(Updated
up to September 19, 2014)
Source
- RBI
In terms of the Foreign Exchange
Management Act (FEMA), 1999 a person resident outside India means a person
who is not resident in India.
What are the different types of
accounts which can be maintained by an NRI1/PIO2 in
India?
If a person is NRI or PIO, she/
he can, without the permission from the Reserve Bank, open, hold and
maintain the different types of accounts given below with an Authorised
Dealer in India, i.e. a bank authorised to deal in foreign exchange. NRO Savings accounts can also be maintained with the
Post Offices in India.
Types of accounts which can be
maintained by an NRI / PIO in India
A. Non-Resident Ordinary Rupee
Account (NRO Account)
Any person resident outside
India may open NRO account with an authorised dealer or an authorised bank
for the purpose of putting through bona fide transaction in rupees.
Opening of accounts by
individual/ entities of Pakistan and entities of Bangladesh require prior
approval of Reserve Bank of India.
NRO accounts may be opened /
maintained in the form of current, savings, recurring or fixed deposit
accounts.
● Savings Account -
Normally maintained for crediting legitimate dues /earnings / income such
as dividends, interest etc. Banks are free to determine the interest rates.
● Term Deposits -
Banks are free to determine the interest rates. Interest rates offered by
banks on NRO deposits cannot be higher than those offered by them on
comparable domestic rupee deposits.
● Account should be denominated
in Indian Rupees.
● Permissible credits to NRO
account are transfers from rupee accounts of non-resident banks,
remittances received in permitted currency from outside India through
normal banking channels, permitted currency tendered by account holder
during his temporary visit to India, legitimate dues in India of the
account holder like current income like rent, dividend, pension, interest,
etc., sale proceeds of assets including immovable property acquired out of
rupee/ foreign currency funds or by way of legacy/ inheritance.
● Eligible debits such as all local
payments in rupees including payments for investments as specified by the
Reserve Bank and remittance outside India of current income like rent,
dividend, pension, interest, etc., net of applicable taxes, of the account
holder.
● NRI/PIO may remit from the
balances held in NRO account an amount not exceeding USD one million per
financial year, subject to payment of applicable taxes.
● The limit of USD 1 million per
financial year includes sale proceeds of immovable properties held by NRIs/
PIOs.
● Other than current income and
the limit of USD 1 Mn per financial year applicable to NRIs/PIOs, balances
in NRO accounts cannot be repatriated without the prior approval of RBI.
● The accounts may be held
jointly with residents and / or with non-resident Indian.
● The NRO account holder may opt
for nomination facility.
● NRO (current/savings) account
can also be opened by a foreign national of non-Indian origin visiting
India, with funds remitted from outside India through banking channel or by
sale of foreign exchange brought by him to India. The details of this
facility are given in the FAQs on “Accounts opened by Foreign Nationals and
Foreign Tourists” available on the RBI website.
● Loans to non-resident account
holders and to third parties may be granted in Rupees by Authorized Dealer
/ bank against the security of fixed deposits subject to certain terms and
conditions.
B. Non-Resident (External) Rupee
Account (NRE Account)
● NRE account may be in the form
of savings, current, recurring or fixed deposit accounts (with maturity of
minimum one year). Such accounts can be opened only by the NRI (as defined
under Regulation 2(vi) of Notification No. FEMA 5/2000-RB dated May 3, 2000) himself and not through the holder of the power of
attorney.
● NRIs may be permitted to open
NRE account with their resident close relatives (relative as defined in
Section 6 of the Companies Act, 1956) on ‘former or survivor ‘basis. The
resident close relative shall be eligible to operate the account as a Power
of Attorney holder in accordance with the extant instructions during the
life time of the NRI/PIO account holder.
● Account will be maintained in
Indian Rupees.
● Balances held in the NRE account
are freely repatriable.
● Accrued interest income and
balances held in NRE accounts are exempt from Income tax and Wealth tax,
respectively.
● Authorised dealers/authorised
banks may at their discretion/commercial judgement allow for a period of
not more than two weeks, overdrawings in NRE savings bank accounts, up to a
limit of Rs.50,000 subject to the condition that such overdrawings together
with the interest payable thereon are cleared/repaid within a period of two
weeks, out of inward remittances through normal banking channels or by
transfer of funds from other NRE/FCNR accounts.
● Savings - Banks are free to determine the interest rates.
● Term deposits – Banks are free to determine the interest rates
of term deposits of maturity of one year and above. Interest rates offered
by banks on NRE deposits cannot be higher than those offered by them on
comparable domestic rupee deposits.
● Permissible credits to NRE
account are inward remittance to India in permitted currency, proceeds of
account payee cheques, demand drafts / bankers' cheques, issued against
encashment of foreign currency, where the instruments issued to the NRE
account holder are supported by encashment certificate issued by AD
Category-I / Category-II, transfers from other NRE / FCNR accounts, sale
proceeds of FDI investments, interest accruing on the funds held in such
accounts, interest on Government securities/dividends on units of mutual
funds purchased by debit to the NRE/FCNR(B) account of the holder, certain
types of refunds, etc.
● Eligible debits are local
disbursements, transfer to other NRE / FCNR accounts of person eligible to
open such accounts, remittance outside India, investments in shares /
securities/commercial paper of an Indian company, etc.
● Loans can be extended against
security of funds held in NRE Account either to the depositors or third
parties without any ceiling subject to usual margin requirements.
● Such accounts can be operated
through power of attorney in favour of residents for the limited purpose of
withdrawal of local payments or remittances through normal banking channels
to the account holder himself.
C. Foreign Currency Non Resident
(Bank) Account – FCNR (B) Account
● NRIs are eligible to open and
maintain these accounts.
● FCNR (B) accounts are only in
the form of term deposits of 1 to 5 years
● All debits / credits
permissible in respect of NRE accounts, including credit of sale proceeds
of FDI investments, are permissible in FCNR (B) accounts also.
● Account can be held in any
freely convertible currency.
● Loans can be extended against
security of funds held in FCNR (B) deposit either to the depositors or
third parties without any ceiling subject to usual margin requirements.
● The interest rates are
stipulated by the Department of Banking Operations and Development, Reserve
Bank of India. With effect from March 1, 2014, in respect of FCNR (B)
deposits of maturities, 1 year to less than 3 years, interest shall be paid
within the ceiling rate of LIBOR/ SWAP rates plus 200 basis points for the
respective currency/ corresponding maturity. For FCNR(B) deposits with
maturity of 3-5 years interest shall be paid within the ceiling rate of
LIBOR/ SWAP rates plus 300 basis points. On floating rate deposits,
interest shall be paid within the ceiling of SWAP rates for the respective
currency/ maturity plus 200 bps/ 300 bps, as the case may be. For floating
rate deposits, the interest reset period shall be six months.
● When an account holder becomes
a person resident in India, deposits may be allowed to continue till
maturity at the contracted rate of interest, if so desired by him.
● Terms and conditions as
applicable to NRE accounts in respect of joint accounts, repatriation of
funds, opening account during temporary visit, operation by power of
attorney, loans/overdrafts against security of funds held in accounts,
shall apply mutatis mutandis to FCNR (B). NRI can open joint account with a
resident close relative (relative as defined in Section 6 of the Companies
Act, 1956) on former or survivor basis. The resident close relative will be
eligible to operate the account as a Power of Attorney holder in accordance
with extant instructions during the life time of the NRI/ PIO account
holder.
Is the permission of the Reserve
Bank required for opening the various accounts, mentioned above, by
Bangladesh / Pakistan individuals/entities?
Opening of accounts by
individuals/entities of Pakistan and entities of Bangladesh nationality
requires prior approval of the Reserve Bank.. All such requests may be
referred to the General Manager, Foreign Exchange Department, Central
Office Cell, Reserve Bank of India, 6 Sansad Marg, New Delhi - 110 001.
However, individuals of Bangladesh nationality are permitted to open NRO
accounts without the prior approval of Reserve Bank of India, subject to
conditions.
Can an individual resident
Indian borrow money from his close relatives outside India?
Yes, an individual resident
Indian can borrow a sum not exceeding USD 250,000 or its equivalent from
his close relatives3 staying
outside India, subject to the conditions that:
i.
the
minimum maturity period of the loan is one year;
ii.
the
loan is free of interest; and
iii.
the
amount of loan is received by inward remittance in free foreign exchange
through normal banking channels or by debit to the NRE/FCNR(B) account of
the NRI.
Can an individual resident lend
money to his close relative NRI / PIO?
Yes, an individual resident can
lend money by way of crossed cheque /electronic transfer within the overall
limit prescribed under the Liberalised Remittance Scheme, to meet the
borrower’s personal or business requirements in India, subject to
conditions. The loan should be interest free and have a maturity of minimum
one year and cannot be remitted outside India.
Can an individual resident repay
loans of close relative NRIs to banks in India?
Yes, where an authorised dealer
in India has granted loan to a non-resident Indian such loans may also be
repaid by resident close relative (relative as defined in Section 6 of the
Companies Act, 1956), of the Non-Resident Indian by crediting the
borrower's loan account through the bank account of such relative.
What are the other facilities
available to NRIs/PIO?
A. Investment facilities for
NRIs
NRI may, without limit, purchase
on repatriation basis:
● Government dated securities /
Treasury bills
● Units of domestic mutual
funds;
● Bonds issued by a public
sector undertaking (PSU) in India.
● Non-convertible debentures of
a company incorporated in India.
● Perpetual debt instruments and
debt capital instruments issued by banks in India.
● Shares in Public Sector
Enterprises being dis-invested by the Government of India, provided the
purchase is in accordance with the terms and conditions stipulated in the
notice inviting bids.
● Shares and convertible
debentures of Indian companies under the FDI scheme (including automatic
route & FIPB), subject to the terms and conditions specified in
Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
● Shares and convertible
debentures of Indian companies through stock exchange under Portfolio
Investment Scheme, subject to the terms and conditions specified in
Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as
amended from time to time.
NRI may, without limit, purchase
on non-repatriation basis :
● Government dated securities /
Treasury bills
● Units of domestic mutual funds
● Units of Money Market Mutual
Funds
● National Plan/Savings
Certificates
● Non-convertible debentures of
a company incorporated in India
● Shares and convertible
debentures of Indian companies through stock exchange under Portfolio Investment
Scheme, subject to the terms and conditions specified in Schedules 3 and 4
to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from
time to time.
● Exchange traded derivative
contracts approved by the SEBI, from time to time, out of INR funds held in
India on non-repatriable basis, subject to the limits prescribed by the
SEBI.
Note : NRIs are not permitted to
invest in small savings or Public Provident Fund (PPF).
B. Investment in Immovable
Property
● NRI5 /
PIO4 may
acquire/transfer immovable property in India other than agricultural land/
plantation property or a farm house out of repatriable and / or
non-repatriable funds.
● Foreign national of non Indian
origin resident outside India shall not acquire/transfer any immovable
property in India other than on lease not exceeding five years, without
prior approval of Reserve Bank of India.
● The payment of purchase price,
if any, should be made out of
(i) funds received in India
through normal banking channels by way of inward remittance from any place
outside India or
(ii) funds held in any
non-resident account maintained in accordance with the provisions of the
Act and the regulations made by the Reserve Bank.
Note : No payment of purchase price for acquisition of
immovable property shall be made either by traveller’s cheque or by foreign
currency notes or by other mode other than those specifically permitted as
above.
● NRI 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
● NRI 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 law in force at the time of acquisition by him or the
provisions of these Regulations or from a person resident in India
● An NRI may transfer any
immovable property in India to a person resident in India.
● NRI may transfer any immovable
property other than agricultural or plantation property or farm house to a
person resident outside India who is a citizen of India or to a person of
Indian origin resident outside India.
In respect of such investments,
NRIs are eligible to repatriate:
● The sale proceeds of immovable
property in India if the property was acquired out of foreign exchange
sources i.e. remitted through normal banking channels / by debit to NRE /
FCNR (B) account.
● The amount to be repatriated
should not exceed the amount paid for the property in foreign exchange
received through normal banking channel or by debit to NRE account (foreign
currency equivalent, as on the date of payment) or debit to FCNR (B)
account.
● In the event of sale of
immovable property, other than agricultural land / farm house / plantation
property in India, by a person resident outside India who is a citizen of
India / PIO, the repatriation of sale proceeds is restricted to not more
than two residential properties subject to certain conditions.
● If the property was acquired
out of Rupee sources, NRI or PIO may remit an amount up to USD one million
per financial year out of the balances held in the NRO account (inclusive
of sale proceeds of assets acquired by way of inheritance or settlement),
for all the bonafide purposes to the satisfaction of the Authorized Dealer
bank and subject to tax compliance.
● Refund of (a) application /
earnest money / purchase consideration made by house-building
agencies/seller on account of non-allotment of flats / plots and (b)
cancellation of booking/deals for purchase of residential/commercial
properties, together with interest, net of taxes, provided original payment
is made out of NRE/FCNR (B) account/inward remittances.
Repayment of Housing Loan of NRI
/ PIOs by close relatives of the borrower in India
Housing Loan in rupees availed
of by NRIs/ PIOs from ADs / Housing Financial Institutions in India can be
repaid by the close relatives in India of the borrower.
C. Facilities to returning
NRIs/PIOs
● Returning NRIs/PIOs may
continue to hold, own, transfer or invest in foreign currency, foreign
security or any immovable property situated outside India, if such
currency, security or property was acquired, held or owned when resident
outside India
● The income and sale proceeds
of assets held abroad need not be repatriated.
Foreign
Currency Account
● A person resident in India who
has gone abroad for studies or who is on a visit to a foreign country may
open, hold and maintain a Foreign Currency Account with a bank outside
India during his stay outside India, provided that on his return to India,
the balance in the account is repatriated to India. However, short visits
to India by the student who has gone abroad for studies, before completion
of his studies, shall not be treated as his return to India.
● A person resident in India who
has gone out of India to participate in an exhibition/trade fair outside
India may open, hold and maintain a Foreign Currency Account with a bank
outside India for crediting the sale proceeds of goods on display in the
exhibition/trade fair. However, the balance in the account should be
repatriated to India through normal banking channels within a period of one
month from the date of closure of the exhibition/trade fair.
Resident
Foreign Currency Account
● A person resident in India may
open, hold and maintain with an authorised dealer in India a Resident
Foreign Currency (RFC) Account.
● Proceeds of assets held
outside India at the time of return can be credited to RFC account.
● The funds in RFC accounts are
free from all restrictions regarding utilisation of foreign currency
balances including any restriction on investment in any form outside India.
● RFC accounts can be maintained
in the form of current or savings or term deposit accounts, where the
account holder is an individual and in the form of current or term deposits
in all other cases.RFC accounts are permitted to be held jointly with a
resident close relative(s) as defined in the Companies Act, 1956 as joint
holder (s) in their RFC bank account on ‘former or survivor basis’.
However, such resident Indian close relative, now being made eligible to
become joint account holder shall not be eligible to operate the account
during the life time of the resident account holder.
General facilities
Can Exchange Earners Foreign
Currency (EEFC) accounts be held jointly with a -resident Indian?
Yes, EEFC account of a resident
individual can be held jointly with a resident close relative on a ‘former
or survivor’ basis.
However, such resident Indian
close relative will not be eligible to operate the account during the life
time of the resident account holder.
Can a resident individual
holding a savings bank account include non-resident close relative as a
joint account holder?
Yes, individuals resident in
India are permitted to include non-resident close relative(s) as a joint
holder(s) in their resident bank accounts on ‘either or survivor’ basis
subject to conditions.
Can a resident individual gift
shares/securities/convertible debentures etc to NRI close relative?
Yes, a resident individual is
permitted to gift shares/securities/convertible debentures etc to NRI close
relative up to USD 50,000 per financial year subject to certain conditions.
Can a resident individual give
rupee gifts to his visiting NRI/PIO close relatives?
Yes, a resident individual can
give rupee gifts to his visiting NRI/PIO close relatives by way of crossed
cheque/electronic transfer within the overall limit prescribed under
Liberalised Remittance Scheme for the resident individual and the gifted
amount should be credited to the beneficiary’s NRO account.
What types of services can be
provided by a resident individual to his / her non-resident close
relatives?
A resident may make payment in
rupees towards meeting expenses on account of boarding, lodging and
services related thereto or travel to and from and within India of a person
resident outside India who is on a visit to India. Further, where the
medical expenses in respect of NRI close relative are paid by a resident
individual, such a payment being in the nature of a resident to resident
transaction may also be covered under the term “services”.
1 A Non Resident Indian (NRI) is a person resident outside
India, who is a citizen of India or is a person of Indian origin.
2 A Person of Indian Origin (PIO) for
this purpose is defined in Regulation 2 of FEMA Notification ibid as 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
grandparents 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).
3 'Close relative' means relative as
defined in Section 6 of the Companies Act, 1956.
4 'A Person of Indian Origin' means an
individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or
Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held
an Indian Passport or (ii) who or either of whose father or mother or whose
grandfather or grandmother was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955).
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