyo-Mitsubishi Ltd.
21. Banque Nationale De Paris
22. Barclays Bank p.l.c.
23. Benares State Bank Ltd.
24. Bharat Overseas Bank Ltd.
25. Bombay Mercantile Co-operative Bank Ltd.
26. The British Bank of the Middle East.
27. Canara Bank.
28. Catholic Syrian Bank Ltd.
29. Central Bank of India
30. Centurion Bank Ltd.
31. The Chase Manhattan Bank
32. Chinatrust Commercial Bank
33. Cho Hung Bank
34. Citibank N.A.
35. City Union Bank Ltd.
36. Commerzbank A,G.
37. Corporation Bank
38. Credit Agricole Indosuez
39. Credit Lyonnais
40. Dena Bank
41. Deutsche Bank Aktiengesellschaft
42. The Development Bank of Signapore Ltd.
43. Development Credit Bank Ltd.
44. Dhanalakshmi Bank Ltd.
45. Dresdner Bank A.G.
46. Federal Bank ltd.
47. The Fuji Bank ltd.
48. Global Trust Bank Ltd.
49. HDFC Bank Ltd.
50. The Hongkong and Shanghai Banking Corporation Ltd.
51. ICICI Banking Corporation Ltd.
52. IDBI Bank Ltd.
53. Indian Bank
54. Indian Overseas Bank
55. Induslnd Bank Ltd.
56. International Nederlanden Bank (ING Bank)
57. Jammu and Kashmir Bank Ltd.
58. KBC Bank N.V.
59. Karnataka Bank Ltd.
60. Karur Vysya Bank Ltd.
61. Krung Thai Bank Public Company Ltd.
62. Lakshmi Vilas Bank Ltd.
63. Maharashtra State Co-operative Bank Ltd.
64. Mashreq Bank p.s.c.
65. Morgan Guaranty Trust Co. of New York
66. Nedungadi Bank Ltd.
67. Oman International Bank S.A.O.G.
68. Oriental Bank of Commerce
69. Oversea-Chinese Banking Corporation Ltd.
70. Punjab National Bank
71. Punjab and Sind Bank
72. The Sakura Bank Ltd.
73. Sangli Bank Ltd.
74. Sanwa Bank Ltd.
75. Sarawat Co-operative Bank Ltd.
76. SBI Commercial and International Bank Ltd.
77. The Sian Commercial Bank Ltd.
78. Societe Generale
79. Sonali Bank
80. South Indian Bank Ltd.
81. Standard Chartered Bank
82. State Bank of Bikaner and Jaipur
83. State Bank of Hyderabad
84. State Bank of India
85. State Bank of Indore
86. State of Bank of Mauritius Ltd.
87. State Bank of Mysore
88. State Bank of Patiala
89. State Bank of Saurashtra
90. State Bank of Travancore
91. The Sumitomo Bank Ltd.
92. Syndicate Bank
93. Tamlinad Mercantile Bank Ltd.
94. Thomas Cook (India) Ltd.
95. Times Bank Ltd.
96. The Toronto Dominion Bank
97. UCO Bank
98. Union Bank of India
99. United Bank of India
100. United Western Bank Ltd.
101. UTI Bank Ltd.
102. Vijaya Bank
103. Vysya Bank Ltd.
B. Institutions holding restricted authorisiation to deal in foreign exchange
1. Export-Import Bank of India
2. Industrial Credit & Investment Corporation of India Ltd.
3. Industrial Development Bank of India
4. Industrial Finance Corporation of India
5. SBI Factors and Commercial Services Pvt. Ltd.
6. Small Industries Development Bank of India
Classification of Non Resident Accounts
Non-resident accounts are based on
(a) Repatriation : These are two types, namely Oridnary accounts without any repatriation facility and external accounts with full repatriation facility.
(b) The currency of account : Non-residents can maintain their accounts either in Indian rupees or specified foreign currency mostly US& Pound Sterling, Deutsche marks or Japanese yen.
Non-Repatriable Accounts
1. Non-resident Ordinary Rupee Account-NRO A/C -Savings, Current and Time Deposits
2. Non-resident Non-Repatriable Term Deposits -NRNR Accounts
3. Non-residents (Special) Rupee -NRSR Account : The scheme has been effective from 15th April, 1999.
Repatriable Accounts:
4. Non-resident External Rupee Account – NRE A/C : Savings, Current & Time Deposits
5. Foreign Currency Non-resident Bank Deposits -FCNR-B Accounts.
Two earlier schemes namely Foreign currency Non resident Accounts (FCNR) and Foreign currency (Ordinary Non repatriable) (FCONR) deposit scheme were discontinued in 1994. Acceptance of deposits under the FCNR scheme has been discontinued w.e.f. 15th August 1994. Deposits already accepted are however, allowed to continue till their maturity and thereafter no renewals would be permitted. Acceptance of deposit under the FCONR scheme has been discontinued with effect from 20th August 1994 and the existing deposits will not be renewed on maturity.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 - Non-Resident Ordinary Rupee Account (NRO Accounts)
General
When an Indian national or person of Indian origin residing in India leaves India for a foreign country (other than Nepal and Bhutan) for taking up employment, business or vocation outside India, or for any other purpose, indicating his intention to say outside India permanently or for an indefinite period, he becomes a person resident outside India. His bank account, if any, in India is designated as an Ordinary Non-resident Account (NRO Account). Such accounts can also be opened with funds remitted from abroad. . As funds in this type of account are non repatriable, they cannot be remitted abroad to the account holders or transferred to their NRE Accounts without the Reserve Bank’s prior permission. Interest earned on these deposits is not exempt from Indian Income-tax.
Type of Account
The accounts may be maintained in the form of savings or current or term deposit accounts. The accounts can also be opened jointly by non-residents with their close relatives resident in India and operations thereon by the resident account holders can be made freely. If an account is used only for the personal or business needs of the resident account holder, it may be opened jointly even with a person who is not a close relative but this needs prior permission of the Reserve Bank. Interest earned on balances in NRO Accounts is not exempt from Indian Income-tax instead Income-tax (at present @ 20%) is deducted at source i.e. at the time of payment of interest by the bank. Balance held in NRO Account can neither be repatriated nor any remittance in foreign currency is allowed without prior approval of Reserve Bank.
Operation of the Account
There are not many restrictions on the operation of this account and a number of credit and debit transactions can be made after filling up Form A4. The following credit transactions can be made :
(a) Proceeds of remittances received in any permitted form through normal banking channels.
(b) Proceeds of foreign currency notes/traveller cheques tendered by the account holder during his temporary visit to India.
(c ) Remittance by way of transfer from rupees accounts of non-resident banks.
(d) Legitimate dues in rupees of the account holder in India.
Certain credits to the accounts such as proceeds of foreign inward remittances, dividend and interest earned on shares/securities acquired with the Reserve Bank’s permission (wherever necessary ) and held in India by the account holder, sale proceeds/maturity proceeds of shares/securities, surrender value of life insurance policies of the account holder and proceeds of cheques for small amounts upto specified limits can be made by banks without the Reserve Bank’ permission.
Following debit transactions can also be made after filling Form A4
(a) All local payments in rupees.
(b) Debits for investment and credits representing sale proceeds of investments may also be permitted by banks.
Withdrawals from these accounts can be freely made for local disbursements as well as for investments in Units of UTI, Government securities and National Plan/Savings Certificates, without prior approval of the Reserve Bank.
Change of Status from Resident to Non-resident Account vice versa
All resident accounts of a person with banks in India will automatically be treated ordinary non-resident accounts on his becoming non-resident.
Similarly NRO account may be redesignated as resident accounts on the account of holder becoming resident in India. It may be noted that residential status of a person will be determined as per the definition under Foreign Exchange Regulation Act, 1973.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Non-resident Non-Repatriable Term Deposit Account: (NRNR Accounts)
General
With a view to providing further incentives and wider options to persons of Indian Nationality/Origin residing abroad (NRIs) and Overseas Corporate Bodies predominantly owned by NRIs (OCBs) as well as giving opportunities to persons of non-Indian origin and overseas corporate bodies owned by them for making investments in India, Reserve Bank has formulated Non-resident (Non-repatriable) Rupee Deposit Scheme. The Scheme came into effect from 15th June, 1992.
The scheme is open to all non-residents including foreign citizens of non-Indian origin (except Pakistani and Bangladeshi Nationals) and Overseas Corporate Bodies owned by them. Accounts under the Non-resident (Non-Repatriable ) Rupee Deposit Scheme may be opened in Indian rupees by authorised dealers out of the funds in freely convertible foreign exchange transferred for the purpose to India in an approved manner from the county of residence of the prospective non-resident account holder or from any other country. Accounts may also be opened by transfer of funds from the existing NRE/FCNR Accounts of the non-resident account holder. No penal interest is charged in case of premature withdrawal of existing NRE/FCNR deposits for the purpose of making investment under the scheme.
Authorised dealers are free to fix the maturity period of such deposits between six months and three years. They are also free to fix the rate of interest payable on such deposits. The exact rates may be ascertained from the concerned bank. The maturity proceed of the deposit will not quality for repatriation outside India at any time. However, the interest accrued on the deposits held under the scheme from the quarter beginning October 1, 1994 are eligible for repatriation .The income form the deposits under the schemes will be free from Indian Income-tax. Exemption from Income-tax will, however, not be available to resident donees and those resident who being joint holders, become owners of the deposits as survivors of the non-resident depositor.
NRNR vis a vis NRO Account
The depositor under both the schemes are accepted in Indian rupees on non-repatriation basis. The main points of distinction under both the schemes are as under :
(a) Accounts under NR (NR) Scheme can be opened only with proceeds of fresh remittances from abroad or by transfer from existing NR (E) FCNR Accounts of the depositor, whereas legitimate local resources may be utilised to open NRO Accounts.
(b) Advances against security of deposit under NRO Scheme are governed by directives of Reserve Bank of India, whereas banks have freedom to determine rates of interest, margin etc. while granting advances against security of deposits held under NR (NR) Scheme.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4 - Non-Resident (Special) Rupee (NRSR) Accounts
In order to simplify the procedures applicable to operation of bank accounts and financial transactions in India by non-resident individuals of Indian nationality/persons of Indian origin, it was decided to introduce, with effect from 15th April 1999, a new type of account viz., Non-Resident (Special) Rupee (NRSR) Account for such persons who would voluntarily undertake not to seek repatriation of funds held in these, with the exception that investment of funds held in these accounts in shares/securities and immovable property will be governed by the extant exchange control regulations. For opening of NRSR account, the applicant should submit an application in Form NRSR to an authorised dealer, together with the undertaking contained therein duly signed. Authorised dealers may, on receipt of the application and the undetaking open the account and allow all financial transactions therein freely without going into the details of sources of credits and purposes of debits. This facility will, however, not be available to overseas corporate bodies.
The non-resident individuals of Indian nationality /persons of Indian origin maintaining Non-Resident (Ordinary) Account have the option of converting these accounts into Non-Resident (Special) Rupee Accounts. Similarly, when a resident becomes a non-resident by virtue of going abroad on emigration/employment etc. he will also have an option of designating his account as Non-Resident Ordinary Account or Non-Resident (Special) Rupee Account. There will be no need for completion of Form A4 either for approval or for reporting the transactions in Non-Resident (Special) Rupee Accounts.
NRSR accounts may be current, savings, recurring or fixed deposits accounts. Requirements in regard to resident accounts, including nomination facility, shall apply to NRSR accounts. Opening of and operations on the accounts of individuals of Pakistani/Bangladeshi/Sri Lankan nationality require approval of Reserve Bank.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5 - Non-resident External Rupee Account - NRE Account
General
Persons of Indian nationality or origin resident abroad may open, with authorised banks in India, Non-resident (External) Accounts (NRE Accounts), designated in rupees. These accounts can be maintained in the form of savings, current or term deposit accounts. Opening of NRE Accounts jointly in the names of two or more non residents is permitted provided all the account holders are persons of Indian nationality or origin. For opening these accounts, the funds are required to be remitted to India through (a) proceeds of foreign exchange remittances from abroad through banking channels in an approved manner.
(b) proceeds of foreign currency notes and traveler cheques brought into India by the non-resident while on a temporary visit to India.
(c) transfer from an existing Non-Resident (External) FCNR account of the same person.
The account holder has to furnish an undertaking on the account opening form that he would promptly send an intimation to his bank if and when he returns to India for permanent residence.
Proceeds of remittance arranged by the account holder through banking channels from any country can be credited to this account. Similarly, income from the account holder’s investment from the funds in the account can be credited to it, except in cases where the investments are permitted on non-repatriable basis. Remittances from the account to the country of residence of the account holder or any other country are freely allowed.
Authorised dealers may allow operations on NRE Accounts by persons resident in India in terms of Powers of Attorney (Annexure 14.5) or other appropriate authority granted in their favour of non-resident account holders, provided the powers are restricted to withdrawals for local payments.
Type of Account
All types of accounts ie. current, savings and term deposit etc. can be opened under
Non-Resident (External) Accounts Scheme. A Non-resident can open joint account with other non-resident provided all the account holders are persons of Indian nationality or origin. Opening of a joint account by a non-resident person with a person resident in India is not permitted under NR (E) Scheme.
Non-resident account can grant power of attorney or such other authority to residents in India for operating their NR (E) Accounts in India. Such authority, is however, restricted to withdrawals for local payments only. The resident power of attorney holder cannot repatriate funds held in accounts outside India under any circumstances or make payment of gifts on behalf of the account holder.
Account can also be opened by an eligible non-resident Indian during his temporary visit to India, against tender of foreign currency traveler cheques/currency notes, provided the bank is satisfied that the prospective account holder has not ceased to be a non-resident. The amount so tendered would be endorsed on the Currency Declaration Form CDF where applicable, before crediting the rupee equivalent to the account.
Operation of NRE Accounts
There are certain restrictions on operation of NR (E) accounts and Form A2 / Form A4 is to be completed for few transaction. These forms may be completed either by the resident party to the transaction or by the bank after obtaining necessary information from the resident party account holder. The undernoted transactions of debits/credits are permitted in NR(E) accounts:
Credits in the account
Transaction where Form A4 is not to be completed.
(i) Transfer from FCNR accounts of the same accounts holder.
(ii) Interest accruing on balances in Non-resident (External) or FCNR accounts of the account holder.
Transactions where Form A4 is to be completed.
(i) Proceeds of foreign exchange remittances, drafts, personal cheques etc. in the name of the account holder.
(ii)Proceeds of foreign currency travellers cheques, drafts and personal cheques drawn by account holder on a foreign currency account maintained abroad by him deposited by account holder during his temporary visit to India, provided authorised dealer is satisfied that the account holder is still normally resident abroad, the travellers cheques/drafts are standing in the name of account holder and have not been endorsed in his favour and in the case of travellers cheques, they are discharged by the account holder in the presence of the bank officials.
(iii) Proceeds of foreign currency/bank notes tendered by account holder during his temporary visits to India, provided these are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that the account holder is still normally resident outside India.
Debits in the account
Transactions where Form A4 is not be completed.
i) All local payments except for the purpose of investment.
ii) Transfer to any other NR (E) of FCNR account of the same person.
iii) Transfer to NR (E) accounts of persons other than the account holder for bona file personal purpose.
Transactions where Form A4 is required to be completed.
i) Payments for permissible investments by the account holder.
ii) Payments towards purchase price of immovable property by account holder. However, if the account holder is not an Indian national, declaration to Reserve Bank of India for acquisition of property under section 31 of Foreign Exchange Regulation Act, 1973 is to be obtained.
iii) Any other transaction if covered under general or special permission granted by Reserve Bank.
Transaction required to be reported on Form A2
i) Remittance abroad.
ii) Sale of foreign currency traveller cheques etc. to account holder himself or his dependants provided that they hold a ticket showing journey date which should not be later than thirty days from the date of sale.
All other transactions of credit/debit to these accounts not covered under the above provisions required prior approval of Reserve Bank. Form A4 is to be completed in duplicate in such cases and forwarded to Reserve Bank through the bank with whom the account is maintained. The transactions will be put through the account only after a copy of Form A4 duly approved by Reserve Bank is received back.
Change of Status from Non-resident to Resident
Immediately upon return of the account holder to India and on his becoming resident in India, NR (E) account will be redisignated as resident rupees account or converted to RFC account as per the option of the account holder.
However, if the account holder is only on a short visit to India, the account will continue to be treated as NR (E) account even during his stay in India.
In respect of funds held in fixed deposits in NR(E) Accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full even after conversions into resident account.
Advantages of NRE Account
Non-residents can enjoy the following advantages by maintaining NRE Accounts:
1. Term deposits for one year and above made by non-residents carry interest at rates higher than those available to residents in India.
2. The interest on deposits and any other income accruing on the balance in the accounts are free of Indian Income-tax.
3. The balances in the accounts are free of Wealth-tax.
4. Gifts to close relatives in India from out of balances in the accounts are free of Gift-tax, when gifted before 1st October, 1998, thereafter there is no gift tax in India.
5. The entire credit balance (inclusive of interest earned thereon) can be repatriated outside India at any time without reference to the Reserve Bank.
6. Local disbursement from the accounts can be made freely.
7. Purchases of Units of Unit Trust of India (UTI), Central and State Government Securities and National Plan/Savings Certificates can be made freely from the balances in these accounts.
8. Sale proceeds/maturity proceeds/repurchase price of Units of UTI, securities or certificates originally purchased out of the funds in the account can be freely credited to these accounts by banks, without reference to the Reserve Bank.
9. Account holders are supplied special series of cheques forms for operations on these accounts.
10. Account holders can avail of loans/overdrafts from banks against security of fixed deposits in their NRE accounts.
Disadvantages of NR(E) Accounts
NR (E) accounts are opened in Indian rupees and all foreign exchange remittances received for credit of those accounts are first converted to Indian rupees at the buying rates by the banks. Any withdrawal in foreign currency will be permitted by the bank by converting Indian rupees in the account to foreign currency at the selling rate. This conversion loss is to be borne by the account holder.
Exchange rates are subject to fluctuation on day to day basis and Indian rupee has depreciated against all major foreign currencies in recent past. Balances held in Indian rupees in NR (E) accounts are thus exposed to exchange fluctuation risk.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6 - Foreign Currency (Non-Resident) Accounts (Banks) Scheme FCNR-B Accounts
Deposits under FCNR scheme were accepted by banks for maturities from 6 months to 3 years. Acceptance of deposits for shorter maturities was discontinued, in a phased manner and with effect from 15th February, 1994, deposits under FCNR scheme can be accepted only for a maturity period of 3 years. However, to enable to NRI depositors to continue with foreign currency deposits of shorter maturities, a new scheme known as Foreign Currency (Non-resident) Accounts (Banks) Scheme (FCNR (Banks) was introduced, with effect from 15th May, 1993. There is basically no difference for the depositor between these two schemes except the period of deposits.
For the banks accepting deposits under this scheme, there are a few changes. Exchange risk cover from Reserve Bank will not be available and will have to be borne by the banks themselves. There will be no obligation under the ‘Statutory Liquidity Ratio’ or priority sector lending. There is also no obligation for Cash Reserve Ratio. Resources mobilised under the scheme can be invested by the banks without any interest rate stipulation. However, non-resident depositors are not affected by these provisions.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
7 - Nomination Facility for Bank Accounts in India
The Banking Companies (Nomination) Rules, 1985 framed under Banking Regulation Act, 1949 enable to accept nominations. Nomination can be made by the account holder or, as the case may be, by all the joint account holders together, in respect of an account held by them with a bank in India. The nomination can be made only in respect of a deposit held in the individual capacity as a holder of an office or otherwise. The nomination has to be made in favour of only one individual. The nominee may be a minor but in that case the account holder should, while making the nomination, appoint another individual (who is not a minor) to receive the amount of deposit on behalf of the nominee during his minority, in case of need. The nomination made can be varied or cancelled by the account holder any time during the currency of the account by filing an application in the prescribed form.
Nomination facility for non resident accounts
The nomination facility is also available to holders of non-resident accounts. However, in case of deposits held in FCNR and NRE accounts, the deceased account holders nominees (who could also be residents in India) would not be automatically entitled to the right of repartriation of the funds acquired by them. Similarly credit of the amount becoming payable to a nominee to his NRE/FCNR account requires prior permission of Reserve Bank of India. In such cases, the nominees are required to make separate applications to Reserve Bank of India, which would be considered in the light of the residential status of individuals nominees and the relevant Exchange Control Regulations. Utilisation of the funds in India by the nominees would not, however, need exchange control approval.
The forms prescribed for deposit accounts under the nomination Rules are Form DA 1 for nomination, Form DA 2 for cancellation and Form DA 3 for variation.
Remittance/Transfer of Funds to Non-Resident Nominees
The Banking Companies (Nomination) Rules, 1985 framed under Banking Regulation Act, 1949 enables banks to pay the amount standing to the credit of the deceased depositor to his nominee. Authorised dealers may allow remittance of funds lying in the NRE/ FCNR accounts of the deceased account holder to their non-resident nominees subject to the following conditions:
(i) Application in Form LEG is submitted by the nominee (s).
(ii) A valid nomination has been registered in the banks record in favour of the nominees/s in confirmity with the provisions of the Banking Companies (Nomination) Rules, 1985.
(iii) The nominee continues to be non-resident at the time of the claim/remittance sought for from India and that the deceased depositor was non-resident at the time of his/her death.
(iv) All the legal heirs are non-residents. A signed declaration to the effect, duly witnessed, may be submiited by the nominee to the authorised dealer.
Applications in Form LEG together with the documents/particulars mentioned therein received from the nominees should be scrutinized and after satisfying about the legality of the claim as per the internal guidelines, authorised dealers may settle the claim and allow transfer of fund to the extent of balance held in the deceased depositor’s NRE/FCNR accounts. All other cases which do not fulfill the aforesaid terms and conditions or where the amount in NRE/FCR account is claimed by a person other than the nominee, should be referred to the concerned Regional Office of Reserve Bank for prior approval by authorised dealer in
Form LEG supported by documents indicated therein together with the legal representation issued by an Indian Court.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Taxation -
(1) -Definitions Categories and Provisions
(2)-Provisions of Income Tax
(3)-Rates of Direct Taxes affecting NRIs
(4)-Exemptions in Income Tax for NRIs

1 - Definition of a Non-Resident Indian (NRI) -
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) for the purpose of certain facilities.
Main categories of NRIs
The following are the main three categories of NRIs:-
(i) Indian citizens who stay abroad for employment or for carrying on a business or Vocation or any other purpose in circumstances indicating an indefinite period of stay abroad.
(ii) Indian citizens working abroad on assignment with foreign government agencies like United Nations Organisation (UNO), including its affiliates, International Monetary Fund (IMF), World Bank etc.
(iii) Officials of Central and State Government and Public Sector undertaking deputed abroad on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.
Provisions regarding Resident and Non-Resident under Income Tax Act and Foreign Exchange Regulation Act
The residential status of a person is decided under two different Acts, one under Income Tax Act, 1961, ( I.T. Act) and another under Foreign Exchange Regulation Act, 1973 (FERA). The concept of Non-Resident under FERA is different as compared to that under Income Tax Act. Under Income Tax Act, the residential status of a person is determined on the basis of number of days he stays in India whereas under FERA, it is the intention of a person to be in India or outside India would be an important factor determining his residential status.
Provisions under the I.T. Act
The residential status for the Income Tax Act is determined in section 6 as under:
1. An individual will be treated as a resident in India in any previous year if he fulfills any of the following two conditions:
(a) he/she is in India in that year for period or periods amounting in all to 182 days or more, or
(b) Having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more, and has been in India for 60 days or more in that year.
2. Under Explanation to section 6 (1) of the Income-tax Act, the residential status of an individual who is rendering service outside India and who visits India during leave or vacations in any previous year or an individual who is outside India and who comes on a visit to India in any previous year will be determined as under :
(a) An Indian citizen who leaves India in any previous year for the purpose of employment outside India or as a crew member of an Indian ship would be treated as a resident in India if he stays in India in that year for 182 days or more [instead of 60 days as stated in 1 (b) above ]. Conversely, if he stays in India for less than 182 days, he will be treated as non-resident for that year and his foreign income would not attract tax liability.
Further, w.e.f. 1st April, 1999, a crew member will be treated as non-resident in India if he is on board such ship outside the territorial water of India for 182 days or more during any year.
(b) An Indian citizen or a person of Indian origin who resides outside India and who comes on a visit to India in any previous year will be treated as resident in India if he stays in India in that year for 182 days or more [instead of 60 days as stated in 1 (b) above.]
Conversely, he will be treated as non-resident if he stays in India in that year for less than 182 days.
(3) An individual (whether Indian citizens or not) who is outside India and who comes on a visit to India in any previous year will be treated as "non-resident" in India if he stays in India in that previous year less than 182 days subject to the condition that during the preceding four previous years his stay in India does not amount to 365 days or more.
An Individual who fulfills any of the conditions mentioned in section 6(1) is treated as resident in India. But in order to become an "ordinarily resident", he must satisfy the following two conditions as laid down under section 6(6) (a) of the Income-tax Act, 1961:
(i) He should have been resident in India in nine out of the ten previous years preceding the previous year in which he is resident within the meaning of section 6(1); and
(ii) He should have been in India for a period or periods amounting in all to 730 days or more during the seven years preceding that previous year.
If he does not fulfill any of the above conditions, he will be treated as "not ordinarily resident".
(4) An individual who does not satisfy both the conditions as mentioned above as laid down in section 6 (1) will be treated as "non-resident" in that previous year.
(5) A Hindu undivided family, firm or other association of persons will be treated as "non –resident" in India in any previous year if the control and management of its affairs is situated wholly outside India during that year.
(6) A company will be treated as "non-resident" in India in any previous year if it is not an Indian company and also the control and management of its affairs is not situated wholly in India in that year.
The Provisions under Foreign Exchange Regulation Act (FERA) :
Section 2 (p) and 2 (q) of FERA define resident and non-resident as under:
2(p) "person resident in India" means-
(i) a citizens of India ,who has, at any time after the 25th day of March, 1947, been staying in India, but does not include a citizens of India who has gone out of, or stays outside, India in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.
(ii) a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of sub-clause (i) to be resident in India, return to, or stays in, India, in either case-
a) for or on taking up employment in India, or
b) for carrying on in India a business or vocation in India, or
c) for any other purposes, in such circumstances as would indicate his intention to stay in India for an uncertain period.
(iii) a person, not being a citizen of India, who has come to, or stays in India, in either case-
a) for or on taking up employment in India, or
b) for carrying on in India a business or vocation in India, or
c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period.
(iv) a Citizen of India, who not having stayed in India at any time after the 25th day of March, 1947, comes to India for any of the purpose referred to in paragraphs (a), (b), and (c) of the sub-clause (iii) or for the purpose and in the circumstances referred to in paragraph (d) of that sub-clause or having come to India stays in India for any such purpose and in such circumstances.
Explanation.- A person, who has, by reason only of paragraph (a) or paragraph (b) or paragraph (d) of sub-clause (iii) been resident in India, shall, during any period in which he is outside India be deemed to be not resident in India.
Clarification :
(A) It has been clarified in the Exchange Control Manual (ECM) that Indian Citizens who proceed abroad for business visits, medical treatment, study which do not indicate their intention to stay outside in India for an indefinite period will be considered as "person resident in India" during their temporary absence from India.
(B) An office or a branch situated in India, of any business, whether carried on by a body corporate or otherwise, whether Indian or Foreign, is treated for all purpose of FERA as "person resident of India".
2 (q) "person resident outside India" means a person who is not resident in India . Thus the term "non-resident" is synonymous with the term, "person resident outside India".
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 - The Provisions of Income Tax Act with reference to Non-Resident Indians -
Persons liable to tax
Section 4 of the I.T. Act is a charging section. Under this section the Income Tax is charged for any assessment year at the rates prescribed for that year in accordance with the provisions of the I.T. Act in respect of total income of the previous year of any person.
The previous year for the purpose of Income Tax Act would mean a financial year which ends on 31st March of every year immediately preceding the assessment year.
The person has been defined to include:
i) an individual
ii) a Hindu Undivided Family (HUF)
iii) a company
iv) an association of persons or a body of individuals, whether incorporated or not,
v) a local authority, and every artificial juridical person, not falling within any of the preceding sub-clauses.
Income liable to tax For resident
The resident is charged to tax on all the incomes :-
(i) which is received or is deemed to be received in India
(ii) which accrues or arises or is deemed to accrue or arise in India, and
(iii) which accrues and arises outside India which means the world income is taxable in case of a resident
For resident but not ordinarily resident
Person who is resident but not ordinarily resident is liable to tax the same way as that of resident except that the income which accrues or arises outside India is not taxable in India unless it is derived from a business controlled in or a profession setup in India.
For non residents
In case of a non-resident the income received or deemed to be received in India or income accrues or arises or is deemed to accrue or arise in India only is taxable in India. Thus, the income accruing or arising outside India is not taxable in India.
The following income which might have been payable outside India are deemed to arise in India.
i) dividend paid by an Indian company to a non-resident.
Interest paid on moneys borrowed and brought into India, and
iii) royalty and technical services fees where the royalty is payable in respect of any right or fees are payable in respect of technical services used for business or profession in India which is exempt, if it is payable :
(a) through an agreement made before 1st April, 1976 which is approved by the Central Government, and
(b) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer based equipment under approved specified scheme of the Government of India.
A person having been a non-resident for a continuous period of 2 years on his return, will remain "not ordinary resident" for all least for 8 subsequent years. A not ordinary resident person will have the advantage of both (1) he will be liable to pay income tax on his Indian income only and (2) his foreign income will be free from Indian income tax.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3 - Rates of Direct Tax Affecting NRIs
The following are the direct tax rates which affect the NRIs.
INCOME TAX
The basic limit and the income tax rates for assessment year 2000-2001 relevant to Financial Year 1999-2000 are as under :-
Status
Income (Rs.)
Tax Rate %
For Individuals, HUFS, Trusts, AOPs. etc
50,000/-
NIL
50,000/- - 60,000/-
10
60,000/- - 150,000/-
20
Above 150,000/-
30
2. Partnership firms and domestic companies Re. 1 onwards, 35%
3. Other than domestic company Re. 1 onwards, 48% (Foreign Companies)
4. Royalty and technical fees are liable at a concessional rate of 30% and 20% respectively.
WEALTH TAX
Under the Wealth Tax Act, 1957, Individuals, HUFs and Companies pay wealth tax. Individuals will include residents as well as non-residents. In the case of individuals, HUFs and certain companies, Wealth Tax is payable at 1 % on the net wealth exceeding Rs. 1.5 Million as on valuation date which is the last date of the previous year i.e. 31st March. Net wealth is arrived at after various deductions, exemption and liabilities as on the valuation date.
GIFT TAX
Under the Gift Tax Act, 1958, gift tax was payable by the donor upto 30th September, 1998. The Gift Tax Act has been repealed with effect from 1st October, 1998 and therefore the Gift Tax is not chargeable for the gifts made on or after 1st October, 1998.
The gift can therefore be freely given by NRIs to residents, but they must be genuine and by an NRI who has capacity to give such gifts.
ESTATE DUTY
Estate duty was payable on the estate of a persons who have died on or before 15th March, 1985. The Estate Duty Act has been repealed and therefore there is no estate duty from the said date.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4 - Exemptions in Income Tax for NRIs
Following are the incomes of NRIs that are exempt from income tax Interest on specified securities or bonds, including income by way of premium on the redemption of such bonds.
Interest on Non-Resident External Account [NRE] and Foreign Currency Non-Resident Account [ FCNR].
Interest on Notified Savings Certificates, subscribed in convertible foreign exchange. National Savings Certificates VI and VII issues have been notified for this purpose. However, sale of these Certificates have been discontinued from 1st April, 1989.
Tax on salary income of a foreign technician paid by the employer, such tax paid is not a perquisite in the hands of such technician.
Remuneration received by non-Indian citizen as employee of a foreign enterprise for service rendered in India.
Salary received by a non-resident, who is not a citizen of India, for services rendered in connection with his employment on a foreign ship provided that his total stay in India does not exceed 90 days in the previous year.
Remuneration received by an individual who is not a citizen of India as an employee of the Government of foreign State during his stay in India in connection with his training in any establishment/office/undertaking owned by the Government.
Allowances or perquisites paid or allowed as such outside India by the Government to its employee who is a citizen of India for rendering service outside India.
Foreign income and remuneration received by an individual who is assigned duties in India from Government of a foreign State for services rendered in connection with co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State.
Foreign income and remuneration or fee received by a consultant, being an individual, who is either not a citizen of India or being a citizen of India, is not ordinarily resident in India, or any other person, being a non-resident.
Foreign income and remuneration received by an individual who is an employee of the consultant referred above and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India.
Foreign income of any member of family of person referred to in three section above
Interest on Non-resident (Non-Repatriable) Rupee Deposit Account [NRNR]. Interest on NRNR account is not exempt from income tax when a person acquires the status of Resident but not Ordinary Resident.
Interest earned on Foreign Currency (Ordinary Non-Repatriable Deposit Account [ FCONR]. Under this section, any interest on deposits in foreign currency with a schedule bank, if a scheme approved by the Reserve Bank of India is exempt. This exemption is also available to a person who is not ordinarily resident. Interest on Resident Foreign Currency account [ RFC] is exempt till such time as NRI maintains the status of Not Ordinarily Resident.
Interest on bonds issued under the Gold Deposit Scheme, 1999.
Income of European Economic Community derived in India by way of interest, dividends or capital gains from investment made out of its funds under notified scheme.
Income of SAARC fund for Regional Projects set up under Colombo Declaration issued on 21stDecember, 1991.
Any income by way of-
(i) dividends specified
(ii) income received in respect of unit from the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); or
(iii) income received in respect of units of a mutual fund specified
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Indian Missions Abroad -
Consulate General of India - Sao Paulo - Brazil
Indian Embassy, People`s Republic of China
High Commission of India, United Kingdom
High Commission of India, Singapore
High Commission of India, Ottawa
High Commission of India, Brunei Darussalam
Embassy of India, Washington DC
Embassy of India, Tehran, Iran
Embassy of India, Stockholm
Embassy of India, Peru
Embassy of India, Oman
Embassy of India, Nepal
Embassy of India, Turkey
Embassy of India, Moscow
Embassy of India, Mexico
Embassy of India, Madrid
Embassy of India, Kuwait
Embassy of India, Jakarta
Embassy of India, Havana (Cuba)
Embassy of India, France
Embassy of India, Croatia
Embassy of India, Cairo
Embassy of India, Budapest
Embassy of India, Bratislava
Embassy of India, Bonn
Embassy of India, Berlin, Germany
Embassy of India, Belgium
Consulate General of India, Chicago, USA
Embassy of India, Bangkok
Embassy of India, Bahrain
Embassy of India, Argentina
Embassy of India, Abu Dhabi
Consulate General of India,Frankfurt
Consulate General of India, Vancouver, Canada
Consulate General of India, Shanghai
Consulate General of India, San Francisco
Consulate General of India, New York
Consulate General of India, Johannesburg, South Africa
Consulate General of India, Hong Kong
Consulate General of India, Frankfurt, Germany
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


No comments:

Post a Comment