A Comprehensive Guide for Indians residing outside India (NRI) This Free NRI guide has been compiled with the help of information available in official website of various government departments like Reserve Bank of India, Income Tax Department, various State Governments, Department of Oversea Affairs, Ministry of Home Affairs, SEBI, and other reliable website sources. I have taken adequate care to provide current and authentic information. This NRI Guide is intended to serve as a ready reference book to guide NRIs on various matters affecting their financial and other related subjects. This does not purport to be a legal document. So I am not sure that, any errors occurred while compiling this reference guide. In case of any variation between what has been stated in this NRI Guide and the relevant Act, Rules, Regulations, Policy Statements, Government Orders/Circulars etc., the latter shall prevail. Kindly note that, rules related to NRIs are subject to change. Errors and omissions are expected. This free e-book is circulated with the understanding that, neither the author nor the publisher will be responsible for any action taken on the basis of contents of this book whether directly or indirectly for any error or omission to any person whether a user of this e-book or not. The persons willing to accept this disclaimer only required to read this e-book. The Honorable Finance Minister of India presented the Union Budget 2012-2013 on 16thMarch 2012, and thereafter presented the Finance Bill, 2012 before the Parliament. For the easy reference and information important budget proposals mostly affecting NRIs and common men are also included in this guide at the relevant places. As of date, these are proposals only and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2013-2014 relevant to Financial Year 2012-13, unless specifically provided otherwise. Prakash Nair Prakash @yourownadviser.com www.yourownadviser.com PLEASE VISIT www.yourownadviser.com to download this NRI Guide

1. 1|Page

2. NRI GUIDE 2012
(Ver 2.00)
(A Comprehensive Guide for Indians residing outside India)
Prepared by
Prakash Nair
Prakash@yourownadviser.com
www.yourownadviser.com
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3. PREFACE
This Free NRI guide has been compiled with the help of information available in official website
of various government departments like Reserve Bank of India, Income Tax Department,
various State Governments, Department of Oversea Affairs, Ministry of Home Affairs, SEBI, and
other reliable website sources. I have taken adequate care to provide current and authentic
information. This NRI Guide is intended to serve as a ready reference book to guide NRIs on
various matters affecting their financial and other related subjects. This does not purport to be a
legal document. So I am not sure that, any errors occurred while compiling this reference guide.
In case of any variation between what has been stated in this NRI Guide and the relevant Act,
Rules, Regulations, Policy Statements, Government Orders/Circulars etc., the latter shall
prevail. Kindly note that, rules related to NRIs are subject to change. Errors and omissions are
expected.
This free e-book is circulated with the understanding that, neither the author nor the publisher
will be responsible for any action taken on the basis of contents of this book whether directly or
indirectly for any error or omission to any person whether a user of this e-book or not. The
persons willing to accept this disclaimer only required to read this e-book.
The Honorable Finance Minister of India presented the Union Budget 2012-2013 on 16thMarch
2012, and thereafter presented the Finance Bill, 2012 before the Parliament. For the easy
reference and information important budget proposals mostly affecting NRIs and common men
are also included in this guide at the relevant places. As of date, these are proposals only and if
adopted by the Parliament and passed as Finance Act; will come into force for and from
Assessment Year 2013-2014 relevant to Financial Year 2012-13, unless specifically provided
otherwise.
Prakash Nair Prakash @yourownadviser.com www.yourownadviser.com
Date: 22-March-2012
The greatest reward the author can get the feedback good or bad from the readers. Any
suggestions for improvement are most welcome. In case I missed some important information
or provided wrong information, please let me know
Your suggestions, comments, criticism may send to Prakash@yourownadviser.com or
pnair1966@yahoo.com The decision whether to reply to any query or not lies with the Author
To receive regular update on NRI related matters, please send a request and register your e-mail id
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4. INDEX
Sl
Nos Chapters and contents Page Nos
Abbreviations 16 -17
CHAPTER - 1 18-19
Residential Status
1 A Non Resident Indian (NRI)
2 A Person of Indian Origin (PIO)
3 A Person of Indian Origin
4 What is India DIASPORA
CHAPTER - 2 20-37
1 Various Types of Bank Account - NRIs are permitted to Open
2 Non-Resident Ordinary/ Rupee Account (NRO Account)
3 Non-Resident (External) Rupee Account (NRE Account)
Foreign Currency Non Resident (Bank) Account – FCNR (B)
4 Account
5 NRE Current Accounts
6 NRO Current Account
7 Resident Foreign Currency Accounts (RFS Accounts)
8 Foreign Currency Account
CHAPTER -3 38-41
1 Facilities Available to NRIs/PIO
2 Investment facilities for NRIs
3 NRI may, without limit, purchase on repatriation basis:
4 NRI may, without limit, purchase on non-repatriation basis :
An individual resident can borrow money from his close relatives
5 outside India
Repayment of Housing Loan of NRI / PIOs by close relatives of
6 the borrower in India
Foreign Exchange Management (Deposit) Regulations, 2000 - Credit
7 to Non Resident (External) Rupee Accounts Loan given to non-resident
8 Facilities to returning NRIs/PIO
CHAPTER - 4 42-44
NRIs are not permitted to invest in small savings or Public
1 Provident Fund (PPF).
2 PPF (Public Provident Fund)
3 NSC (National Savings Certificate) – 5 years and 10 years
4 Senior citizens savings account
5 Tax saving infrastructure bonds under section 80CCF
6 Post office time deposits are not available for NRIs.
FEMA Circular related to restircation for NRI's for Opening Small
7 Savings Accounts
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5. CHAPTER - 5 45-46
NRIs Investments in Immoveable Properties
CHAPTER - 6 47-64
NRI Taxation
1 Expatriates Working Abroad – Tax Provisions
1a How to determine Residential Status
Income Tax Rates proposed in Union Budget 2012 for the
2 financial year 2012-2013
3 Particulars of Income Tax Incidence for various tax status
4 Tax Exemptions from Income Tax available for NRIs
5 Other Tax Aspects related to NRIs
6 Special Provisions Relating to Non-Residents
7 Income Tax Clearance Certificate
8 Tax Exemption Certificate - Lower or Nil Rate of TDS:
9 Renting out of Property by an NRI in India
9a Remittance of Rent
9b Tax treatment of rental income
9c Deemed rental income
Service Tax applicable to renting out of residential properties for
9d commercial use
NRI and Senior Citizen status for Income Tax calculation
10 purposes
11 Tax Liabilities related to NRIs investments made in Joint basis
12 Bank Term Deposits - Tax aspects
13 Property Rental income – Tax Aspects
14 Mutual Fund/Equity Investments – Tax Aspects
15 NRI income and Applicability of TDS on the same
16 Tax Treatment of overseas Financial Assets.
Other Tax Aspects related to NRIs including Immovable
17 Properties
18 Tax Treatment of selling property abroad
19 Tax Treatment of Rental Income Earned Abroad
20 Tax Treatment of Dividend on overseas Investments
21 One Time Financial Settlement
22 Capital Gains – earned abroad
CHAPTER - 7 65-77
Budget 2012 Proposals
CHAPTER - 8 78-79
1 Interest on Investments
2 Rental Income
3 Dividend Income
4 TDS on salary payments to Non Residents & Expatriates
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6. 5 Capital Gains on Securities
Deduction of interest paid on more than one loan borrowed for
5 purchase or construction of same house
CHAPTER - 9 80-87
Double Taxation Avoidance Agreements (DTAA)
CHAPTER -10 88-89
From 15G & Form 15H - NRIs are not eligible to submit these
forms
CHAPTER 11 90-107
Capital Gain Tax
1 Capital Asset
2 Short Term Capital Gain (STCG)
3 Long Term Capital Gain (LTCG)
4 Computation of Indexation Benefits
5 What is the indexed cost of acquisition?
6 Cost Inflation Index Form 1981 to 2011
7 Capital Gain Exemptions can be availed
What are the consequences if a new house is transferred within
8 3 years?
Exemption available on capital gains that arise from transfer of
9 house property
10 How to avoid paying capital gains tax
Exemption of long term capital gains on transfer of residential
property if invested in plant machinery through small/medium
11 enterprise, for 5 years (Budget 2012 proposal)
Relief from long-term capital gains tax on transfer of residential
property if invested in a manufacturing small
12 or medium enterprise
13 Capital Gains Accounts Scheme
14 Who are eligible to take the advantage
15 List of Banks who can Accept Deposit
16 Opening a bank account for Capital Gains Account Scheme-
17 Capital Gain treatment of Inherited or gifted properties
Please note that the long-term capital gains earned by you from
inherited shares sold on any recognized stock exchange in India
18 by paying the applicable STT are exempt from tax provided
CHAPTER - 12 108-111
Wealth Tax Implications of NRIs
CHAPTER - 13 112-117
Guide on filing of Income Tax Return by NRIs
CHAPTER - 14 118-120
Clubbing of Incomes
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7. CHAPTER - 15 121-122
Tax on Gifts - the facts need to know
CHAPTER -16 123-125
What is Advance Tax
CHAPTER - 17 126-130
General Tax Deduction available for NRIs
1 NRI Tax-saving tips
2 Section 80C of Income Tax Act
2.a Life Insurance and Retirement/Pension Plans
2.b Investment in House property
2.c ELSS (Tax saving Equity Mutual Fund schemes)
3 Section 80D - Health Insurance Premium
4 Deductions u/s 80 G
5 Deduction under 80E
6 Bank Deposits and applicable tax - Sect 80TTA
7 Rajiv Gandhi Equity Savings Scheme
CHAPTER - 18 131-144
NRI Welfare Schemes
1 Budget 2012: Rs 50 crore to be spent on overseas Indians
2 Pravasi Bharatiya Bima Yojana
3 Deserted NRI Women Welfare Scheme
4 Indian Community Welfare Fund (ICWF)
5 Facilitating investment in India
6 Know India Program (KIP)
7 Scholarship Programme for Diaspora Children
8 Migrant Resource Center, Kochi
9 NRIs - Facilities for Returning Indians
10 Investment facilitation and knowledge networking
11 Bilateral Labour Co-operation
12 Global Indian Network of Knowledge (Global Ink)
13 India Development Foundation of Overseas Indians
14 Scholarship Programme for diaspora Children (SPDC)
15 Direct Admission to Students Abroad (DASA)
16 Reservation for NRIs at Indian educational institutions
17 Assistance for problems relating to Overseas Indian Marriages
18 Voting Rights to Non-resident Indians
19 Double Taxation related maters
20 Recruitment of maid for Oman
CHAPTER 19 145-152
State Governments Welfare Schemes
1 Government of Assam
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8. 2 Government of Bihar
3 Government of Gujarat
4 Government of Karnataka
5 Government of Kerala
5.a Pravasi Pension Scheme for Non-Resident Keralites
5.b Pravasi Identity Card
6 Government of Orissa
7 Government of Rajasthan
CHAPTER 20 153-166
NRI Investment Options
Investments in Shares and Securities listed in Indian Stock
1 Market
1.a Portfolio Investment Scheme (PIS) for NRIs
1.b IPO Electronic Mode and Electronic Voting
1.c Securities Transaction Tax (STT) (2012 Budget proposal)
2 NRIs investment in Mutual Funds Schemes
FDI (Foreign Direct Investment) in Partnership Firm / Proprietary
3 Concern
4 Company Fixed Deposit Investments for NRIs
5 Non-Banking Financial Company (NBFC) Deposits
6 Investment in Commercial Papers (CD) by NRIs
CHAPTER 21 167-174
National Pension System (NPS) - NRIs are eligible to invest
CHAPTER - 22 175-182
PAN ( Permanent Account Number)
1 NRIs and PAN
2 Advantages of Having a PAN
3 How to apply for PAN
4 New PAN Application From 49A and 49AA w.e.f 01/11/2011
5 INSTRUCTIONS FOR FILLING FORM 49A
6 GENERAL INFORMATION FOR PAN APPLICANTS
CHAPTER - 23 183-186
Know Your Customer (KYC) Requirements
1 Background
2 Key Changes in KYC Norms
3 Impact on investors
4 Who can carry out uniform KYC:
5 Impact on current arrangements with CVL:
6 Due diligence in the KYC process
CHAPTER - 24 187-191
NRIs Guide to deal the inherited properties
1 Inheriting immoveable properties
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9. 2 Inheriting Financial Assets and Investments in India
3 Remittance Exchange Control Regulations
4 Inheritance and Gifting rules in India
5 Exclusions to taxing of gifts in the hands of recipient -
CHAPTER 25 192-194
How its useful for NRIs to use Power of Attorney (POA) in India
CHAPTER 26 195-199
Top 10 Home Buying tips for NRIs
NRIs Tips to buy properties
CHAPTER - 27 200-204
Facilities for Returning NRIs
CHAPTER - 28 205-207
NRI's guide to selling property in India
CHAPTER - 29 208-222
CUSTOMS AND BAGGAGE RULES REALTED TO
INTERNATINAL PASSENGERS
1 Clearance of arriving passengers:
2 Green Channel or Walk through Channel
3 Red Channel
4 Passenger crossing Green Channel with Dutiable Goods
5 Clearance of arriving passengers
6 Duty free allowances and entitlements for Indian Residents and
6.a Duty Free Entitlements
6.b Tobacco, Alcoholic liquor
6.c Not Allowed Items
6.d Applicable Customs Duty
6.e Duty Allowance applicable for Professionals
7 Import of jewellery/gold/silver:
8 Duty free allowances and entitlements for tourists
9 Item Permitted Quantity Present Duty
10 Category of Tourist Duty Free Allowance
11 Allowances and entitlements on Transfer of Residence (TR):
12 Import of baggage of deceased person
13 Import of unaccompanied baggage
14 Aircraft Crew Members
15 Import of foreign exchange/currency
16 Import of Indian currency
17 Import of fire arms as baggage
18 Import of pet animals as baggage
19 Detained baggage
20 Mishandled baggage
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10. 21 Clearance of departing passengers
22 Export of gold jewellery as baggage
23 Export of currency
24 International Passenger Facilitation
25 Import and Export through Courier
26 Categories of goods allowed import through courier:
27 Categories of goods allowed export through courier
28 Import and export of gems and jewellery
29 Import and Export through Post
30 Procedure in case of postal exports
31 Procedure for claiming Drawback on exports through post
32 Drawback in respect of goods re-exported through post:
33 Re-export of partial consignment
CHAPTER- 30 223-250
Baggage Rules at a Glance
CHAPTER - 31 251-306
All About Indian Passport
CHAPTER - 32 307-309
Home Loans for NRIs
CHAPTER - 33 310-319
Overseas Citizenship of India (OCI)
CHAPTER - 34 320-321
Person of India Origin (PIO) Scheme
Person of Indian Origin Card (PIO Card) 321-322
CHAPTER - 35 322-333
1 Non-Resident Indian (NRI) Pensioners:
Savings Bank account maintained by residents in India – non-
resident close relative allowed as jointholder A.P. (DIR Series)
2 Circular No.12 dated September 15, 2011
Account Scheme (NRE)/ Foreign Currency (Non-Resident)
3 Account (Banks) Scheme (FCNR(B))
Foreign Investments in India – increase in limit for transfer of
4 security by way of gift
A.P. (DIR Series) Circular No.14 dated September 15, 2011
5 Gift in Rupees by Resident Individuals to NRI close relatives
Meeting of Medical expenses of NRIs close relatives by Resident
6 Individuals
FEMA – Repayment of loans of Non-resident close relatives by
7 residents
MASTER CIRCULAR ON ACQUISITION AND TRANSFER OF
IMMOVABLE PROPERTY IN INDIA BY NRIs/PIOs/FOREIGN
8 NATIONALS OF NON-INDIAN ORIGIN
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11. CHAPTER -36 334-354
Emigration Clearance – Indian and foreign persons
All About Emigration
1 What is Emigration
2 Statutory Framework
3 Salient Features of the Act
4 Instructions for Indian Passengers
5 Instruction For Foreigners Coming To India
6 Requirements concerning stay of Foreigners in India
7 Guidelines for Emigration Clearance System
8 Who Needs Emigration Clearance
9 Insurance policy- Pravasi Bhartiya Bima Yojana
10 ECNR/ECR/POE
11 Employment Guidelines for Emigrants
12 List of Registered Agents
13 Abolition of ECRS
14 How can one seek employment abroad
15 Guidelines for Departure to a foreign country for employment
16 CUSTOMS FORMALITIES
CHAPTER -37 355-363
1 Inheritance Certificate
2 International Driving Licence
3 International Passport
CHAPTER -38 364-366
Islamic Fund -Sharia Law and Investment Structures
CHAPTER - 39 367-437
Master Circular on Foreign Investment in India
CHAPTER - 40 438-447
Forex Facilities for Residents (Individuals)
CHAPTER - 41 448-453
Air Travel Tips for NRIs
CHAPTER - 42 454
Baggage Insurance Policy
1 Loss of Checked Baggage – Checked Baggage
2 Delay of the checked Baggage
CHAPTER - 43 455-458
Different Modes of Money Remittance - NRIs
CHAPTER - 44 459-460
P Notes (Participatory Notes) and NRIs
CHAPTER - 45 461-463
Passive Foreign Investment Company - PFIC
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12. CHAPTER - 46 464-472
The Foreign Contribution (Regulation Act, 2010)
CHAPTER - 47 473-479
Wills
CHAPTER 48 480-483
ADMISSION TO UNDERGRADUATE ENGINEERING
PROGRAMME
CHAPTER 49 484-485
Exchange Earner's Foreign Currency (EEFC) Account
CHAPTER 50 486
EXIM Policies
CHAPTER 51 487
Compounding of Contraventions under FEMA, 1999
CHAPTER 52 488-489
What is Consumer Court
CHAPTER 53 490
Duty Free Shops
CHAPTER 54 491-493
Import of Gold and Silver by NRIs
CHAPTER 55 494-501
Acquisition of Indian Citizenship (IC)
CHAPTER 56 501-507
GENERAL REQUIREMENTS FOR REGISTRATION OF A
FOREIGN NATIONAL
CHAPTER 57 508- 512
What is AADHAAR ?
CHAPTER 58 513-515
PROCEDURE FOR THE ADOPTION OF AN INDIAN CHILD BY
A FOREIGNER OR NRI
CHAPTER 59 525-516
Employment Guidelines for Emigrants
CHAPTER 60 517
NRIs properties disputes settlement
CHAPTER 61 518-520
Right to Information Act 2005
CHAPTER 62 521-541
NRIs and Financial Planning
1 Ten Tips for a good Financial Planning & Investments
2 Why you need an Emergency Saving Fund
3 How to plan for your Child’s Higher Education
4 Victims of Bad Financial Advises
5 Impact of inflation in Retirement Planning
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13. 6 Why Health Insurance is important
7 How to choose the right Life Insurance Policy
8 Insurance cover for your bank deposits
9 13 Tips to avoid Investment Fraud
CHAPTER 63 542-543
Impact of proposed Direct Tax Code on NRIs
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14. Abbreviations
AD - Authorized Dealer
ADR- American Depository Receipts
BPO- Business Process Outsourcing
CBDT- Central Board of Direct Taxes
CBSE -Central Board of Secondary Education
CII- Confederation of Indian Industry
COC -Certificate of Coverage
DASA- Direct Admission to Students Abroad
DIN- Director Identification Number
DIPP -Department of Industrial Policy and Promotion
DMRC - Delhi Metro Rail Corporation
DP - Partner
DSC - Digital Signature Certificate
DTAA - Double Taxation Avoidance Agreement
DTC - Direct Taxes Code
ECNR - Emigration Check Not Required
ECR- Emigration Check Required
EdCIL- Education Consultants India Limited
EP -F Employees’ Provident Fund
ESIC- Employees’ State Insurance Corporation
ESOP - Employees’ Stock Option Plan
FCCB- Foreign Currency Convertible Bonds
FCNR -Foreign Currency (Non Resident) Account
FDI - Foreign Direct Investment
FEMA - Foreign Exchange Management Act
FRRO - Foreigners’ Regional Registration Office
GDR - Global Depository Receipts
ICWF - Indian Community Welfare Fund
IIM- Indian Institute of Management
IIT- Indian Institute of Technology
IPICOL -Industrial Investment Promotion Corporation of Orissa Limited
ISCE - Indian School Certificate Examination
IT - Information Technology
ITC -Industrial Training Centre
ITI - Industrial Training Institute
IW - International Worker
JV - Joint Venture
KYC - Know Your Customer
LLP - Limited Liability Partnership
LRS- Liberalized Remittance Scheme
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15. MCA - Ministry of Corporate Affairs
MHA - Ministry of Home Affairs
MNC - Multinational Company
MOIA - Ministry of Overseas Indian Affairs
MOU - Memorandum of Understanding
MRTS - Mass Rapid Transit System
NCR- National Capital Region
NGO - Non-Government Organization
NOR - Not Ordinarily Resident
NORKA- Non Resident Keralites Affairs Department
NR - Non Resident
NRB- Non Resident Bihari
NRE - Non Resident External account
NREGA- National Rural Employment Guarantee Act
NRG - Non Resident Gujaratis
NRGF- Non Resident Gujaratis Foundation
NRI- Non Resident Indian
NRK- Non Resident Keralites
NRO - Non Resident Ordinary Rupee account
NROFC - Non Resident Oriya Facilitation Centre
NSC - National Savings Certificate
OCI - Overseas Citizen of India
OIFC - Overseas Indian Facilitation Centre
OWRC - Overseas Workers Resource Centre
PAN- Permanent Account Number
PF- Provident Fund
PIO - Person of Indian Origin
PIS - Portfolio Investment Scheme
PPF- Public Provident Fund
PSU - Public Sector Company
RBI- Reserve Bank of India
RFC - Resident Foreign Currency
ROR - Resident and Ordinarily Resident
SEBI - Securities and Exchange Board of India
SME - Small and Medium Enterprises
SPDC - Scholarship Programme for diaspora Children
SSA - Social Security Agreement
STT - Securities Transaction Tax
TAN - Tax Deduction Account Number
VAT- Value Added Tax
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16. CHAPTER – 1
Residential Status
In terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outside
India means a person who is not resident in India.
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) - 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
if
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-
citizen sub
clause (a) or (b).
3. A Person of Indian Origin - means an individual (not being a citizen of Pakistan or
Bangladesh or Sir 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
Passport
whose grandfather or grandmother was a citizen of India by virtue of the Constitution of
India or the Citizenship Act, 1955 (57 of 1955).
The residential status of a person as refered in Sec. 2(31) of the Act. for each assessment year
of
under consideration to determine the scope of total income.
Importance
• Total income of an assessee cannot be determined without knowing his residential status.
• The residential status shall be determined for every person for each previous year
independently.
• The onus of responsibility to prove the residential status is on the assessee.
The criteria related to determination of residential status of an individual is described in details in
the later part of this guide (more details refer Chapter 6 – NRI Taxation)
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17. Diaspora is a word of Greek origin that means scattering or sowing of seeds It is used to
seeds.
refer to people who leave their native lands to live in other parts of the world for
employment, business or any other purpose. Indian Diaspora is a generic term used for
addressing people who have migrated from the territories that are currently within the
borders of the Republic of India It constitutes NRIs (Non-resident Indians) and PIOs
India. resident Indians
(Persons of Indian origins The Indian Diaspora is estimated to be over 30 million. The
ns).
Government of India recognises the importance of Indian Diaspora as it has brought
economic, financial, and global benefits to India The Indian Diaspora today constitutes
India.
an important, and in some respects unique force in world culture.
n unique,
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18. CHAPTER 2
Various Types of Bank Accounts - NRIs
are permitted to open
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19. 1. Types of accounts which can be maintained by an NRI / PIO 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
Authorized Dealer in India, i.e., a bank authorized to deal in foreign exchange. NRO Savings
exchange
accounts can also be maintained with the Post Offices in India. However, individuals/ entities of
.
Bangladesh and Pakistan require the prior approval of the Reserve Bank.
2. Non-Resident (Ordinary) Rupee Account (NRO Account)
Resident
NRO accounts may be opened / maintained in the form of current,
savings, recurring or fixed deposit accounts.
ings,
• Savings Account - Normally maintained for crediting legitimate dues /earnings / income
such as dividends, interest etc.The interest rates on NRO Savings deposits shall be at
the rate applicable to domestic savings deposits. Currently the interest rate is 4 - 7 per
savings
cent.(varies banks to banks)
(varies
• NRO Term Deposits - Banks are free to determine the interest rates. (now banks are
offering 8-9.5% interest depending the duration of the deposit)
9.5%
• Account should be denomin
denominated in Indian Rupees.
• Permissible credits to NRO account are transfers from rupee accounts of non 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.
way
• 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.
applicable
• 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
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20. • The limit of USD 1 million per financial year includes sale proceeds of immovable
properties held by NRIs/PIO.
• 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.
• 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.
3. Non-Resident (External) Rupee Account (NRE Account)
• NRE account may be in the form of savings, current, recurring
or fixed deposit accounts. Such accounts can be opened only by the non-resident
himself and not through the holder of the power of attorney.
• Account will be maintained in Indian Rupees.
• Account can be opened with resident join holder – subject to terms and conditions
• 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, overdrawing 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 - The interest rates on NRE Savings deposits shall be at the rate applicable to
domestic savings deposits. Currently the interest rate above >= 4 % (varies from banks
to bank)
• Term deposits – Banks are free to fix the term deposit interest rates. On 16th
Decemer,2011 with a view to providing greater flexibility to banks in mobilizing non-
resident deposits and also in view of the prevailing market conditions, RBI has decided
to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and
Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under
Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks
are free to determine their interest rates on both savings deposits and term deposits of
maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit
accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with
immediate effect. However, interest rates offered by banks on NRE and NRO deposits
cannot be higher than those offered by them on comparable domestic rupee deposits.
Now banks are competing each other to attract NRE deposits and offering annual
interest in the range of 6.50 to 9.50%., earlier is was 3.25%. RBI direction is applicable
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21. for all Commercial and Scheduled Banks, Foreign Banks and Regional Rural Banks
functioning in India with the license of RBI
• 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, 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 up to Rs.100 lakh can be extended against security of funds held in NRE Account
either to the depositors or third parties.
• Such accounts can be operated through power of attorney in favour of residents for
limited purpose of withdrawal of local payments or remittances through normal banking
channels to the account holder himself.
4. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account
• 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 are permissible in FCNR (B)
accounts also.
• Account can be in Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and
Australian Dollar
• In case the depositor with any convertible currency other than designated currency
desires to place a deposit in these accounts, authorised dealers may undertake with the
depositor a fully covered swap in that currency against the desired designated currency.
Such a swap may also be done between two designated currencies.
• Loans up to Rs.100 lakh can be extended against security of funds held in FCNR(B)
deposit either to the depositors or third parties.
• The interest rates are stipulated by the Department of Banking Operations and
Development, Reserve Bank of India.
• 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.
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22. • 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).
NRIs can now hold bank accounts in any currency
The Reserve Bank permitted Indians who have non-resident accounts
in the country can now hold them in any currency which is fully convertible. The move is likely to
help NRIs/Persons of India Origin as it will give them more options in the holding of accounts,
and lessen the risk from fluctuations in major currencies.
Earlier, FCNR(B) account holders were allowed to hold accounts in only certain currencies such
as the Pound Sterling, US dollar, Japanese yen, euro, Canadian dollar and Australian dollar. It
has been decided that Authorised Dealer banks in India may be permitted to accept Foreign
Currency (Non- Resident) Account (Banks) deposits in any permitted currency. It may be noted
that ‘Permitted currency' for this purpose would mean a foreign currency which is freely
convertible," RBI said in a notification.
"The Committee to Review the Facilities for Individuals under Foreign Exchange Management
Act, 1999 in its Report has recommended that FCNR(B) accounts may be permitted to be
opened in any freely convertible currency" RBI said.
RBI also said that any citizen who was earlier residing in a foreign country can own or transfer
property or other assets in that nation if it was acquired during the time of his residence there.
a person resident in India is free 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 by such person when he was resident outside India or inherited
from a person who was resident outside India, RBI said.
In a clarification issued by it regarding repatriation of income and sale proceeds of assets held
abroad by NRIs who have returned to India permanently, RBI said an investor can retain and
reinvest the income earned on investments made under the Liberalised Remittance Scheme.
The apex bank said that clarifications are as per relevant sections of the Foreign Exchange
Management Act of 1999.
FCNR deposits can be maintained in any of the nine currencies- American Dollar (USD), British
Pounds (GBP), Euro (EUR) , Japanese Yen (YEN), Australian Dollar (AUD), Singapore
Dollar(SGD), Hong Kong Dollar (HKD), Swiss Franc(CHF) and Canadian Dollar (CAD). FCNR
accounts can be opened only as term deposits (fixed deposits/cash certificates).
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23. 5.NRE Current Accounts
Transfer and repatriate funds easily with your NRE Rupee Current
Account. Convenient banking options make your account accessible to you from anywhere in
the world.
•
o Ideal for foreign nationals who have ESOPs Employee Stock Option Plan
(ESOP) are the shares offered to the employees of a company, wherein
promoters decide to dilute their stake. Employees are often given a share of the
business after a certain length of employment or they can buy shares at any
time. issued by Indian companies
o Repatriate your principal and interest amount fully
o Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, Telegraphic
Transfers and Cheque / Draft for free
o Utilise account balance for repatriable investments as well as local payments in
India
o Deposit your overseas earnings in the non-interest bearing Rupee account
o Avail of free ATM Card for the mandate holder in India
o Get an International Debit Card
o Get a personalized cheque book
o Operate your account, anywhere, anytime with convenient banking channels like
NetBanking
o
• To deposit money in your NRE Current Account, you can:
o Transfer funds from abroad in a freely convertible foreign currency These are
foreign currencies that can be exchanged easily with other currencies and are
recognized by the international market.
o Present foreign currency notes/travellers cheques brought in by you or another
NRI during a visit to India
o Directly remit the amount to us
o Transfer funds from an existing NRE/FCNR Account held in other Banks
Fees and Charges
• Normally you need to maintain an Average Quarterly Balance (AQB) of Rs.5,000 -
25,000/- (this conditions varies from banks to bank) In case your Average Quarterly
Balance (AQB) dips below the required amount, a fee of Rs 500 - 1000 per quarter
(varies from banks to bank) will be charged.
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24. Documents Required
o Photocopy of the pages of the passport containing passport details and personal
details of all applicants
o Copy of valid visa / work permit
o One passport photograph of each applicant
o One document confirming either the overseas or Indian address. The address on
the document has to match the address mentioned in the application form.
In case, you cannot go to bank branch for account opening and you reside in a non
FATF country, all photocopies of the above documents to be attested by Indian
Embassy or by a Notary.
In case, you cannot go to any branch for account opening and you reside in a FATF
country, then either all photocopies of the above documents to be attested by an Indian
Embassy or Notary or by a Banker overseas If the documents are not certified then all
documents need to be self signed and submitted along with one additional documents
required by the respective banks
Eligibility
• You are eligible if you are a non-resident individual of Indian nationality or of Indian
origin.
a) In what currency is my NRE Current Account be maintained?
• Your NRE Current Account is maintained in Indian Rupees.
b) What is the minimum amount with which I can open an NRE Current Account?
• The minimum amount required to open an NRE Current Account is INR 5,000- 25,000 or
its equivalent in foreign currency( this minimum amount varies from banks to bank). You
would be required to maintain an Average Quarterly Balance of INR 5,000 to 25,000/-
only.
c) What is the frequency of interest payment on my NRE Current Account?
• No interest is payable.
d) What do I get against my NRE Current Account?
• You will get a cheque book and an International Debit Card against your NRE Current
Account.
f) Can I repatriate funds in my NRE Current Account?
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25. • Yes. The principal and interest earned on NRE Current Account are fully repatriable.
g) What taxes am I liable to pay if I have an NRE Current Account?
• As per current guidelines, funds in NRE Current Account are exempted from income tax
in India.
h) Can I transfer funds between NRE Current Accounts?
• Yes. Transfer of funds from NRE Current Accounts is allowed for bonafide personal
purposes such as personal expenses, education of children, and gifts.
i) If I am visiting India, can I use Travellers Cheques or foreign currency to open an account or
credit my existing NRE Current Account?
• Travellers Cheques can be used to credit/open the account. If the foreign currency notes
brought by you exceed USD 5,000/- or the combined value of Travellers Cheques and
notes exceed USD 10,000/-, then you have to submit a Currency Declaration Form
(CDF) to the customs authorities on arrival in India. You must produce the CDF for
endorsement by the Bank when you submit the money for opening/credit to an Account.
j) Can I appoint a mandate holder for my NRE Current Account?
• Yes. You can appoint a mandate holder for NRE Current Account. You can also choose
to provide the mandate holder with an ATM Card.
k) What are the payment services available for my NRE Current Account?
• With Bank's advanced Payment Services, you can bid goodbye to queues and paper
work. Our range of payment options makes it easy for you to pay for a variety of utilities
and services.
l) How do I access my NRE Current Account while I am abroad?
• You can access your NRE Current/Savings Account through NetBanking and
PhoneBanking.
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26. 6. NRO Current Account
Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, Telegraphic
o
Transfers and Cheque / Draft
o Deposit your Rupee earnings in the non-interest bearing Rupee account
o Open an account jointly with an Indian resident
o Utilise account balance for repatriable investments as well as local payments in
India
o Operate your account, anywhere, anytime with convenient banking channels
• Transferring money to and from your account
To deposit money in your NRO Current Account, you can:
Transfer funds from abroad in a freely convertible foreign currency These are
o
foreign currencies that can be exchanged easily with other currencies and are
recognised by the international market.
o Present foreign currency notes / travellers cheques brought in by you or another
NRI during a visit to India
o Directly remit the amount to us
o Transfer funds from an existing NRE/FCNR Account held in other banks
o Make local payments in India
• Documents required
o Photocopy of the pages of the passport containing passport details and personal
details of all applicants
o Copy of valid visa / work permit
o One passport photograph of each applicant
o One document confirming either the overseas or Indian address. The address on
the document has to match the address mentioned in the application form.
Incase, you cannot go to bank branch for account opening and you reside in a non FATF
country, all photocopies of the above documents to be attested by Indian Embassy or by
a Notary.
In case, you cannot go to any bank branch for account opening and you reside in a
FATF country, then either all photocopies of the above documents to be attested by an
Indian Embassy or Notary or by a Banker overseas. If the documents are not certified
then all documents need to be self signed and submitted along with one additional
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27. document required by the bank.
• Eligibility
o You are eligible if you are a non-resident individual of Indian nationality or of
Indian origin.
Upon change of your status from NRI to RI, you need to inform the bank immediately.
o NRO account can be held in Rupees only
o NRO accounts can be held jointly with Residents
o In case of change of status from Resident to Non-Resident, the existing Resident
Account has to be designated as an NRO Account
• FAQs
a) In what currency is my NRO Current Account maintained?
Your NRO Current Account is maintained in Indian Rupees.
b) What is the minimum amount with which I can open an NRO Current Account?
The minimum amount required to open an NRO Current Account is INR 5,000- 25,000 or
its equivalent in foreign currency. You would be required to maintain an Average
Quarterly Balance of INR 5,000- 25,000/- only. (minimum balance requirements varies
from banks to bank)
c) What is the frequency of interest payment on my NRO Current Account?
No interest is payable.
d) What do I get against my NRO Current Account?
You will get a cheque book and an ATM Card against your NRO Current Account
e) What are the permissible debits/credits to the NRO Current Account?
There are no restrictions on the debits from NRO Current Account. Credit of funds
representing legitimate dues of the account holder from local sources for e.g. current
income in India like rent, etc. and proceeds of remittances received from abroad through
normal banking channels can be freely credited.
f) Can I repatriate funds in my NRO Current Account?
You can repatriate up to USD 1 million, for bonafide purposes, per calendar year from
balances in NRO Accounts subject to payment of applicable taxes. The limit of USD 1
million per year includes sale proceeds of immovable properties held by NRIs/PIO
(Person of Indian Origin) remittance can be made if the sale proceeds have been held
by the NRI/PIO for the balance period in eligible investments. (more details about the
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28. repatriation of money abroad is provided in the later part of this guide)
g) Can I have joint applicant for my NRO Current Account?
Yes. You can hold the account jointly with Resident or Non-Resident Indian(s).
Alternately, you can authorise an Indian Resident to operate your account by submitting
a mandate letter.
h) If I am visiting India, can I use Travellers Cheques or foreign currency to open an account or
credit my existing NRO Current Account?
Travellers Cheques can be used to credit/open the Account. If the foreign currency notes
brought by you exceed USD 5,000/- or the combined value of Travellers Cheques and
notes exceed USD 10,000/-, then you have to submit a Currency Declaration Form
(CDF) to the customs authorities on arrival in India. You must produce the CDF for
endorsement by the bank when you submit the money for opening/credit to an account.
i) How do I access my NRO Current Account while I am abroad?
You can access your NRO Savings Account through NetBanking and PhoneBanking
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29. 7. Resident Foreign Currency Accounts (RFS Accounts)
A scheme known as 'Resident Foreign Currency Accounts (RFC accounts) Scheme' has
been drawn up by Reserve Bank in pursuance of Government of India Notification No.
F.10/22/90/NRI Cell dated 17th July 1992 and Reserve Bank Notifications Nos.
FERA.116, 117 and 118 /92-RB dated 7th September 1992 to enable eligible returning
Indians to open and maintain foreign currency accounts with authorised dealers in India.
Reserve Bank has also granted exemption from the prohibition imposed under Section
24 of FERA 1973 in respect of gift of foreign exchange held in India/abroad or of any
property held abroad in certain cases referred to in its Notification No. FERA 165/95-RB
dated 28th April 1995.
Opening of RFC Accounts
(ii) RFC accounts may be maintained in the form of current, savings (without cheque
facility) or term deposit accounts and held singly or jointly only in the names of
eligible persons
Note A -Persons who returned to India prior to 18th April 1992 after having been
resident outside India for a continuous period of not less than one year are also
eligible to open RFC accounts if (a) they are holding valid specific
permission/licence from Reserve Bank as on 17th July 1992 to maintain foreign
accounts or to hold other foreign currency assets abroad or (b) they are in receipt of
pension or other monetary benefits from their overseas employers subsequent to
their return to India even if they did not maintain foreign currency accounts or hold
other foreign currency assets abroad
Note B - Persons holding RIFEE permits or Reconversion facility have been given
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30. option to continue those facilities or avail of RFC account facility (cf. paragraph
12.13). These options can be exercised at one stroke or in part amounts during the
validity period of RIFEE permit or Reconversion facility. Accordingly, holders of
RIFEE permit or Reconversion facility are also eligible to open RFC accounts
Under the scheme, persons of Indian nationality or origin, who, having been resident
outside Inida for a continuous period of not less than one year, have become
persons resident in India on or after 18th April 1992 are eligible to open and
maintain the accounts with authorised dealers in India in any freely convertible
foreign currency. Authorised dealers may, on receipt of an application in form RFC,
open RFC accounts in the names of eligible persons. Persons who returned to India
after a short assignment of less than one year abroad desiring to have RFC
accounts should apply through authorised dealers to Reserve Bank in form RFC.
RFC accounts opened with the specific approval of Reserve Bank will be governed
by the conditions stipulated by Reserve Bank while granting such approval.
Note: For arriving at the period of continuous stay abroad of not less than one year,
short visits to India on personal grounds like meeting family members/relatives or on
health grounds which do not indicate the person's intention to stay in India for an
indefinite period may be ignored.
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31. Explanation: For the purpose of this Scheme -
A person (not being a citizen of Pakistan or Bangladesh) shall be deemed to be of Indian origin, if,
i) he at any time held an Indian passport,
or
ii) he or either of his parents or any of his grand parents was a citizen of India by virtue of
the Constitution of India or the Citizenship Act, 1955 (57 of 1955),
or
iii)
that person is the spouse of an Indian citizen or of a person of Indian origin (not being
a citizen of Pakistan or Bangladesh).
Eligible Assets
Assets acquired or held otherwise than in contravention of the Act by an eligible person ,while he
was resident outside India(non-resident), in the form of deposits in banks outside India,
investments in foreign currency shares or securities or immovable properties situated outside
India or investments in business etc. outside India and include foreign exchange earnings through
employment, business or vocation outside India taken up or commenced by such person while he
was resident outside India.
Credits
Undernoted credit transactions may be allowed in RFC Accounts by authorised dealers.
(a) Remittance in convertible foreign currency from outside India through normal banking
channels representing
i) Funds in bank accounts outside India forming part of eligible assets held by
the eligible person.
ii) Income such as dividend, interest, profit, rent, etc. earned on eligible assets
held by the eligible person.
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32. iii) Sale proceeds of eligible assets.
(b) Pension or other monetary benefits received from outside India in convertible foreign
currency, through normal banking channels, arising out of employment taken up
outside India by the eligible person prior to his returning to India.
(c) Interest earned on RFC account.
(d) Foreign currency notes/travellers cheques brought into India by the eligible person,
provided that where the amount tendered exceeds US$ 10,000 or its equivalent
where the value of foreign currency/bank notes exceeds US$ 2500 or its equivalent
they have been declared on the Currency Declaration Form (CDF) (cf. papragraph
7D.5).
(e) Transfers from other RFC accounts of the account holder.
(f) Balances in any NRE/FCNR Account (other than in NRE rupee accounts of persons
resident in the erstwhile Bilateral Group countries which have been funded in non
convertible rupees) in the name of the eligible person standing to his credit at the time
of his arrival in India. No penalty would be payable for premature withdrawal of
NRE/FCNR deposits in such cases.
(g) Unutilised entitlement under any valid RIFEE permit or Reconversion facility granted
by Reserve Bank
(h) Unspent foreign exchange surrendered by the RFC accountholders provided
authorised dealer is satisfied that the concerned foreign exchange/currency had in fact
been released for travel etc. abroad by debit to the same RFC accounts and the
amount of foreign exchange/currency is surrendered within the stipulated period as
required under the Exchange Control regulations.
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33. Debits
(i) The funds in the RFC account may be allowed to be freely utilised by the
account
holder for any bona fide remittance outside India through normal banking channels including for
investments abroad provided the cost of such investments and/or any subsequent payments
required therefor are met out of RFC account.
(ii) Withdrawals/payments from such accounts, other than for remittances outside India,
or
for payments in foreign currency authorised to be made in India by Reserve Bank, shall be
permitted by the authorised dealer only in equivalent Indian rupees.
Rate of Interest
Rate of interest payable on the funds held in RFC accounts may be decided by authorised dealers
on the basis of market rates. No interest shall be payable on balances held in the form of current
accounts.
Nomination Facility
(i) RFC accounts shall have the nomination facility as in the case of resident rupee
accounts.
(ii) On the death of a RFC account holder, the balance in the account may be repatriated
to
nominees to the extent of his/their entitlement, if on the date of death of the account holder such
nominees are resident outside India. To the extent any nominee is a person resident in India on
the date of the death of account holder, the amount may be paid to him in equivalent Indian
rupees.
Reserve Requirements
Funds held in RFC accounts are exempt from CRR/SLR requirements.
Loans/Overdrafts against the Deposits
No loan/overdraft shall be granted by authorised dealers against balances in RFC
accounts.
Transfer of Balances on becoming Non-resident -
Funds held in RFC account may be freely remitted abroad or credited to fresh NRE/FCNR
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34. • 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.
If the individual subsequently goes abroad to become an NRI, the balance in the RFC account
can be converted to NRE/FCNR account. Interest income from RFC is exempt from income-tax
till such time the Returning Indian maintain the status of Resident but Not Ordinarily Resident
(NOR). Hence, if the Returning NRI had been non-resident for a continuous period of 2 years,
he gets exemption from income-tax for subsequent 9 years.
Interest income on RFC deposits is taxable when the NRI loses RNOR (resident not ordinarily
resident) status and becomes an ordinary resident. The balances in NRE or FCNR account can
be credited to RFC Account on the change of the status of the NRE or FCNR Account holder
from a Non-Resident to a Resident. Under the current FEMA regulations the Non-Resident
Indian is not required to satisfy a minimum period of stay of one year. A person can maintain an
RFC Account, once he becomes a resident for any length of time as long as he remains to be a
resident. If his status changes once again from Resident to Non-Resident, the funds held in
RFC account are allowed to be freely remitted abroad or credited to fresh NRE or FCNR
account. However the current regulation under FEMA is silent about the above provision.
The treatment of deducting tax at source on interest on RFC Account is similar to Domestic
Term Deposits. However it is possible for a person, whose status under the Income Tax
Provision is Resident but not Ordinarily Resident to claim that the interest on Term deposits is
not liable to tax under the provisions of Section 10 of the Income Tax Act, 1961. The individual
should furnish Form 15AA if he does not require the bank to deduct tax at source.
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35. 8. 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 is repatriated to India through normal banking
channels within a period of one month from the date of closure of the exhibition/trade
fair.
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36. CHAPTER 3
Facilities available to NRIs/PIO
What are the facilities available to NRIs/PIO?
1. Investment facilities for NRIs
As a resident, you made some investments and redeemed them after becoming an NRI, these
will be treated differently. For instance, NRIs cannot extend the tenure of their PPF account.
Capital gains long-term or short-term-will be applicable when you redeem/sell your past
investments. If you sell shares that are listed on a recognized stock exchange in India after
holding them for more than a year, you will not have to pay tax on the capital gain provided the
securities transaction tax has been paid. If NRI wish to buy/sell shares on Indian Stock Market,
they need to open a special account called PIS.. NRIs can open PIS account both repatriation
(NRE) and non-repatriation basis. But capital gain tax will be deducted at source for all sell
transactions (this TDS is not applicable for resident share trading account) They are not allowed
to trade in ordinary resident share trading/depository account. NRIs are also not allowed to
open Commodity Trading account. But they can buy commodities through ETFs (Exchange
Traded Funds). NRIs are also allowed to invest in Tax Free Bonds.
2. NRIs are allowed, 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.
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37. 3. NRIs are allowed , 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.
4. An individual resident can borrow money from his close relatives outside India
An individual resident can borrow sum not exceeding USD 250,000
or its equivalent from his close relatives 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
account of the NRI.
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38. 5. 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.
RBI/2011-12/465
A. P. (DIR Series) Circular No.95
March 21, 2012
To
All Category-I Authorised Dealer Banks and Authorised banks
Madam / Sir,
Foreign Exchange Management (Deposit) Regulations, 2000 - Credit to Non Resident (External)
Rupee Accounts
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulation 5(6)
of ForeignExchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000
notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000, as amended from time to time, in
terms of which, an individual resident in India may borrow a sum not exceeding USD 250,000/- or its
equivalent from her / his close relatives outside India, subject to the conditions mentioned therein.
2. The Reserve Bank has received representations that the repayment of such loans may be allowed to
be credited to the Non Resident (External) Rupee (NRE) Accounts. On review, it has been decided that
AD Category-I banks may allow repayment of such loans to NRE / Foreign Currency Non-Resident
(Bank) [FCNR(B)] account of the lender concerned subject to the condition that the loan to the resident
individual was extended by way of inward remittance in foreign exchange through normal banking
channels or by debit to the NRE / FCNR(B) account of the lender and the lender is eligible to open NRE /
FCNR(B) account within meaning of the Foreign Exchange Management (Deposit) Regulations, 2000
notified vide Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time. Such
credit shall be treated as an eligible credit to the NRE / FCNR(B) account in terms of Para 3(j) of
Schedule-1 read with Para 5 of Scheule-2 of Notification No. FEMA 5/2000-RB, ibid.
3. Authorized Dealer banks may please bring the contents of this circular to the notice of their
constituents concerned.
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39. 4. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if
any, required under any other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager-in-Charge
6. Facilities to returning NRIs/PIO
• Returning NRIs/PIO 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
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40. CHAPTER 4
Investment Options not permitted for NRIs
NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).
The following investments options are not available to NRIs
a) PPF (Public Provident Fund)
b) NSC (National Savings Certificate) – 5 years and 10 years
c) Senior citizens savings account
d) Tax saving infrastructure bonds under section 80CCF
e) Post office time deposits are not available for NRIs.
NRIs are not allowed to invest in Public Provident Fund (PPF) and the Senior Citizens Savings
Scheme and Post Office Small Savings Schemes. If and when the accounts office comes to
know of the anomaly, the deposit will be returned to the investor, without any interest.
As per rules NRIs are not allowed to open Savings, Recurring Deposit, Term Deposit and
Monthly Income Scheme accounts or purchase of National Saving Certificates issued by Post
Offices. The accounts opened prior to this date are allowed to continue up to their maturity. As
and when the irregularity comes to the notice of the authorities, the money will be returned to
you without any interest. Those NRIs who have opened such accounts will do well by
withdrawing the investment themselves or face the consequence of the violation of the rules.
Those small savings accounts like MIS,NSC etc already opened can be continued till maturity.
When an Indian Resident goes abroad, there is no other choice other than leaves most of
his/her investments either financial or non-financial assets like property in India itself. These
investments may include the above mentioned prohibited investments in like PPF, NSC, Post
Office MIS and other small savings deposits etc. A resident Indian who subsequently becomes
NRI during the currency of term of these investments may continue the same till maturity. This
means, they are not allowed to open a new account or extend the scheme beyond its maturity.
However, an already existing investment may be continued. For those instruments that require
periodic investments like PPF, the NRI may use either the NRE or the NRO as per his
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41. convenience for further investments, it is better to use the NRO account. The ex-minor can take
over the operations of the PPF account by registering his signature at the accounts office. The
guardian will have to attest the signature of the ex-minor. The PPF maturity proceeds belong to
the minor (or the minor holder who has turned major). The guardian has no right to the same.
. Foreign Exchange Management Act
Restriction for NRI's for opening an account in PPF scheme,
post office saving bank and purchase National Saving Certificates.
July 25, 2003
PUBLIC PROVIDENT FUND (AMENDMENT) SCHEME, 2003
Notification No. G.S.R. 585(E), dated 25-7-2003
In exercise of the powers conferred by sub-section (4) Section 3 of the Public Provident Fund
Act, 1968 (23 of 1968), the Central Government hereby makes the following further amendment
to the Public Provident Fund Scheme, 1968, namely :—
1. (1) This Scheme may be called the Public Provident Fund (Amendment) Scheme, 2003.
(2) It shall come into force on the date of its publication in the Official Gazette.
2. In the Public Provident Fund Scheme, 1968, in paragraph 3, after sub-paragraph (2), the
following sub-paragraph shall be inserted, namely:—
“(3) Non-Resident Indians (NRIs) are not eligible to open an account under the Public
Provident Fund Scheme:
Provided that if a resident who subsequently becomes NRI during the currency of maturity
period prescribed under Public Provident Fund Scheme, may continue to subscribe to the Fund
till its maturity on a non-repatriation basis.”
Post Office Savings Bank General (Amendment) Rules, 2003
Notification No. G.S.R. 586(E), dated 25-7-2003
In exercise of the powers conferred by section 15 of the Government Savings Banks Act, 1873
(5 of 1873), the Central Government hereby makes the following rules further to amend the Post
Office Savings Bank General Rules, 1981, namely :—
1. (1) These rules may be called the Post Office Savings Bank General (Amendment) Rules,
2003.
(2) They shall come into force on the date of their publication in Official Gazette.
2. In the Post Office Savings Bank General Rules, 1981, —
(i) rule 3 shall be re-numbered as sub-rule (1);
(ii) after sub-rule (1) as so re-numbered, the following sub-rule shall be inserted, namely:—
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42. “(2) Non-Resident Indians (NRIs) are not eligible to open an account in a Post Office Savings
Bank:
Provided that if a resident who opened an account in any Post Office Savings Bank,
subsequently becomes Non-Resident Indian during the currency of maturity period, may
continue such account till its maturity on a Non-Repatriation Basis”.
National Savings Certificates (VIII Issue) (Third Amendment) Rules, 2003
Notification No. G.S.R. 591(E), dated 25-7-2003
In exercise of the powers conferred by section 12 of the Government Savings Certificates Act,
1959 (46 of 1959), the Central Government hereby makes the following rules further to amend
the National Savings Certificates (VIII Issue) Rules, 1989, namely :—
1. (1) These rules may be called the National Savings Certificates (VIII Issue) (Third
Amendment) Rules, 2003.
(2) They shall come into force on the date of their publication in Official Gazette.
2. In the National Savings Certificates (VIII Issue) Rules, 1989, in rule 4, after sub-rule (2), the
following sub-rule shall be inserted, namely :—
“(3) Non-Resident Indians (NRIs) are not eligible to purchase the National Savings Certificates :
Provided that if a resident who subsequently becomes NRI during the currency of maturity
period, shall be allowed to avail the benefits of the certificates on maturity on a non-repatriation
basis.”
Kisan Vikas Patra (Second Amendment) Rules, 2003
Notification No. G.S.R. 592(E), dated 25-7-2003
In exercise of the powers conferred by section 12 of the Government Savings Certificates Act,
1959 (46 of 1959), the Central Government hereby makes the following rules further to amend
the Kisan Vikas Patra Rules, 1988, namely :—
1. (1) These rules may be called the Kisan Vikas Patra (Second Amendment) Rules, 2003.
(2) They shall come into force on the date of their publication in Official Gazette.
2. In the Kisan Vikas Patra Rules, 1988, in rule 6, after sub-rule (2), the following sub-rule shall
be inserted, namely :—
“(3) Non-Resident Indians (NRIs) are not eligible to purchase the Kisan Vikas Patras :
Provided that if a resident who subsequently becomes NRI during the
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43. CHAPTER 5
NRI’s Investment in immovable Properties
Investment in immovable Property
• NRI / PIO / Foreign National who is a person resident in India (citizen of Pakistan,
Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior
approval of the Reserve Bank) may acquire immovable property in India other than
agricultural land/ plantation property or a farm house out of repatriable and / or non-
repatriable funds.
• 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:
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44. 7. 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.
8. 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.
9. In the event of sale of immovable property, other than agricultural land / farm house /
plantation property in India, by NRI / PIO, the repatriation of sale proceeds is restricted
to not more than two residential properties subject to certain conditions.
10. 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.
11. 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.
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45. CHAPTER 6
NRI Taxation
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46. 1. Expatriates Working Abroad – Tax Provisions
The tax liability related to expatriates working outside the
India would be determined based on their residential status. The following are the
main categories of Non-Resident Indians as per Income Tax Act, 1961
1) Non-Resident Indian (NRI)
a) He/She is not in India for 182 days or more during the relevant previous year
b) He/She india for 60 days or more during the previous year and he/she is not
in India for 365 days or more during the 4 years prior to the previous year
c) In the case of an individual on visit to India or a member of the crew of an
Indian ship or a person leaving India for employment outside India, the
requirement of stay in India of 60 days in condition 2 above is extended to
182 days.
2) Resident but not Ordinarily Resident (RNOR)
A NRI who has returned to India for good is covered under the provisions of section
6(6) of the Income-tax Act. He is given a special status of RESIDENT BUT NOT
ORDINARILY RESIDENT (RNOR) if he satisfies one of the following conditions:
a) He is not a resident, as per the above provisions, for at least 9 out of 10
previous years prior to the previous year under consideration.
b) His stay in India during the 7 previous year prior to the previous year under
consideration should not be 730 days or more
Tax Liabilities Thus according to condition in clause (a) a new comer to India would remain
‘not ordinarily resident’ in India for the first 9 years of his stay in India. Similarly, in case
where a person who is resident in India goes abroad and ceases to be a resident in India for
atleast 2 years, he shall, on his return, be treated as not ordinarily resident for the next 9
years. ies of each category of Individuals
Based on the residential status of payer, his/her tax liability will be as follows:-
a) Resident - All income of the previous year wherever accruing or arising or received by
him including incomes deemed to have accrued or arisen.
b) Non-Resident Indian - All income accruing, arising to or deemed to have accrued or
arisen or received in India.
c) Resident but not Ordinary Resident - All Income accruing or arising or deemed to have
accrued or arisen or received in India. Moreover, all income earned outside India will
also be included if the same is derived from a business or profession controlled or set up
in India.
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47. The residential status of a person as refered in Sec. 2(31) of the Act. for each
assessment year under consideration to determine the scope of total income.
Importance
• Total income of an assessee cannot be determined without knowing his residential
status.
• The residential status shall be determined for every person for each previous year
independently.
• The onus of responsibility to prove the residential status is on the assessee.
2. Income Tax Rates proposed in Union Budget 2012 for the financial
year 2012-2013
The basic income tax exemption limit has been increased to Rs. 200,000 from Rs. 180,000.00.
As per the present exemption limit the tax applicable from FY 2012-13 is given below
The rates of Basic Tax, Education Cess and Higher Secondary Education Cess have been
kept unalteredfor all assesses total 3%
Up to Rs 200,000 : NIL (for FY 2011-12 Rs 180,000)
Rs 200,000-500,000: 10%
Rs 500,000-1,000,000 20% (for FY 2011-2012 Rs 500,000-800,000)
Above Rs 1,000,000.00: 30% (FY 2011-12 above Rs. 800,000)
As a result of increasing the basic exemption limit, for NRIs as well as for all resident Indians,
the tax liability will come down and tax reduction of up to Rs 22,000 is likely on income of Rs
1,000,000.00
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48. Proposed basic exemption and
Existing basic exemption and
Assessee Income Slabs (FY 2011-12) Income Slabs (YF 2012-2013)
Total Income Tax Rate Total Income Tax Rate
uptoRs.1,80,000/- Nil uptoRs.2,00,000/- Nil
10% of income 10% of income
Rs.1,80,001/- above Rs.2,00,001/- above
toRs.5,00,000/- Rs.1,80,000/- toRs.5,00,000/- Rs.2,00,000/-
Rs.32,000/- Rs.30,000/- plus
plus 20% of 20% of income
Rs.5,00,001/- income above Rs.5,00,001/- above
toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/-
All
Individuals, Rs.1,30,000/- plus
HUF, AOP Rs.92,000/- 30% of income
and BOI plus 30% of above
(except those income above Rs.10,00,000/-
stated below) AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/-
uptoRs.1,90,000/- Nil uptoRs.2,00,000/- Nil
10% of income 10% of income
Rs.1,90,001/- above Rs.2,00,001/- above
toRs.5,00,000/- Rs.1,90,000/- toRs.5,00,000/- Rs.2,00,000/-
Rs.31,000/- Rs.30,000/- plus
plus 20% of 20% of income
Individuals, Rs.5,00,001/- income above Rs.5,00,001/- above
being toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/-
resident Rs.91,000/- Rs.1,30,000/- plus
woman, upto plus 30% of 30% of income
the age of 60 income above above
years AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/-
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49. uptoRs.2,50,000/- Nil uptoRs.2,50,000/- Nil
10% of income 10% of income
Rs.2,50,001/- above Rs.2,50,001/- above
Individuals, toRs.5,00,000/- Rs.2,50,000/- toRs.5,00,000/- Rs.2,50,000/-
being Rs.25,000/- Rs.25,000/- plus
resident, and plus 20% of 20% of income
‘Senior Rs.5,00,001/- income above Rs.5,00,001/- above
Citizen’ (i.e. toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/-
above 60 Rs.85,000/- Rs.1,25,000/- plus
years) upto plus 30% of 30% of income
the age of 80 income above above
years AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/-
uptoRs.5,00,000/- Nil uptoRs.5,00,000/- Nil
Individuals, 20% of income 20% of income
being Rs.5,00,001/- above Rs.5,00,001/- above
resident, and toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/-
‘ Very Senior Rs.60,000/- Rs.1,00,000/- plus
Citizen’ i.e. of plus 30% of 30% of income
age 80 years income above above
and above AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/-
For assessment year 2012-13, additional surcharge called the “Education Cess on income-tax” and
“Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two per
cent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases.
No marginal relief shall be available in respect of such Cess.
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50. 3. Particulars of Income Tax Incidence for various tax status
Resident
but not
ordinarily Non-
Particulars of Income Tax incidence in case of Resident resident Resident
a. Income received in India whether accrued in India or
outside India YES YES YES
b. Income deemed to be received in India whether accrued in
India or outside India YES YES YES
c. Income accruing or arising in India whether received in
India or outside India. YES YES YES
d. Income deemed to accrue or arise in India, whether
received in India or outside India. YES YES YES
e. Income received and accrued outside India from a business
controlled in profession set up in India YES YES NO
f. Income received and accrued outside India from a business
controlled from outside India or profession set up outside
India. YES NO NO
g. Income earned and received outside India but later on
remitted to India. NO NO NO
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51. 4 Tax Exemptions from Income Tax available for NRIs
Income from the following investments made by NRIs/PIOs out of convertible foreign exchange
is totally exempt from tax:
(a) Deposits in under mentioned bank accounts
(i) Non Resident External Rupee Account (NRE)
(ii) Foreign Currency Non Resident Account (FCNR)
(b) Units of specified mutual funds, other specific securities, bonds and savings
certificates (subject to conditions prescribed under the Income-tax laws and regulations).
(c) Dividend declared by Indian company.
(d) Long term capital gains arising from transfer of equity shares in a company and/or equity
oriented schemes of Mutual Funds, which are subject to Securities Transaction Tax.
It should be noted that the tax exemptions relating to NRE bank deposits will cease immediately
upon the NRI/PIO becoming a resident in India whereas the interest on FCNR bank deposits will
continue to be tax free as long as the NRI maintains the status of Resident but Not Ordinarily
Resident or until maturity,
5.Other Tax Aspects related to NRIs
A person who is non-resident is liable to tax on that income only which is earned by him in India.
Income is earned in India if
1. It is directly or indirectly received in India; or
2. It accrues in India or the law construes it as having accrued in India..
The following are some of the instances when the law construes and income to have accrued in
India:
1) income from property if such property is situated in India;
2) income from any asset or source if such asset or source is in India;
3) income from salaries if the services are rendered in India. In such cases salary for rest
period or leave period will be regarded as earned in India if it forms part of service
contract,.
4) income from salaries payable by the Government to a citizen of India even though the
services are rendered outside India;
5) income from dividend paid by an Indian company even if the same is paid outside
India;
6) income by way of interest payable by Government or by any other person in certain
circumstances ;
7) income by way of Royalty if payable by the Government or by any other person in
certain circumstances;
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