www.nristreet.com. This slideshow provides defition of NRI. The main objective of the document is to show the Opportunities for NRI under FEMA and Implications of FEMA for NRI. NRI FAQ

1. om
Foreign Exchange Management Act
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A primer for NRIs
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2. om
Content Overview
1. Overview of Opportunities in FEMA
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2. Definition of NRI
3. Possession & Surrender of Foreign Exchange
et
4. Bank Accounts
5. Loans to NRIs
6. Loans by NRIs
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7. Investment in Immoveable Property
8. Investments in India
9. Starting a Business
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10. Insurance Policies
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11. Derivative Contracts
12. Remittance of Assets
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13. Special Cases of Residents

3. om
Person Resident outside India
• Means a Person who is not a Resident in India
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4. om
Definitions -NRI
• Means a person resident outside India who is a citizen of
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India or a person of Indian Origin.
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Exception: Applicable only under the Foreign Exchange Management
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(Remittance of Assets) Regulations
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• Means a person resident outside India who is a citizen of
India.
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5. om
Case Study
• Mr. Khan, a Senior Citizen, goes to USA for medical
.c
treatment in March 2007. The Doctors advise him that
the medical treatment will last for 10 months and he
et
decides to stay with his son in California. He comes back
in Jan ‘08. What his residential status for:
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 FY 2006-07
 FY 2007-08
 FY 2008-09
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6. om
Case Study
• Sunny Singh, a software engineer is deputed by his Company for an
.c
st
overseas assignment in Italy for a period of 20 months starting 1 Jan
2007. What is his residential status for:
 FY 2007-08
et
 FY 2008-09
• Would it make a difference if he was not deputed by his company
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but went on his own accord to work for the Company in Australia?
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7. om
Not Permanently Resident
Means a Person resident in India:
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• For employment of a specified duration (irrespective of the
length), or
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• For a specific job or assignment of duration not exceeding 3
years. re
Special Feature:
• Can retain currency without limit like travellers’ cheques etc
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acquired/owned when he was a resident outside India and
is
brought into India.
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8. om
Definitions -PIO
• Means a citizen of any country other than of a Prohibited Country, if
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a) He at any time held Indian Passport: or
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b) He or either of his parents or any of his grand- parents were a citizen of
India by virtue of the Constitution of India or the Citizenship Act,1955, or
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c) The person is a spouse of an Indian citizen or a person referred to in sub-
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clause (a) or (b).
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9. om
Prohibited Countries
• Indian Citizens who are now taken citizenship / carry passport of the following countries
are not considered as PIOs i.e. they get the same treatment as Foreigners under FEMA.
.c
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Regulation Prohibited Countries
Borrowing or Lending in Rupees
re Bangladesh, Pakistan
Remittance of Assets Bangladesh, Pakistan
Non Resident Accounts Bangladesh, Pakistan
Investment in Shares Bangladesh, Pakistan, Sri Lanka
Acquisition and Transfer of Bangladesh, Pakistan, Sri Lanka,
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Immoveable Property Afghanistan, China, Iran, Nepal,
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Bhutan
NRE / FCNR (B) NRO
As per Bank’s
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Maximum Amount Rs. 50,000
judgement

10. om
PIO Card
• Privileges
.c
 No Visa Required to come to India
 No separate Student / Employment Visa
 Exempt from registration requirement if single stay in India does not exceed
et
180 days
 Parity with NRIs in facilities in Economic, Social and Financial field
• Validity – 15 Years from the date of issue
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• How to Apply
 Submit the prescribed Form accompanied by documentary evidence that
person is PIO
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 Form to be submitted to the Indian Embassy where the person is a Resident
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 Fee is Rs 15,000 for (Rs 7,500 for children upto 18 years of age)
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11. om
Possession & Surrender of Foreign Exchange
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12. om
Brining and Retention of Foreign Exchange in India
• Brining Foreign Exchange
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ANY PERSON can at ONE TIME get the following amounts to India:
• USD 5,000 of foreign currency
• USD 10,000 in currency and travellers cheques including the currency
et
mentioned above
(Amounts in excess of above: Currency Declaration Form)
•Retention of Foreign Exchange
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PERSON RESIDENT IN INDIA can AT ANY GIVEN TIME retain upto USD 2,000
only if the same are acquired are as follows:
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• Unspent amount out of foreign exchange purchase for foreign travel
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• Payment for services outside India, if the services are not arising from any
business or anything done in India
• Gift, Honorarium, payment for services or settlement received from a Person
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Resident Outside India visiting India
• Gift or Honorarium while on a visit outside India

13. om
Surrender of Foreign Exchange
• Periods of Surrender
• 180 days from:
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• In case of Receipt – Date of Receipt
• In case of any amount is unused – Date of Purchase
• In case of unspent – Date of return to traveller
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• Exchange brought back can be utilised for next visit
• Unspent exchange can also be deposited in RFC (D) Account
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14. om
Bank Accounts
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15. om
Bank Accounts – Which one?
NRE NRO
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Used for international receipts and Used for local receipts
payments
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Fully Repatriable Non-Repatriable (Now repatriation
re allowed for certain types of
payments upto USD 1 Million per
year)
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16. om
Permissible Credits
NRE/FCNR (B) NRO
-Remittances from abroad -Cheques, -Remittances from Abroad -
.c
travellers cheques, currency etc. deposited Legitimate dues in India of the
during temporary visit to India -Transfer from Account holder
et
other NRE/FCNR
Account -Interest on funds in the Account
-Interest and maturity of Government
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securities and units of MFs if they were
bought in Foreign Currency
-Refund of share/debenture subscription if
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original payment made from NRE
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-Refund of amount paid for flat booking if
paid in foreign currency
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17. om
Permissible Debits
NRE / FCNR (B) NRO
.c
-Local disbursements -Payment of local expenses
-Remittances outside India -Investments
-Transfer to NRE / FCNR Account -Remittance of current income out
et
of self or any other person of India net of taxes
-Investment in shares, securities,
commercial paper of Indian
Company
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-Purchase of immoveable property
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18. om
Bank Accounts -I
Non-Resident Foreign Non Resident
(External) Currency (Non Ordinary
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Rupee Account Resident) Bank Account
Account
Popularly known NRE Account FCNR (B) NRO Account
et
as Account
Currency in Rupees Rupees Pound Sterling,
which the US Dollar,
Account can be
re Deutsche Mark,
Japanese Yen,
maintained
Euro
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Who Can Open NRI / PIO NRI / PIO Any Person
Resident outside
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India (i.e. even
Foreigners)
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19. om
Bank Accounts -II
Non-Resident Foreign Non Resident
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(External) Currency (Non Ordinary
Rupee Account Resident) Bank Account
Account
et
Type of Account Current Account, Term (Fixed) Current Account,
Savings Account, Deposit Savings Account,
Recurring Period of Fixed Recurring
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Deposit, Fixed
Deposit
Deposit is Deposit, Fixed
Deposit
between 1 and
3 years only
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Joint Accounts Only Between Only Between Account be held
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NRIs / PIOs NRIs / PIOs jointly with
Residents
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20. om
Bank Accounts -III
Non-Resident Foreign Non Resident
(External) Currency (Non Ordinary
.c
Rupee Account Resident) Bank Account
Account
When the Non - Account to be NRI can ask for Account to be
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Resident Re-designated as redemption of the Re-designated as
becomes a Resident Resident Account deposit, or Deposit is Resident Account i.e.
normal bank
i.e. normal bank allowed
account in India
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account in India,
or
to continue till its
due date and then
- Funds in the redeemed
Account can be Deposit is
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transferred to converted into
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Resident Foreign resident Foreign
Currency Account Currency Account
on maturity
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21. om
Issues – Bank Accounts
• What happens to the Savings Bank Accounts when a resident becomes a Non-
.c
Resident?
• What happens to the NRE/NRO/FCNR Accounts when a non- resident becomes
a resident?
et
• Can one open more than one Accounts:
 With different branches of the same Bank
 With different banks
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• Is money freely transferable between:
 NRE to NRO and vice versa
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 NRE to FCNR and vice versa
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 NRO to FCNR and vice versa
• Can the Accounts be opened and operated by a Power of Attorney (POA)
holder? Are there any restrictions on the transactions that a POA holder can
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undertake?

22. om
Remitting Money to India
Q: Are there restrictions / limits on sending money to India?
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et
A: No. They can send money in any form without limit.
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Exception: Loans to relatives in India (Maximum Amount is USD 250,000)
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23. om
Loans to NRIs
• Personal Loans
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– Loan for personal use against Shares, Property etc.
• Housing Loans
– To purchase residential and commercial property
et
• Loans against Bank Accounts
• Temporary Overdraft
• NRI Employees of Indian Companies
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24. om
Personal Loans -I
• Types:
.c
– Against Security
 Security of shares or securities
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 Security of immoveable property other than
 Security of immoveable property other than agricultural land, plantation or
farm house re
• Other Loans
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25. om
Personal Loans – Against Security
• Purpose
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 Own personal requirements or for own business purpose
 Not to be utilised for business of chit fund, nidhi company, trading in TDR, agricultural
or real estate business
et
• Loan amount not to be credited to NRE Account
• Loan amount not to be remitted outside India
• Repayment from
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 Remittance from outside India
 Debit to NRE / FCNR / NRO Account of borrower
 Sale of property against which loan is availed
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26. om
Other Loans – I
• Purpose
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– Any purpose as per the Loan Policy laid down by the Board of Directors of
the Authorised Dealer except:
et
• Chit Fund, Nidhi Company
• Agricultural Loans, Plantation, Real Estate, Farm House
•
•
Trading in TDR
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Investment in Capital Market including margin trading and derivatives
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27. om
Other Loans – II
• Other Conditions
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• Amount not to be credited to NRE / FCNR Accounts
• Loan amount not to be remitted outside India
• Repayment:
et
 Remittance from outside India
 Debit to NRE / FCNR / NRO Account of borrower
 Sale of property against which loan is availed
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28. om
Housing Loans
• Purpose: Purchase of Residential Property
• No. of Properties: No Limit
.c
• Amount of Loan: No Limit
• From Whom Can they Loans be availed
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– Banks (SBI, ICICI, Axis etc) or Financial Institutions (HDFC)
• Bank Account in India: Not Required
• Mortgage: Compulsory. In addition, Bank can also take lien of borrowers other
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assets
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29. om
Housing Loans – II
• Repayment: The loan can be repaid in any of the following 4 ways:
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 Transferring the amounts from your Bank account outside India
 Making the payments out of funds in NRE / FCNR / NRNR / NRO Accounts in
India
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 Rental Income of property which you have acquired
 Asking a relative in India to make the payment on your behalf
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30. om
Housing Loans -III
• Can Banks keep different terms and conditions for NRI?
.c
• No. The quantum, repayment period and margin money have to be
same for Residents and NRIs
• Exception: Rate of Interest can be different
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31. om
Loans against Bank Accounts
NRE / FCNR (B) NRO
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To Account Holder / Third Allowed Allowed
Parties in India (Against security of FD (Against security of FD
and for specified and for specified
et
Purposes as given in Purposes as given in
next slide) next slide)
Foreign Currency Loan to Allowed (Against Not Allowed
Account Holder / Third security of funds held in
Party outside India
t re Account for any
bonafide purpose)
All the above loans are now restricted to Rs 20 Lacs
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32. om
General Features of Loans in India
• Purpose of Loan
 Personal or Business purposes
 Investment in firms and companies on non-repatriation basis
.c
 Purchase of residential house for own use
• Loan cannot be used for Relending, Agricultural / plantation
activities, Real estate business
et
• Third Party can be Individual, Firms or Companies
• No consideration e.g. commission can be paid to NRI for agreeing
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to pledge his deposits
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33. om
Temporary Overdraft
.c
Regulation Prohibited Countries
Borrowing or Lending in Rupees Bangladesh, Pakistan
et
Remittance of Assets Bangladesh, Pakistan
Non Resident Accounts Bangladesh, Pakistan
Investment in Shares Bangladesh, Pakistan, Sri Lanka
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Acquisition and Transfer of
Immoveable Property
Bangladesh, Pakistan, Sri Lanka,
Afghanistan, China, Iran, Nepal,
Bhutan
NRE / FCNR (B) NRO
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As per Bank’s
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Maximum Amount Rs. 50,000
judgement
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Period Maximum 2 Weeks As per Bank’s
judgement

34. om
NRI Employees of Indian Companies
• A Corporate registered in India or Indian Company can grant loans to
employees who are NRI / PIO
.c
• Loan to be accordance with the Staff Welfare Scheme / Staff Housing Loan
Scheme ie conditions to be same
• Amount to be credited to NRO Account
et
• Repayment to be made by borrower himself through remittance outside India
or debit to NRE / FCNR / NRO Account
• Loans can be also given for buying ESOP subject to:
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 Maximum of Rs. 20 Lacs
 Loan amount not to exceed 90% of purchase price of shares
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35. om
Questions
• What happens to the Loan / Overdraft given by the Bank to a Resident if he
becomes a Non-Resident?
.c
• How does one repay a Loan if the Lender becomes a Non-Resident?
• What happens when the borrower becomes a Non-Resident?
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36. om
Solutions
• An Authorised Dealer may allow continuance of the loan subject to:
.c
 Period of the loan cannot exceed the period originally granted
 Repayment is made by inward remittances or from NRE/FCNR/NRO Accounts
• If the Lender becomes Non-Resident, amount should be paid to his NRO
et
A/c
• If the Borrower becomes Non-Resident, he can repay out of NRO / NRE
Account
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37. om
Loans by NRIs
• Loans to Individuals
• Loans to Relatives
• Loans to Companies
.c
• Loans against Bank Accounts
– As discussed in the Bank Accounts section
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38. om
Loans to Individuals
• NRI can give loan to any Resident
• Principal is not repatriable.
.c
• Loan to be given out of remittance outside India or from NRE/NRO/FCNR
Account
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• Maximum Period of Loan: 3 Years
• Interest: 2% over the Bank Rate
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39. om
Loans to Relatives
• Indian Resident can borrow only from ‘Close Relatives’
• Minimum maturity is 1 Year
.c
• Maximum Amount is USD 250,000
• Loan is Free of Interest
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• Loan received from remittance outside India or debit to NRE / FCNR Account
• Loan amount if fully repatriable.
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40. om
Loans to Companies
• Company must be incorporated in India
• Repatriation and Non Repatriation basis
• Company is borrowing by way of Non-Convertible Debentures issued by way of Public
.c
Offer
• Rate of Interest :SBI PLR + 3%
• Borrowing Company does not carry out activities of agriculture, real estate, chit fund,
et
nidhi fund
• Period: Not less than 3 years
• Additional Conditions
– Non-Repatriation basis: Remittance from outside India / NRE / FCNR / NRO Account
– Repatriation Basis
•
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NRO Account not allowed for investment
• Percent holding by all NRIs should be within FDI Limit
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41. om
Immoveable Property -Eligibility
• Definition of Person of Indian origin excludes citizens of:
– Pakistan
.c
– Bangladesh
– Sri Lanka
– Afghanistan
et
– China
– Iran
– Nepal re
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42. om
Non-Resident India
What can be Acquired Any immoveable property other than
Agricultural property, plantation or farm
.c
house
Payment Mode Remittance from outside India or debit
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to non-resident account
Transfer of Agricultural Land, Plantation Only to person resident in India
or Farm House
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Transfer of Any Other Property To a Person Resident in India
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i.e. Indian Citizen, NRI, PIO, Foreigner
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43. om
PIO – Acquisition of Property
Type of Property Mode of Status of Transferor
Acquisition
.c
Any immoveable property other Any Mode other Resident (Indian and
than Agricultural property, than Gift and Foreign Citizen)
plantation or farm house Inheritance NRI
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PIO
Any immoveable property other Gift Resident (Only Indian
than Agricultural re Citizen) NRI
property, plantation or farm PIO
house
Any Property Inheritance Resident (Indian and
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Foreign Citizen) NRI
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PIO
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44. om
PIO – Transfer of Property
Type of Property Mode of Status of Transferee
Transfer
.c
Any immoveable property Sale Person Resident in
other than Agricultural India ie. Resident. PIO
property, plantation or farm Foreign Citizen
et
house Resident in India
Agricultural property, plantation or Gift, Sale Indian Citizen Resident in
farm house India
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Residential or Commercial Gift Resident
Property NRI
PIO resident outside
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India
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Foreign Citizen
Resident in India
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45. om
Remittance of Sale Proceeds
• Purchase in Foreign Currency
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 Amount cannot exceed the remittance originally made to acquire the
property
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 In case of residential property, the remittance is restricted to 2 such
properties
• Purchased out of Rupee Funds
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 Entire amount, subject to a maximum of USD 1 Mn can be remitted
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46. om
Investment in Securities
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47. om
Definition of Securities
• Shares, Stocks
• Bonds
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• Debentures
• Units of Mutual Fund
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• Government Securities
• Savings Certificates
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48. om
Investment in Listed Companies
• Share / Convertible Debentures of an Indian Company
• Through Registered Broker on a recognised Stock Exchange
.c
• Single NRI can invest upto 5% of Total Paid up value of shares / debentures
• Aggregate investment by all NRIs not to exceed 10% of Total Paid up Value
• – This limit can be increased to 24% by the Company by passing a Special Resolution in
et
General Meeting
• NRI has to take delivery of shares
• Repatriation Basis: Payment must be made out of foreign remittance, NRE,
FCNR Account
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• Non-Repatriation Basis: Payment can be made out of NRO Account
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49. om
Investment in Listed or Unlisted Companies
• Shares / Convertible Shares of listed or unlisted company
.c
• Shares can be issued by Public Issue or Private Placement
• Company cannot be chit fund, nidhi fund, real estate, agriculture or plantation
business
et
• No limit on % of holding and amount of investment
• Payment must be made out of foreign remittance, NRE, FCNR, NRO Account
• Amount of sale consideration, net of taxes to be credited to NRO Account
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• Principal and gains are not repatriable.
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50. om
Housing & Real Estate
• Only NRIs are allowed to invest upto 100% in the following:
.c
– Development of serviced plots and construction of residential premises
construction of residential premises
– Development of townships
et
– City & Regional level Infrastructure facilities including roads and bridges
– Manufacture of building materials.
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51. om
Investment in Other Securities
• NRI can without limit on Repatriation or Non-Repatriation basis invest in:
.c
 Government dated securities, Treasury Bills, Units of Mutual Fund
 Bonds issued by PSU
 Shares in PSU disinvestment
et
• NRI can invest without limit on.
Non-Repatriation basis:
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 National Plan / Certificates
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52. om
Transfer of Shares
• NRI can transfer shares or convertible debentures only to other NRI by
way of Sale or Gift
.c
 If the Transferee has other venture or tie up or collaboration etc in India in the same,
prior permission of Central Government required
 The above permission is not required for companies in IT sector
et
• NRIs need prior permission of RBI to transfer shares to person resident in
India. re
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53. om
Starting a Business in India
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54. om
Proprietary Concern / Firm
• NRI / PIO can invest in the capital of Proprietary Concern / Firm
.c
on the following conditions:
 Amount received by inward remittance or through non-resident Bank Account
resident Bank Account
et
 Firm is not in the agricultural or plantation activity or in real estate or Print
Media
 Amount invested is not eligible for repatriation.
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55. om
Insurance Policies
• General / Life Insurance Policies taken by a Person when he was a Non-
Resident can continue after he becomes a Resident
.c
• If the premium has been paid by remittance from India, the maturity proceeds
have to be brought back to India through Banking channel within 7 days of receipt.
et
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56. om
Derivative Contracts
• NRI can enter into Rupee Forward Contract to hedge:
 Dividend due on shares held in Indian Company
 Balances held in FCNR and NRE Accounts
.c
 Investment made under the Portfolio Investment Scheme
• Cross currency exposure in FCNR Account
st
et
• Investment made in India since 1 Jan ‘93
• Proposed Foreign Investment in India.
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57. om
Remittance of Assets
• Which assets can be remitted?
.c
• Deposit with Bank, Firm or Company
• Provident Funds, Superannuation benefits
• Maturity proceeds / claims from insurance company
et
• Sale proceeds of shares or securities
• Sale proceeds of immoveable property
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• Sale proceeds of any other assets held in accordance with FEMA
Regulations
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58. om
Normal Remittance – NRI / PIO
• Upto US$ 1 Million (Approximately Rs 4.5 Crores) can be remitted out of:
.c
 Balance in NRO Account
 Sale proceeds of Assets
 Assets acquired by way of legacy or inheritance
et
• If remittance is made in multiple instalments, all of them to be made
through the same Authorised Dealer
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59. om
Some Provisions Applicable to Residents
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60. om
Special Case: Indians going out
• Amounts that can be freely taken out:
.c
 Immigration : USD 100,000 of the limit prescribed by the destination
country
 Employment: USD 100,000
et
 Education: USD 100,000 per academic year or estimate from the
Educational Institution, whichever is higher
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61. om
Resident Foreign Currency A/c
• Who can Open: A person Resident in India (ie all categories including Firms,
Companies etc.)
.c
• Type: Current or Term Deposit
• Permissible Credits Foreign Exchange Received:
 As pension/any superannuation/other monetary benefits
et
 On realised on conversion of assets referred in sub-section 6(4) & repatriated to India
 FE received as gift or inheritance
 FE received as proceeds of Life Insurance claims / maturity / surrender values
re
• Permissible Debits: This A/c is free from all the restrictions regarding utilisation
of FC balance including any restriction on investment in any form, by whatever
name called outside India
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62. om
Resident Foreign Currency (Domestic)
• Who can Open? Resident Individual (ie No Firms, Companies etc.)
• Currency : Any foreign currency
• Type: Current Account without interest
.c
• Permissible Credits
Only in the form of currency notes or travellers cheques received by way of:
et
 While on a visit abroad, payment for services not arising from any business in India
 Payment received as honorarium, gift or settlement of lawful obligation from a person on a
visit to India
 Honorarium or Gift received on a visit outside India
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 Unspent amount of foreign exchange taken for foreign travel
 Gift from a close relative
 Earning from Export of Goods or Services, Honorarium, Royalty or any other lawful means
 Disinvestment proceeds from sponsored ADR/GDR issue
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 Insurance claim or maturity value of life insurance policy
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– Permissible Debits
• All Current and Capital Account transactions
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– No ceiling on amount of balance in the Account

63. om
USD 200,000 Scheme
• A Resident Individual can freely remit abroad upto USD 200,000 per
.c
financial year
• Purpose can be any capital or current account transaction
• Resident can open a Bank Account with a foreign bank for this purpose
et
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64. om
Thank You
Visit
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