REMITTANCES AND INVESTMENT
FACILITIES FOR
NON RESIDENT INDIVIDUALS (NRIS/PIO/
FOREIGN NATIONALS)
INCLUDING REGULATIONS IMMOVABLE
PROPERTY & DEPOSITIN INDIA
Section 3 of Foreign Exchange Management
Act, 1999
Save as otherwise provided in this Act, rules or regulations made there
under, or with the general or special permission of the Reserve Bank, no
person shall(a) Deal in or transfer any foreign exchange or foreign security to any
person not being an authorized person;
Section 3 of Foreign Exchange Management
Act, 1999
(b) Make any payment to or for the credit of any person resident
outside India in any manner;
(c) Receive otherwise through an authorized person, any payment by
order or on behalf of any person resident outside India in any manner;
Section 3 of Foreign Exchange Management
Act, 1999
Explanation: For the purpose of this clause, where any person in, or resident
in, India receives any payment by order or on behalf of any person resident
outside India through any other person (including an authorized person)
without a corresponding inward remittance from any place outside India,
then, such person shall be deemed to have received such payment otherwise
than through an authorized person;
Section 3 of Foreign Exchange Management
Act, 1999
(d) Enter into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to acquire, any
asset outside India by any person.
Explanation: For the purpose of this clause, "financial transaction" means
making any payment to, or for the credit of any person, or receiving any
payment for, by order or on behalf of any person, or drawing, issuing or
negotiating any bill of exchange or promissory note, or transferring any
security or acknowledging any debt.
Dealings in foreign exchange are not permitted unless
specifically permitted under the Act, rules or
regulations made under the Act or with general or
special permission of the Reserve Bank of India
(RBI).
IMPORTANT DEFINITIONS
 "Foreign currency" means any currency other than Indian currency
 "Foreign exchange" means foreign
currency and includes,
(a) Deposits, credits and balances payable in any foreign
currency,
(b) Drafts, travelers cheques, letters of credit or bills of
exchange, expressed or drawn in Indian currency but payable in any
foreign currency,
(c) Drafts, travelers cheques, letters of credit or bills of
exchange drawn by banks, institutions or persons outside India, but
payable in Indian currency.
IMPORTANT DEFINITIONS
 Person resident in India means-
1. A person residing in India for more than one hundred and eighty-two
days during the course of the preceding financial year but does not include(A) Person who has gone out of India or stays outside India, in either case(i)For or on taking up employment outside India, or
(ii)For carrying on outside India a business or vocation , or
(iii)For any other purpose, in such circumstances as would indicate his
intension to stay outside India for an uncertain period;
IMPORTANT DEFINITIONS
(B) A person who has come to or stays in India, in either case, otherwise than(i)For taking up employment in India, or
(ii) For carrying on in India a business or vocation in India, or
(iii) For any other purpose, in such circumstances as would indicate his
intension to stay in India for an uncertain period;
2. Any person or body corporate registered or incorporated in India,
3. An office, branch or agency in India owned or controlled by a person
resident outside India,
4. An office, branch or agency outside India owned or controlled by a person
resident in India;
IMPORTANT DEFINITIONS
 Person resident outside India means a person who is not resident in
India; NRI and PIO aredefined underForeign ExchangeManagement
(Deposit) Regulations 2000asunder:
 Non-resident Indian means a person resident outside India who is a
citizenof Indiaorisapersonof Indiaorigin.
IMPORTANT DEFINITIONS
 Person of Indian origin: Regulation 2(iv) of the Foreign Exchange
Management (Remittance ofAsset) Regulations, 2000 reads as:
‘Person of Indian Origin (PIO)’ means a citizen of any country
other than Bangladesh or Pakistan, if
(a) he at any time held Indian passport; or
(b) 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 the Citizenship Act,1955 (57 of 1955); or
(c) the person is a spouse of an Indian citizen or a person
referred to in sub-clause (a) or (b)
RELEVANT RULES, REGULATIONS,
CIRCULARS and POLICIES
1.
Foreign Exchange Management (CurrentAccount transaction) Rules, 2000.
2.
Foreign Exchange Management (Acquisition and Transfer of Immovable
Property in India) Regulations, 2000.
3.
Foreign Exchange Management (Deposit) Regulations, 2000.
4.
Foreign Exchange Management
Transactions) Regulations, 2000.
5.
Foreign Exchange Management (Remittance ofAssets) Regulations, 2000.
6.
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000.
(Permissible
Capital
Account
RELEVANT RULES, REGULATIONS,
CIRCULARS and POLICIES
7.
Foreign Exchange Management (Deposit) Regulations, 2000..
8.
Foreign Exchange Management
Transactions) Regulations, 2000.
9.
Foreign Exchange Management (Remittance ofAssets) Regulations, 2000.
(Permissible
Capital
Account
10. Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000.
11. Foreign Exchange Management (Investment in Firm or Proprietary Concern in
India) Regulations, 2000
RELEVANT RULES, REGULATIONS,
CIRCULARS and POLICIES
12. Master Circular No. 2/2010-11,dated 1/7/2010 - Master Circular on Remittance
Facilities for Non-Resident Indians/Persons of Indian Origin/Foreign Nationals
13. Master Circular No. 13/2010-11,dated 1/7/2010 - Master Circular on
Foreign Investment in India
14. Master Circular no.15/2010-11,dated 1/7/2010 - Master Circular on Acquisition
and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals
of Non-Indian Origin
15. Consolidated Foreign Direct Investment Policy, Circular 1 of 2011
REMITTANCES
As per Black’s Law Dictionary ‘remittance’means:
Asum of money sent to another as payment for goods and services.
An instrument (such as a cheque) used for sending money.
The action or process of sending money to another person or place.
REMITTANCES
In addition to the usual inward remittances for purchase of goods and
services from India NRIs and PIOs remit funds into India mainly on
account of the following:
(i) Remittance of salaries to their families in India;
(ii) Gifts to their families and friends in India; and
(iii) Contributions to charitable organizations.
CURRENT ACCOUNT TRANSACTION
"current account transaction" means a transaction other than a capital
account transaction and without prejudice to the generality of the foregoing
such transaction includes:(i) payments due in connection with foreign trade, other current business,
services, and short-term banking and credit facilities in the ordinary course
of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parents, spouse and children residing
abroad, and
(iv) expenses in connection with foreign travel, education and medical care of
parents, spouse and children.
INVESTMENT
The investments can mainly be categorized into the following:
Investment in
Securities.
Investment in
Immovable Property
Investment in
Deposits
CAPITAL ACCOUNT TRANSACTIONS
‘capital account transaction’to mean a transaction which alters the assets or
liabilities, including contingent liabilities, outside India of persons resident
in India or assets or liabilities in India of persons resident outside India, and
includes transactions referred to in sub-section (3) of section 6.
CAPITAL ACCOUNT TRANSACTIONS
Classes of Capital Account Transactions of person’s resident outside India
1.
Investment in India by a person resident outside India, that is to say,
(i) issue of security by a body corporate or an entity in India and investment therein by a person
residentoutsideIndia;and
(ii) investment by way of contribution by a person resident outside India to thecapital of a firmora
proprietorshipconcernoranassociationofpersonsinIndia.
2.
AcquisitionandtransferofimmovablepropertyinIndiabyapersonresidentoutsideIndia.
3.
GuaranteebyapersonresidentoutsideIndiainfavorof,or onbehalfof,apersonresidentinIndia.
4.
Importandexportofcurrency/currencynotesinto/fromIndiaby apersonresidentoutsideIndia.
5.
DepositsbetweenapersonresidentinIndiaandapersonresidentoutsideIndia.
6.
ForeigncurrencyaccountsinIndiaofapersonresidentoutsideIndia.
7.
RemittanceoutsideIndiaofcapitalassetsinIndiaofapersonresidentoutsideIndia.
INVESTMENT IN SECURITIES
 Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulation, 2000.
 Regulation 5
A person resident outside India may purchase shares or convertible
debentures of an Indian company under Foreign Direct Investment
Scheme, subject to conditions in Schedule 1.
REGULATION 5
1. A n NRI may purchase shares or convertible debentures of an Indian
company:
(i) on a stock exchange under the PIS (Schedule 3);
(ii) on non-repatriation basis other than under PIS (Schedule 4).
2. An NRI may purchase securities, other than shares or convertible
debentures of an Indian company (Schedule 5).
3. An NRI may invest in exchange traded derivative contracts approved by
SEBI from time to time out of INR funds held in India on nonrepatriable basis subject to the limits prescribed by SEBI.
FOREIGN DIRECT INVESTMENT
• FDI is prohibited in the following activities/sectors:
(a) Retail Trading (except single brand product retailing)
(b) Lottery Business including Government /private lottery, online lotteries etc.
(c) Gambling and Betting including casinos etc.
(d) Business of chit fund
(e) Nidhicompany
(f) Trading in Transferable Development Rights (TDRs)
(g) Real Estate Business or Construction of Farm Houses
(h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes
(i) Activities / sectors not opened to private sector investment including Atomic
Energy and Railway Transport (other than Mass Rapid Transport Systems).
Besides foreign investment in any form, foreign technology collaboration in any
form including licensing for franchise, trademark, brand name, management
contract is also completely prohibited for Lottery Business and Gambling and
Betting activities.
ROUTES AVAILABLE FOR INVESTING IN
AN INDIAN COMPANY
 Automatic Route
The non-resident investor or the Indian company does not require any
approval from the RBI or Government of India for the investment.
 Government Approval Route
Prior approval of the Government of India through Foreign Investment
Promotion Board (FIPB) is required.
INVESTMENT IN A FIRM OR A
PROPRIETARY CONCERN
 In terms of Foreign Exchange Management (Investment in Firm or
Proprietary Concern in India) Regulations, 2000, no person resident
outside India shall make any investment by way of contribution to
the capital of a firm or a proprietary concern or any association of
persons in India. Provided that the RBI may, on an application made
to it, permit a person resident outside India subject to such terms
and conditions as may be considered necessary to make an
investment by way of contribution to the capital of a firm or a
proprietaryconcern or any association of persons in India.
INVESTMENT IN A FIRM OR A
PROPRIETARY CONCERN
An NRI or PIO may invest by way of contribution to the capital of a firm or a
proprietary concern in India, provided that –
a) The amount invested is received either by inward remittance through normal
banking channels or out of an account maintained with an authorized dealer/
authorized bank by the NRI or the PIO in accordance with the relevant
Regulations;
b) the firm or the proprietary concern is not engaged in any agricultural/plantation
activity or real estate business, i.e. dealing in land and immovable property
with a view to earning profit or earning income there from;
c) The amount invested shall not be eligible for repatriation outside India;
d)The firm or the proprietary concern is not engaged in print media.
BANK ACCOUNTS AND DEPOSITS
 AN NRI/PIO/Foreign National can open following types of
Accounts.
1. Non-Resident (Ordinary) Rupee Account (NRO Account)NRI/PIO/Foreign National
2. Non-Resident (External) Rupee Account (NRE Account)NRI/PIO
3. Foreign Currency Non Resident (Bank) Account – FCNR (B)
Account –NRI/PIO
Description
FCNR(B)
NRE
NRO
Who can open an
account
NRI
NRI
Any person resident
outside India
Restrictions on opening
Individuals/entities of
Bangladesh/Pakistan
nationality require
approval of RBI
Individuals/entities of
Bangladesh/Pakistan
nationality require
approval of RBI
Individuals/entities of
Bangladesh/Pakistan
nationality require
approval of RBI
Currency denomination
US Dollar, UK Pounds,
Yen, Euro, Canadian
dollars and Australian
dollars
Indian Rupees
Indian Rupees
Reparability of principal
amount
Freely repatriable
Freely repatriable
Current income fully
repatriable. Up to USD 1
million per year for bona
fide purposes permitted
Description
Permissible
Credits
FCNR(B)
NRE
NRO
Remittances in
Remittances in
Remittances from
foreign exchanges,
foreign exchanges,
abroad and
transfer from other transfer from other legitimate dues in
NRE/FCNR account, NRE/FCNR account,
India of the
refund when
refund when
account holder
permissible
permissible
payment was made payment was made
from same account from same account,
current income like
rent, dividend,
pension, interest etc.
subject to TDS and
CS certificate
Description
Permissible
Debits
Type of
Account
FCNR(B)
NRE
NRO
All local/foreign
payments for
permissible
transactions on
current/capital
account
All local/foreign
payments for
permissible
transactions on
current/capital
account
(1) All local payments
including permissible
investments
(2) Remittances
abroad of current
income in India, net
of taxes
(3) Remittances of
medical expenses,
educational expenses,
and proceeds of sale
op property up to USD
1 million
Term deposit only
between one to five
years
Current, savings,
recurring or fixed
deposits
Current, savings,
recurring, fixed deposit
etc.
INVESTMENT IN IMMOVABLE
PROPERTY
Foreign Exchange Management (Acquisition and transfer of immovable property in India)
Regulations, 2000.
Regulation 3&4
Aperson resident outside India whoisa citizen ofIndiaora PIOmay –
(a) acquire immovable property in India other than an agricultural property, plantation, or a farm
house through payment made out of funds received in India through normal banking
channels by way of inward remittance or funds held in any non-resident account maintained
in India (payment either by travelers cheque or by foreign currency notes or by other mode
otherthan those specifically permitted -notpermitted ).
(b) An NRI can transferany immovable propertyinIndia toapersonresident inIndia.
(c) AnNRIcantransferanyimmovablepropertyotherthanagricultural orplantationproperty or
farmhouse to a person resident outside India who is a citizen of India or to a person of Indian
originresident outside India.
INVESTMENT IN IMMOVABLE
PROPERTY
A PIO :
may acquire any immovable property in India other than agricultural land / farm house/ plantation property
by way of gift from a person resident in India or from a person resident outside India who is a citizen of
India or from a person of Indian origin resident outside India;
may acquire any immovable property in India by way of inheritance from a person resident outside India
who had acquired such property in accordance with the provisions of the foreign exchange laws in force at
the time of acquisition by him or the provisions of these Regulations or from a person resident in India;
may transfer any immovable property in India other than agricultural land/farm house/plantation property,
by way of sale to a person resident in India;
Transfer agricultural land/farm house/ plantation property in India, by way of gift or sale to a person resident
in India who is a citizen of India;
Transfer residential or commercial property in India by way of gift to a person resident in India or to a
person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India.
REPATRIATION OF PROCEEDS
Of immovable property is allowed subject to the following conditions namely:
•the immovable property was acquired by the seller in accordance with the provisions
of the foreign exchange law in force at the time of acquisition;
•the amount to be repatriated does not exceed:
•(a) the amount paid for acquisition of the immovable property in foreign exchange
received through normal banking channels or out of funds held in FCNR Account
or
•(b) the foreign currency equivalent, as on the date of payment, of the amount paid
where such payment was made from the funds held in NRE Account for
acquisition of the property;
•in the case of residential property, the repatriation of sale proceeds is restricted to not
more than two such properties.
An NRI/PIO/Foreign National can remit, up to US $ 1.00 Million per financial year out of
balances in NRO account or sale proceeds of assets including immovable property, for all
bona fide purposes. If the said amount exceeds the limit, remittance shall be done after
taking permission from the RBI.
Thank You!!!
Disclaimer: This presentation is intended for educational purposes only and does
not replace independent professional judgment.
© Dua Associates-2011