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1 | P a g eNRI GUIDE 2013(Ver 3.00)(A Comprehensive Guide for Indians residing outside India)Prepared byPrakash NairPrakas...
2 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mAll your Financial Planning a...
3 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mPREFACEThis Free NRI guide ha...
4 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mINDEXSlNos Chapters and conte...
5 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER - 4Investment Options...
6 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m12d Service Tax applicable to...
7 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m1 Double Taxation in India - ...
8 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m18Please note that the long-t...
9 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mGeneral Tax Deduction availab...
10 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER 19State Governments ...
11 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m2 Key Changes in KYC Norms3 ...
12 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m8 Duty free allowances and e...
13 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mPerson of India Origin (PIO)...
14 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER -371 Inheritance Cer...
15 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mWhat is Consumer Court 487-4...
16 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mImpact of proposed Direct Ta...
17 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mAbbreviationsAD - Authorized...
18 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mMCA - Ministry of Corporate ...
19 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER – 1Residential Statu...
20 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m4. Resident and ordinarily r...
21 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mensure to monitor carefully ...
22 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mfrom abroad. Also, you shoul...
23 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m8.10 Safe Custody Locker - O...
24 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER 2Various Types of Ba...
25 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m1. Types of accounts which c...
26 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m Loans to non-resident acco...
27 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m (b) Opening of accounts by...
28 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mindividual. The loan amount ...
29 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mundertaking by the remitter ...
30 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m (iii) The usual norms and ...
31 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m The amount due/payable to ...
32 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mParticulars of statement Per...
33 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m Authorised Dealer banks ma...
34 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m13. A.P. (DIR Series) Circul...
35 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mFRRO concerned and the Compl...
36 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mRupee (NRE) Deposit accounts...
37 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m4. Foreign Currency Non Resi...
38 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o msubject to a penal interest ...
39 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mand/or local resources. Bank...
40 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mNetBankingo To deposit mone...
41 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mequivalent in foreign curren...
42 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m6. NRO Current Accounto Remi...
43 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mo NRO account can be held in...
44 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mby you exceed USD 5,000/- or...
45 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o maccounts or hold other forei...
46 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mExplanation: For the purpose...
47 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m(b) Pension or other monetar...
48 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m The funds in RFC accounts ...
49 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m RFC accounts can be mainta...
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This Free NRI guide has been compiled with the help of information available on 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 and tax 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.

Transcript of "NRI Guide 2013 Ver 3.00"

  1. 1. 1 | P a g eNRI GUIDE 2013(Ver 3.00)(A Comprehensive Guide for Indians residing outside India)Prepared byPrakash NairPrakash@yourownadviser.comwww.yourownadviser.comJoin Kerala Syndicate Social Network Group http://groups.google.com/group/kerala-syndicate/Follow me on Face book https://www.facebook.com/YourownadviserWebsite: www.yourownadviser.com
  2. 2. 2 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mAll your Financial Planning and Investment advisory needs visit www.yourownadviser.com
  3. 3. 3 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mPREFACEThis Free NRI guide has been compiled with the help of information available on official website ofvarious government departments like Reserve Bank of India, Income Tax Department, various StateGovernments, Department of Oversea Affairs, Ministry of Home Affairs, SEBI, and other reliable websitesources. I have taken adequate care to provide current and authentic information. This NRI Guide isintended to serve as a ready reference book to guide NRIs on various matters affecting their financialand other related subjects. This does not purport to be a legal document. So I am not sure that, anyerrors occurred while compiling this reference guide. In case of any variation between what has beenstated in this NRI Guide and the relevant Act, Rules, Regulations, Policy Statements, GovernmentOrders/Circulars etc., the latter shall prevail. Kindly note that, rules related to NRIs and tax are subject tochange. Errors and omissions are expected.This free e-book is circulated with the understanding that, neither the author nor the publisher will beresponsible for any action taken on the basis of contents of this book whether directly or indirectly for anyerror or omission to any person whether a user of this e-book or not. The persons willing to accept thisdisclaimer only required to read this e-book.Prakash Nair Prakash@yourownadviser.com www.yourownadviser.comDate: 25-May-2013The greatest reward the author can get the feedback good or bad from the readers. Any suggestions forimprovement are most welcome. In case I missed some important information or provided wronginformation, please let me know.Your suggestions, comments, criticism may send to Prakash@yourownadviser.com orpnair1966@yahoo.com The decision whether to reply to any query or not lies with the AuthorTo receive regular update on NRI related matters, please send a request and register your e-mailid
  4. 4. 4 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mINDEXSlNos Chapters and contents Page NosAbbreviations 17-18CHAPTER - 1Residential Status1 A Non Resident Indian (NRI) 19-232 A Person of Indian Origin (PIO)3 How to Determine the Residential Status of an Indiviudal4 Resident and ordinarily resident- ROR5 Importance of Residential Status6 What is India DIASPORA7 Residential Status Changes from Resident to Non-Resident (Tax, Social Security etc)8 List of itmes to be completed before becoming an NRICHAPTER - 2Various Types of Bank Accounts - NRIs are permitted to open 24-511 Various Types of Bank Account - NRIs are permitted to Open2 Non-Resident Ordinary/ Rupee Account (NRO Account)2.1 RBI Master Circular No. 2/2012-13 related to NRO Account2.2 RBI Circular - Condtions for Opening NRO Account by Banglades Nationality3 Non-Resident (External) Rupee Account (NRE Account)4 Foreign Currency Non Resident (Bank) Account – FCNR (B) Account5 NRE Current Accounts6 NRO Current Account7 Resident Foreign Currency Accounts (RFS Accounts)8 Foreign Currency AccountCHAPTER -3Facilities Available to NRIs/PIO 52-551 Investment facilities for NRIs2 NRIs are allowed, without limit, purchase on repatriation basis3 NRIs are allowed, without limit, purchase on repatriation basis5 An individual resident can borrow money from his close relatives outside India6Repayment of Housing Loan of NRI / PIOs by close relatives of the borrower in India(RBI Circular)7Foreign Exchange Management (Deposit) Regulations, 2000 - Credit to Non Resident(External) Rupee Accounts Loan given to non-resident
  5. 5. 5 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER - 4Investment Options not Permitted for NRIs 56-591 NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).2 PPF (Public Provident Fund)3 NSC (National Savings Certificate) – 5 years and 10 years4 Senior citizens savings account5 Tax saving infrastructure bonds under section 80CCF6 Post office time deposits are not available for NRIs.8 Restritctions of Investments by NRIs/PIOs residing in US and Canada9 FEMA Circular related to restircation for NRIs for Opening Small Savings AccountsCHAPTER - 5NRIs Investments in Immoveable Properties 60-701 Investment in immovable Property2 NRI investment norms in real estate eased3RBI Circular - Acquisition & Transfer of Immovable Property in India byNRIs/PIOs/Foreign Nationals of Non-Indian Origin4 Press Release Ministry of Finance - Acquiring land by NRIsCHAPTER - 6NRI Taxation 71-891 Expatriates Working Abroad – Tax Provisions1 a-b Residential Status for Taxation purposes2 Income Tax Rates proposed in Union Budget 2013 for the financial year 2013-20143 Budget – 2103 Income Tax Surcharge Rate Hiked for Higher Income Assessees4 Additional Tax Rebate of Rs. 2,000.00 from Assessment Year 2014-20155 Particulars of Income Tax Incidence for various tax status6 Tax Exemptions from Income Tax available for NRIs7 Other Tax Aspects related to NRIs8 What is tax on NSC Maturity ?9 Special Provisions Relating to Non-Residents10 Income Tax Clearance Certificate11 Tax Exemption Certificate - Lower or Nil Rate of TDS:12 Renting out of Property by an NRI in India12a Remittance of Rent12b Tax treatment of rental income12c Deemed rental income
  6. 6. 6 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m12d Service Tax applicable to renting out of residential properties for commercial use13 Taxability of immovable property received for Inadequate Consideration (Budget 2013)14 NRI and Senior Citizen status for Income Tax calculation purposes15 Tax Liabilities related to NRIs investments made in Joint basis16 Bank Term Deposits - Tax aspects17 Property Rental income – Tax Aspects18 Mutual Fund/Equity Investments – Tax Aspects19 NRI income and Applicability of TDS on the same20 Tax Treatment of overseas Financial Assets.21 Other Tax Aspects related to NRIs including Immovable Properties22 Tax Treatment of selling property abroad23 Tax Treatment of Rental Income Earned Abroad24 Tax Treatment of Dividend on overseas Investments25 One Time Financial Settlement26 Capital Gains – earned abroad27Compulsory filing of Income tax return in relation to assts located outside Indiairrespective of income28 Section 194E of the Act – Tax deduction at source from payment to non-residententertainer, sports person etc29 Tax Treatment of Interest on Bank Deposits3030.Savings bank interest upto Rs. 10,000.00 is exempted from tax (Section 80 TTA ofIT Act)31Deduction of interest paid on more than one loan borrowed for purchase orconstruction of same houseCHAPTER - 7Budget 2013 - Tax Proposals 90-98Finance Bill 2012 - passed by Lok SabhaCHAPTER - 8Tax Deduction at Source (TDS) 99-1031 Interest on Investments2 Capital Gain on Securities (TDS)3 TDS on salary payments to Non Residents & Expatriates4 How NRI can claim TDS exemption5 TDS on Transfer of Immovable Properties except Agricultural Land6 Tax Deducted at Source related to NRIsCHAPTER - 9Double Taxation Avoidance Agreements (DTAA) 104-114
  7. 7. 7 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m1 Double Taxation in India - DTAA2 Capital Gain tax rates under DTAA3 The Countries with which India has DTAA4 How to get relief in case of Double Taxation?5 Where there is an DTAA agreement (Section 90)6 Where there is an NO DTAA agreement (Section 91)7 Misuse of DTAA, Treaty shopping and amendment made by Finance Act 20128 Tax rates applicable in India under DTAA Agreement9 Amendments relating to DTAA provisions (Union Budget 2012)10 Tax Residency Certificate (TRC) for Indian & Non Resident wef 01.04.201311 11.Finance Ministry clarification on tax residency certificateCHAPTER -10Form 15 G and Form 15H 115-116From 15G & Form 15H - NRIs are not eligible to submit these formsCHAPTER -11Capital Gain Tax 117-1311 Capital Asset2 Short Term Capital Gain (STCG)3 Long Term Capital Gain (LTCG)4 Computation of Indexation Benefits5 What is the indexed cost of acquisition?6 Cost Inflation Index Form 1981 to 20137 Capital Gain Exemptions can be availed8 What are the consequences if a new house is transferred within 3 years?9 Exemption available on capital gains that arise from transfer of house property10 How to avoid paying capital gains tax11Exemption of long term capital gains on transfer of residential property if invested inplant machinery through small/medium enterprise, for 5 years (Budget 2012 proposal)12Relief from long-term capital gains tax on transfer of residential property if invested in amanufacturing small or medium enterprise13 Capital Gains Accounts Scheme14 Who are eligible to take the advantage15 List of Banks who can Accept Deposit16 Opening a bank account for Capital Gains Account Scheme-17 Capital Gain treatment of Inherited or gifted properties
  8. 8. 8 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m18Please note that the long-term capital gains earned by you from inherited shares soldon any recognized stock exchange in India by paying the applicable STT are exemptfrom tax providedCHAPTER - 12Wealth Tax Implications of NRIs 132-1361 What are all the assets included for Wealth Tax computation ?2 Assets not included for Wealth Tax computation3 No wealth tax on agriculture land4 How Net Wealth in determinded5 The Method of valuation of Assets6 What are all the exceptions available7 What about NRIs returning to India ?8 How Should NIRs file Wealth Tax Retunrs ?9 E- filing of annexures-less return of Wealth Tax - Budget 2013CHAPTER - 13Guide on filing of Income Tax Return by NRIs 137-1451 Whi is a Non-Resient In India ?2 Whi is liable to file Income Tax Returns3 Are there any exemption from filing tax retuns ?4 What is the deadline for filing Tax Returns ?5 A guide to filing of Income Tax Retunrs online/offline6 Detaisl required before logging into E-filing website7 Steps to file Income Tax Return online8 Benefits of e-filing over paper filing9Exemptions from filing of Income Tax Returns - Salaried Employees income upto fivelash Wh10 Whi cant claim exemption11 IT clarification dated 25/07/2011 - filing of tax returns - salaried employeesCHAPTER - 14Clubbing of Incomes 146-148CHAPTER - 15Tax on Gifts - the facts need to know 149-150CHAPTER -16What is Advance Tax151-153CHAPTER - 17
  9. 9. 9 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mGeneral Tax Deduction available for NRIs 154-1601 NRI Tax-saving tips2 Section 80C of Income Tax Act2.1 Life Insurance and Retirement/Pension Plans2.2 Tax-breaks in respect of Life Insurance Policies2.3 Raising limit of percentage of eligibel premium for Life Insurance Polcies2.4 Investment in House property2.5 ELSS (Tax saving Equity Mutual Fund schemes)3 Section 80D - Health Insurance Premium3.1 NRIs- Deduction U/s 80D premium paid for Mediclaim Policy4 Deductions u/s 80 G5 Deduction under 80E6 Bank Deposits and applicable tax - Sect 80TTA7 Rajiv Gandhi Equity Savings SchemeCHAPTER - 18NRI Welfare Schemes 161-1711 Pravasi Bharatiya Bima Yojana2 Deserted NRI Women Welfare Scheme3 Indian Community Welfare Fund (ICWF)4 Facilitating investment in India5 Know India Program (KIP)6 Scholarship Programme for Diaspora Children7 Migrant Resource Center, Kochi8 NRIs - Facilities for Returning Indians9 Investment facilitation and knowledge networking10 Bilateral Labour Co-operation11 Global Indian Network of Knowledge (Global Ink)12 India Development Foundation of Overseas Indians13 Scholarship Programme for diaspora Children (SPDC)14 Direct Admission to Students Abroad (DASA)15 Reservation for NRIs at Indian educational institutions16 Assistance for problems relating to Overseas Indian Marriages17 Voting Rights to Non-resident Indians18 Double Taxation related maters19 Recruitment of maid for Oman
  10. 10. 10 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER 19State Governments Welfare Schemes 172-1771 Government of Assam2 Government of Bihar3 Government of Gujarat4 Government of Karnataka5 Government of Kerala5.a Pravasi Pension Scheme for Non-Resident Keralites5.b Pravasi Identity Card6 Government of Orissa7 Government of RajasthanCHAPTER 20NRI Investment Options 178-1891 Investments in Shares and Securities listed in Indian Stock Market1.a Portfolio Investment Scheme (PIS) for NRIs1.b IPO Electronic Mode and Electronic Voting1.c Securities Transaction Tax (STT) (2012 Budget proposal)2 NRIs investment in Mutual Funds Schemes3 FDI (Foreign Direct Investment) in Partnership Firm / Proprietary Concern4 Company Fixed Deposit Investments for NRIs5 Non-Banking Financial Company (NBFC) Deposits6 Investment in Commercial Papers (CD) by NRIsCHAPTER 21National Pension System (NPS) - NRIs are eligible to invest 190-197CHAPTER - 22PAN ( Permanent Account Number) 198-2061 NRIs and PAN2 Advantages of Having a PAN3 How to apply for PAN4 New PAN Application From 49A and 49AA w.e.f 01/11/20115 INSTRUCTIONS FOR FILLING FORM 49A6 GENERAL INFORMATION FOR PAN APPLICANTSCHAPTER - 23Know Your Customer (KYC) Requirements 207-2121 Background
  11. 11. 11 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m2 Key Changes in KYC Norms3 Impact on investors4 Who can carry out uniform KYC:5 Impact on current arrangements with CVL:6 Due diligence in the KYC processCHAPTER - 24NRIs Guide to deal the inherited properties 213-2161 Inheriting immoveable properties2 Inheriting Financial Assets and Investments in India3 Remittance Exchange Control Regulations4 Inheritance and Gifting rules in India5 Exclusions to taxing of gifts in the hands of recipient -CHAPTER 25How its useful for NRIs to use Power of Attorney (POA) in India 217-219CHAPTER 26Top 10 Home Buying tips for NRIs 220-224NRIs Tips to buy propertiesCHAPTER - 27Facilities for Returning NRIs 228-228CHAPTER - 28NRIs guide to selling property in India 229-231CHAPTER - 29CUSTOMS AND BAGGAGE RULES REALTED TO INTERNATINAL PASSENGERS 232-2671 Clearance of arriving passengers:2 Green Channel or Walk through Channel3 Red Channel4 Passenger crossing Green Channel with Dutiable Goods5 Clearance of arriving passengers6 Duty free allowances and entitlements for Indian Residents and6.a Duty Free Entitlements6.b Tobacco, Alcoholic liquor6.c Not Allowed Items6.d Applicable Customs Duty6.e 225-2287 Import of jewellery/gold/silver:
  12. 12. 12 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m8 Duty free allowances and entitlements for tourists9 Item Permitted Quantity Present Duty10 Category of Tourist Duty Free Allowance11 Allowances and entitlements on Transfer of Residence (TR):12 Import of baggage of deceased person13 Import of unaccompanied baggage14 Aircraft Crew Members15 Import of foreign exchange/currency16 Import of Indian currency17 Import of fire arms as baggage18 Import of pet animals as baggage19 Detained baggage20 Mishandled baggage21 Clearance of departing passengers22 Export of gold jewellery as baggage23 Export of currency24 International Passenger Facilitation25 Import and Export through Courier26 Categories of goods allowed import through courier:27 Categories of goods allowed export through courier28 Import and export of gems and jewellery29 Import and Export through Post30 Procedure in case of postal exports31 Procedure for claiming Drawback on exports through post32 Drawback in respect of goods re-exported through post:33 Re-export of partial consignmentCHAPTER- 30Baggage Rules at a GlanceCHAPTER - 31All About Indian Passport 268-317CHAPTER - 32Home Loans for NRIs 318-320CHAPTER - 33Overseas Citizenship of India (OCI) 320-329CHAPTER - 34
  13. 13. 13 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mPerson of India Origin (PIO) Scheme 330-332Person of Indian Origin Card (PIO Card)CHAPTER - 35The General Rules the NRIs should know 333-3351 Non-Resident Indian (NRI) Pensioners:2Savings Bank account maintained by residents in India – non-resident close relativeallowed as jointholder A.P. (DIR Series) Circular No.12 dated September 15, 20113Account Scheme (NRE)/ Foreign Currency (Non-Resident) Account (Banks) Scheme(FCNR(B))4 Foreign Investments in India – increase in limit for transfer of security by way of giftA.P. (DIR Series) Circular No.14 dated September 15, 20115 Gift in Rupees by Resident Individuals to NRI close relatives6 Meeting of Medical expenses of NRIs close relatives by Resident Individuals7 FEMA – Repayment of loans of Non-resident close relatives by residents8MASTER CIRCULAR ON ACQUISITION AND TRANSFER OF IMMOVABLEPROPERTY IN INDIA BY NRIs/PIOs/FOREIGN NATIONALS OF NON-INDIANORIGINCHAPTER -36Emigration Clearance – Indian and foreign persons 336-355All About Emigration1 What is Emigration2 Statutory Framework3 Salient Features of the Act4 Instructions for Indian Passengers5 Instruction For Foreigners Coming To India6 Requirements concerning stay of Foreigners in India7 Guidelines for Emigration Clearance System8 Who Needs Emigration Clearance9 Insurance policy- Pravasi Bhartiya Bima Yojana10 ECNR/ECR/POE11 Employment Guidelines for Emigrants12 List of Registered Agents13 Abolition of ECRS14 How can one seek employment abroad15 Guidelines for Departure to a foreign country for employment16 CUSTOMS FORMALITIES
  14. 14. 14 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER -371 Inheritance Certificate 356-3632 International Driving Licence3 International PassportCHAPTER -38Islamic Fund -Sharia Law and Investment Structures 364-366CHAPTER - 39Master Circular on Foreign Investment in India 367-429CHAPTER - 40Forex Facilities for Residents (Individuals) 430-438CHAPTER - 41Air Travel Tips for NRIs 439-443CHAPTER - 42Baggage Insurance Policy 444-4451 Loss of Checked Baggage – Checked Baggage2 Delay of the checked BaggageCHAPTER - 43Different Modes of Money Remittance - NRIs 446-449CHAPTER - 44P Notes (Participatory Notes) and NRIs 450CHAPTER - 45Passive Foreign Investment Company - PFIC 451-452CHAPTER - 46The Foreign Contribution (Regulation Act, 2010) 453-460CHAPTER - 47Will 461-466CHAPTER 48ADMISSION TO UNDERGRADUATE ENGINEERING PROGRAMME 467-470CHAPTER 49Exchange Earners Foreign Currency (EEFC) Account 471-472CHAPTER 50EXIM Policies 473CHAPTER 51Compounding of Contraventions under FEMA, 1999 474-486CHAPTER 52
  15. 15. 15 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mWhat is Consumer Court 487-488CHAPTER 53Duty Free Shops 489-490CHAPTER 54Import of Gold and Silver by NRIs (deleted)CHAPTER 55Acquisition of Indian Citizenship (IC) 491-498CHAPTER 56GENERAL REQUIREMENTS FOR REGISTRATION OF A FOREIGN NATIONAL 499-503CHAPTER 57What is AADHAAR ? 504-508CHAPTER 58PROCEDURE FOR THE ADOPTION OF AN INDIAN CHILD BY A FOREIGNER ORNRI509-511CHAPTER 59Employment Guidelines for Emigrants 512-513CHAPTER 60NRIs properties disputes settlement 514-514CHAPTER 61Right to Information Act 2005 515-518CHAPTER 62NRIs and Financial Planning 519-5371 Ten Tips for a good Financial Planning & Investments2 Why you need an Emergency Saving Fund3 How to plan for your Child’s Higher Education4 Victims of Bad Financial Advises5 Impact of inflation in Retirement Planning6 Why Health Insurance is important7 How to choose the right Life Insurance Policy8 Insurance cover for your bank deposits913 Tips to avoid Investment FraudCHAPTER 63
  16. 16. 16 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mImpact of proposed Direct Tax Code on NRIs 538-5782Non-resident guarantee for non-fund based facilities entered between two residententities - RBI Circular3 Facilities for Persons Resident outside India FIIs -RBI Circular4 Loans to Non-Residents/Third Parties againt Security of NRE Account/FCNR Deposits-RBI Circular5FDI – Allotment of Shares to person resident outside India under MoA of an Indiancompany – Pricing guidelines6 Import of gold in any form including jewellery – FEMA Clarification7Establishment of Liaison Offices (LO) /Branch Offices (BO) / Project Offices (PO) inIndia by Foreign Entities – Reporting8 Import of Pets as Baggage allowed only to persons transferring their residence to India9 Form 15CA,15CB for remittance of payments to non-resident or foreign company10Clarification – Prior intimation to RBI to raise aggregate FII / NRI limits for investmentsunder PMS11 The limit of NRIs Inward Remittance12 Money Transfer Service Scheme – Master Circular No. 1/2012-1313Remittance Facilities for Non-Resident Indians/Persons of India Origin/ForeignNational
  17. 17. 17 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mAbbreviationsAD - Authorized DealerADR- American Depository ReceiptsBPO- Business Process OutsourcingCBDT- Central Board of Direct TaxesCBSE -Central Board of Secondary EducationCII- Confederation of Indian IndustryCOC -Certificate of CoverageDASA- Direct Admission to Students AbroadDIN- Director Identification NumberDIPP -Department of Industrial Policy and PromotionDMRC - Delhi Metro Rail CorporationDP - PartnerDSC - Digital Signature CertificateDTAA - Double Taxation Avoidance AgreementDTC - Direct Taxes CodeECNR - Emigration Check Not RequiredECR- Emigration Check RequiredEdCIL- Education Consultants India LimitedEP -F Employees’ Provident FundESIC- Employees’ State Insurance CorporationESOP - Employees’ Stock Option PlanFCCB- Foreign Currency Convertible BondsFCNR -Foreign Currency (Non Resident) AccountFDI - Foreign Direct InvestmentFEMA - Foreign Exchange Management ActFRRO - Foreigners’ Regional Registration OfficeGDR - Global Depository ReceiptsICWF - Indian Community Welfare FundIIM- Indian Institute of ManagementIIT- Indian Institute of TechnologyIPICOL -Industrial Investment Promotion Corporation of Orissa LimitedISCE - Indian School Certificate ExaminationIT - Information TechnologyITC -Industrial Training CentreITI - Industrial Training InstituteIW - International WorkerJV - Joint VentureKYC - Know Your CustomerLLP - Limited Liability PartnershipLRS- Liberalized Remittance Scheme
  18. 18. 18 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mMCA - Ministry of Corporate AffairsMHA - Ministry of Home AffairsMNC - Multinational CompanyMOIA - Ministry of Overseas Indian AffairsMOU - Memorandum of UnderstandingMRTS - Mass Rapid Transit SystemNCR- National Capital RegionNGO - Non-Government OrganizationNOR - Not Ordinarily ResidentNORKA- Non Resident Keralites Affairs DepartmentNR - Non ResidentNRB- Non Resident BihariNRE - Non Resident External accountNREGA- National Rural Employment Guarantee ActNRG - Non Resident GujaratisNRGF- Non Resident Gujaratis FoundationNRI- Non Resident IndianNRK- Non Resident KeralitesNRO - Non Resident Ordinary Rupee accountNROFC - Non Resident Oriya Facilitation CentreNSC - National Savings CertificateOCI - Overseas Citizen of IndiaOIFC - Overseas Indian Facilitation CentreOWRC - Overseas Workers Resource CentrePAN- Permanent Account NumberPF- Provident FundPIO - Person of Indian OriginPIS - Portfolio Investment SchemePPF- Public Provident FundPSU - Public Sector CompanyRBI- Reserve Bank of IndiaRFC - Resident Foreign CurrencyROR - Resident and Ordinarily ResidentSEBI - Securities and Exchange Board of IndiaSME - Small and Medium EnterprisesSPDC - Scholarship Programme for diaspora ChildrenSSA - Social Security AgreementSTT - Securities Transaction TaxTAN - Tax Deduction Account NumberVAT- Value Added Tax
  19. 19. 19 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER – 1Residential StatusIn terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outside India meansa 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 aperson of Indian origin.2. A Person of Indian Origin (PIO) - is defined in Regulation 2 of FEMA Notification as a citizen ofany 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 theConstitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of anIndian citizen or a person referred to in sub-clause (a) or (b).3. How to Determine the Residential Status of an IndiviudalThe residential status of a person as refered in Sec. 2(31) of the Income Tax Act for each assessmentyear under consideration to determine the scope of total income chargable to taxAccording to Income Tax Act, an individual is said to be resident in India, if he satisfies at least one of thefollowing basic conditions He is in India during the financial year for a period of 182 days or more He is in India for a period of 60 days or more during the year and 365 days or more during 4years immediately preceding the year in questionThe second condition is not applicable to the following: An Indian citizen who leaves India during the year for the purpose of taking employment outsideIndia or an Indian citizen leaving India during the year as a member of the crew of an Indian ship. An Indian citizen or a person of Indian origin who comes on visit to India during the year (aperson is said to be of Indian origin if either he or any of his parents or any of his grandparentswas born in undivided India).If he satisfies any of the above conditions a. and b., then there is further categorisation of his being anIndian resident into: Resident and ordinarily resident Resident but not ordinarily resident
  20. 20. 20 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m4. Resident and ordinarily resident- RORIf a resident further satisfies the following conditions, he will be a resident and ordinarily resident:1. He has been resident in India in at least 2 out of 10 years [according to basic condition notedabove] immediately preceeding the relevant year.2. He has been in India for a period of 730 days or more during 7 years immediately preceeding therelevant year.If he doesn’t satisfy one or both of these conditions he is treated as a Resident but Not OrdinarilyResident RBNOR.If an individual doesn’t satisfy either of the conditions a. or b. stated in the beginning, then he is a Non-Resident NR and since such an individual that we are talking of is Indian, he or she is a NRI NonResident Indian.5. Importance of Residential Status• 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 laterpart of this guide (more details refer Chapter 6 – NRI Taxation)6. What is Indian DIASPORA ?Diaspora is a word of Greek origin that means scattering or sowing of seeds. It is used to refer topeople who leave their native lands to live in other parts of the world for employment, business orany other purpose. Indian Diaspora is a generic term used for addressing people who havemigrated from the territories that are currently within the borders of the Republic of India. Itconstitutes NRIs (Non-resident Indians) and PIOs (Persons of Indian origins). The IndianDiaspora is estimated to be over 30 million. The Government of India recognises the importanceof Indian Diaspora as it has brought economic, financial, and global benefits to India. The IndianDiaspora today constitutes an important, and in some respects unique, force in world culture.7. Residental status changes from Resident to Non-Resident – Manage your Taxes, SocialSecurity and things to complete before going aborad for employment or short visitBefore you accept a job offer from outside India, first try to undertand the terms and conditions of theemployment. The employment contact is very important; carefully study each and evey terms mnetioendin the employment contact. Understand the tax implications on your earnings abroad, the tax bilateralagreements between India and other country given the monetary impact they may have on you. You willalso have a clear idea about the social security benefits and other service rules. In case you are going fora short period employment and stay in the other country is less than 182 days, you will be treated like aresident tax payer and subject to tax in India, again this depends upon various other factors. Therefore,
  21. 21. 21 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mensure to monitor carefully your physical presence in India, a single additional day here or there canchange your tax liability.The concept of International worker (IW) was introduced in India for the first time in October 2008 andsocial security contributions were made mandatory for IWs in India. Please note that you may become anInternational worker if you are moving to a country with which India has a social security agreement inplace, unless you have obtained a Certificate of Coverage. This is the outcome of the new providentfund regulation for international workers in India. India has currently entered into social securityagreements with France, Denmark, Korea, Netherlands Belgium, Germany, Switzerland andLuxembourg. The consequence of being an international worker is — a higher contribution to the PensionScheme and withdrawal from your provident fund only upon reaching the age of 58 years. One of thebenefits of obtaining a Certificate of Coverage is to avoid social security contribution in your host country.Hence, it is necessary that you plan in advance and concentrate on the essential tax and social securityregulations to avoid further complications and last minutes confussions. A cross-border worker who iscontributing to home country social security and goes to work in another country with which there is anSSA (Social Security Agreement ) for a specified period as prescribed in the SSA can become a“detached worker/excluded worker” by obtaining a “certificate of coverage” from the home country.Employees Provident Fund Organisation (EPFO) has been identified as the Liaison agency to implementthe provisions of the agreement in India and has been authorized to issue “Certificate of Coverage” to theeligible employees deputed to other countries.8. Before you leave India to abroad for employment, please ensure to complete the following.8.1 Term Insurance Policy - Take a Term Insurance Policy to cover your life adequeatly. This willfinancaily protect your family in case of your untimely death. Term insurance plans are pure protectionplans. Most Term Insurnce Policies offered by insurance companies in India can be purchased by a NonResident Indian ( NRI) or a Person of Indian Origin(POI) simply by filling an additional NRI Questionnaire.These policies are similar to the policies that are offered to resident Indians as well. However, only a fewinsurance companies in Inda have actually formulated processes for issuing insurance policies toNRIs/POIs. They will help you with documentations and other requirements for medical tests, etc. Thepayment can be made from your NRO, NRE account or direct remittance from abroad. It is notmandatory for you to presenet within the geograohical area of India while purchasing the Term policy butsome insurance companies insitit for this along with medical examination, this all again depends on theterms and conditions of respective insurance polices. So it is better to take the Term Insurance polcieswhen you are present there in India o avoid lot of complications.8.2 Health Insurnace – It is essential to take sufficient cover which protects you and your entire family. Itis important to choose the right amount of sum insured depending on the past medical history of theelderly family members as they would require higher health insurance coverage. Similarly, the locationwhere you reside should be taken into consideration. In case you are married and having children, betteropt for Family Floater. It is recommended to take health insurance at the early ages to avoid medicalcheck-ups and higher premiums. Even if you are getting medical benefits aborad, you can go for aHealth Insurnce plan in India. It is very important to understand the maximum acceptable age limit offeredby the health insurance company. The possibility of falling sick is much higher at an older age. Hence, itis important that one is covered by a comprehensive health insurance plan even after retirement or return
  22. 22. 22 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mfrom abroad. Also, you should choose a policy that can be renewed after the age of 65 because at anolder age it is difficult to purchase a new insurance policy.8.3 Public Provident Fund (PPF)- NRIs are not allowed to invest in PPF, so before becoming an NRIopen a PPF account, but once you become NRI, you can continue to contribute upto the term of 15 years.But further extnetion is not allowed. The income received from PPF is fully exempted from income tax (asof now, this may change in future also) and also up to Rs. 100,000 you can reduced from your totalincome u/c 80C of Income Tax Act while calculating the taxable income for income earned in India.8.4 Convert Savings Bank Account to NRO Account - NRIs are not permitted to operatate ResidentSavings Bank Account. Once they become NRI, they are required to convert the Savings Bank accountto NRO Account (Non-Resident Ordinary Account) or close the Savings Bank Account. A NRO accountallows you to make payments on dues in India and receive rental and other income from your propertyhere, if you own any and it also allows credit of funds from your overseas account. However, funds in thisaccount can be repatriated within a limit of USD 1 million in a year on paying the applicable charges tothe banker; plus this limit includes any receipts arising out of sale of property and investments. Interest onthe NRO account is taxable with tax deducted at source of 30%. If you live in a country that has a DoubleTaxation Avoidance Agreement (DTAA) with India, this TDS rate would be lower, but you would need tosubmit a tax residency certificate to the bank. The DTAA between India and the US lays down a TDS rateof 15% on interest from deposits in India (to know more about DTAA refer Chapter ). These depositsmay also be taxed in the country of your residence. The US, for instance, taxes global income of itsresidents and citizens. However, if tax has been deducted at source in India, the investor will get a creditin the US for taxes paid in India.8.5 Open Non-Resident External Account – Once you become an NRI immediately open an NREAccount. This account will be used for crediting your remittance from abroad and also crediting ofdividend received from shares (PIS account), mutual funds (NRI status deposit) etc. . Accrued interestincome and balances held in NRE accounts are exempt from income-tax and wealth tax, respectively.Interest on the NRE account and FCNR account are tax free in India. But if you are a resident or citizen ofthe US, tax in levied on this income which will be a part of your global income. If you are a resident of theGulf countries, the NRE and FCNR option would be very profitable for you. For residents of the US, thechoice would depend on the tax slab applicable in the US.8.6 Open PIS (Portfolio Investment Scheme) - Non-residents are not permitted to buy/sell shares intheir resdent share trading account. Immediately you become an NRI close all your local share tradingaccount and open PIS acccunt. NRIs are also not permitttd to deal in commodity market, in case youhave commodity trading account, close those accounts before you become an NRI.8.7 Mutual Fund and other Investments – Change your residential status from Resident to Non-resedntfor all your Mutual Fund and other investments.8.8 Online Payment Option – Activate online payment options for all your future financial commitmentsrealted to car loans, housing loans, investment commitments etc.8.9 Power of Attroney - If required prepare a Power of Attroney document authorizing one of yourrelatives or other trusted persons like your wife, father, mother, brother or friend to sign and executedocuments in your absence. There can be many things which require your presence in India after youhave become an NRI, like if you want to make any real estate transaction or want to operate your bankaccount, investment in Mutual Funds etc. Power of attorney is a legal document giving power to someoneto act on your behalf. It is advisable to make a power of attorney which expires at certain future date. (formore detils realted to Power of Attroney – pleaes see Chapter )
  23. 23. 23 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m8.10 Safe Custody Locker - Open a bank safe custody locker and keep all your valuable documentsthere. If required you can add your wife or close relateives as joint holder for operating the safe custodylocker.VISIT www.keralarealestatesite.com and list your properties absolutely free of charges
  24. 24. 24 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mCHAPTER 2Various Types of Bank Accounts - NRIs are permitted to open
  25. 25. 25 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m1. Types of accounts which can be maintained by an NRI / PIO in IndiaIf a person is NRI or PIO, she/he can, without the permission from theReserve Bank, open, hold and maintain the different types of accounts given below with an AuthorizedDealer in India, i.e., a bank authorized to deal in foreign exchange. NRO Savings accounts can also bemaintained with the Post Offices in India. However, individuals/ entities of Bangladesh and Pakistanrequire the prior approval of the Reserve Bank.2. Non-Resident (Ordinary) Rupee Account (NRO Account)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 asdividends, interest etc.The interest rates on NRO Savings deposits shall be at the rate applicableto domestic savings deposits. Currently the interest rate is 4 - 7 per cent.(varies banks to banks) 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) 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 duesin India of the account holder like current income like rent, dividend, pension, interest, etc., saleproceeds of assets including immovable property acquired out of rupee/foreign currency funds orby way of legacy/ inheritance. Eligible debits such as all local payments in rupees including payments for investments asspecified 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 onemillion per financial year, subject to payment of applicable taxes The limit of USD 1 million per financial year includes sale proceeds of immovable properties heldby 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 originvisiting India, with funds remitted from outside India through banking channel or by sale of foreignexchange brought by him to India.
  26. 26. 26 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m Loans to non-resident account holders and to third parties may be granted in Rupees byAuthorized Dealer / bank against the security of fixed deposits subject to certain terms andconditions. The interest rates offered is almost at par with resident fixed deposits2.1 Non-Resident Ordinary Rupee (NRO) Account – RBI Master Circular No. 2/2012-13 Non-Resident Ordinary Rupee (NRO) Account Master Circular No. 2/2012-13, dated 2-7-2012 The acceptance of deposits by an Authorised Dealer/Authorised bank from persons residentoutside India are regulated by the provisions of sub-sections (1) and (2) of section 6 ofthe Foreign Exchange Management Act, 1999 read with FEMA Notification No.5/2000 RB, datedMay 3, 2000, as amended from time to time. 2. This Master Circular consolidates the existing instructions on the subject of “Non-ResidentOrdinary Rupee (NRO) Account” at one place. The list of underlying circulars/notificationsconsolidated in this Master Circular is furnished in the Appendix. 3. This Master Circular is being issued with a sunset clause of one year. This circular will standwithdrawn on July 1, 2013 and be replaced with an updated Master Circular on the subject. 1. Definitions Non-Resident Indian (NRI) NRI for this purpose is defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000. Interms of this Notification, an NRI is a person resident outside India, who is a citizen of India or is aperson of Indian origin. Person of Indian Origin (PIO) PIO for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of anycountry other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he oreither of his parents or any of his grand parents was a citizen of India by virtue of the Constitutionof India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indiancitizen or a person referred to in sub-clause (a) or (b). 2. Eligibility (a) Any person resident outside India (as per Section 2 of FEMA), may open and maintain NROaccount with an Authorised Dealer or an Authorised bank for the purpose of putting throughbonafide transactions denominated in Indian Rupees, not involving any violation of the provisionsof FEMA, Rules and Regulations made thereunder.
  27. 27. 27 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m (b) Opening of accounts by individuals/entities of Bangladesh/Pakistan nationality/ownershiprequire prior approval of the Reserve Bank. 3. Types of Accounts NRO accounts may be opened/maintained in the form of current, savings, recurring or fixeddeposit accounts. Rate of interest applicable to these accounts and guidelines for opening,operating and maintenance of such accounts shall be in accordance with directives/instructionsissued by the Reserve Bank from time to time. 4. Joint Accounts with Residents/Non- Residents The accounts may be held jointly with residents and/or with non-residents. 5. Permissible Credits/Debits A. Credits (i) Proceeds of remittances from outside India through normal banking channels received inforeign currency which is freely convertible. (ii) Any foreign currency, which is freely convertible, tendered by the account holder during histemporary visit to India. Foreign currency exceeding USD 5000 or its equivalent in the form ofcash should be supported by currencydeclaration form. Rupee funds should be supported byencashment certificate, if they represent funds brought from outside India. (iii) Transfers from rupee accounts of non-resident banks. (iv) Legitimate dues in India of the account holder. This includes current income like rent,dividend, pension, interest, etc. (v) Sale proceeds of assets including immovable property acquired out ofrupee/foreign currency funds or by way of legacy/inheritance. (vi) Resident individual may make a rupee gift to a NRI/PIO who is a close relative of the residentindividual [closerelative as defined in Section 6 of the Companies Act, 1956] by way of crossedcheque /electronic transfer. The amount shall be credited to the Non-Resident (Ordinary) RupeeAccount (NRO) a/c of the NRI/PIO and credit of such gift amount may be treated as an eligiblecredit to NRO a/c. The gift amount would be within the overall limit of USD 200,000 per financialyear as permitted under the Liberalised Remittance Scheme (LRS) for a resident individual. (vii) Resident individual to lend to a Non resident Indian (NRI)/ Person of Indian Origin (PIO)close relative [meansrelative as defined in Section 6 of the Companies Act, 1956] by way ofcrossed cheque /electronic transfer, subject to conditions within the overall limit under theLiberalised Remittance Scheme of USD 200,000 per financial year available for a resident
  28. 28. 28 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mindividual. The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of suchloan amount may be treated as an eligible credit to NRO a/c; B. Debits (i) All local payments in rupees including payments for investments in India subject to compliancewith the relevant regulations made by the Reserve Bank. (ii) Remittance outside India of current income like rent, dividend, pension, interest, etc. in Indiaof the accountholder. (iii) Remittance up to USD one million, per financial year (April- March), for all bonafide purposes,to the satisfaction of the Authorised Dealer bank. (iv) Transfer to NRE account of NRI within the overall ceiling of USD one million per financialyear subject to payment of tax, as applicable 6. Remittance of Assets 6.1 Remittance of Assets by a Foreign National of Non- Indian Origin A citizen of a foreign state, not being a citizen of Nepal or Bhutan or a Person of Indian Origin(PIO), who has retired from an employment in India, or has inherited assets from aperson referred to in sub-section (5) of Section 6 of the FEMA; or is a widow resident outsideIndia and has inherited assets of her deceased husband who was an Indian citizen resident inIndia, may remit an amount, not exceeding USD one million per financial year out of the balancesin the account, on production of documentary evidence in support of acquisition, inheritance orlegacy of assets by the remitter and an undertaking by the remitter and certificate by aChartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide theircircular No.10/2002, dated October 9, 2002. 6.2 Remittance of assets by an NRI/PIO (a) NRI/PIO may remit an amount, not exceeding USD one million per financial year, out of thebalances held in NRO accounts/sale proceeds of assets/the assets in India acquired by him byway of inheritance/legacy, on production of documentary evidence in support of acquisition,inheritance or legacy of assets by the remitter, and an undertaking by the remitterand certificate by a Chartered Accountant in the formats prescribed by the CentralBoard of DirectTaxes vide their circular No.10/2002 dated October 9, 2002. (b) NRI/PIO may also, within the overall limit of USD one million, as stated above, remit saleproceeds of assets acquired under a deed of settlement made by either of his parents or aclose relative (as defined in Section 6 of the Companies Act, 1956) and the settlement takingeffect on the death of the settler, on production of the original deed of settlement and an
  29. 29. 29 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mundertaking by the remitter and a certificate by a Chartered Accountant in the formats prescribedby the Central Board of Direct Taxes vide their circular No.10/2002 dated October 9, 2002. 6.3 Assets acquired in India out of Rupee funds NRI/PIO may remit sale proceeds of immovable property purchased by him as a resident or out ofRupee funds as NRI/PIO, without any lock-in-period, subject to the above limit of USD 1 million,per financial year. 6.4 Restrictions (a) The remittance facility in respect of sale proceeds of immovable property is not available tocitizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. A person or his successor who has acquired immovable property in accordance with Section 6(5)of FEMA, 1999 cannot repatriate sale proceeds of such property outside India except with priorpermission of the Reserve Bank. (b) The facility of remittance of sale proceeds of other financial assets is not available to citizensof Pakistan, Bangladesh, Nepal and Bhutan. 7. Foreign nationals of non-Indian origin on a visit to India NRO (current/savings) account can be opened by a foreign national of non-Indian origin visitingIndia, with funds remitted from outside India through banking channel or by sale of foreignexchange brought by him to India. The balance in the NRO account may be converted by theAuthorised Dealer bank into foreign currency for payment tothe account holder at the time of hisdeparture from India provided the account has been maintained for a period not exceeding sixmonths and the account has not been credited with any local funds, other than interest accruedthereon. In case the account has been maintained for a period more than six months, applicationsfor repatriation of balance will have to be made by the account holder concerned on plain paperto the Regional Office concerned of the Reserve Bank. 8. Grant of loans/overdrafts by the Authorised Bank to account holders and third parties (a) Loans to non-resident account holders and to third parties may be granted in Rupees byAuthorized Dealer/bank against the security of fixed deposits subject to the following terms andconditions: (i) The loans shall be utilised only for meeting borrower’s personal requirements and/or businesspurpose and not for carrying on agricultural/plantation activities or real estate business or for re-lending. (ii) Regulations relating to margin and rate of interest, as stipulated by Reserve Bank, from timeto time, shall be complied with.
  30. 30. 30 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m (iii) The usual norms and considerations as applicable in the case of advances to trade/industryshall be applicable for such loans/facilities granted to third parties. (b) Authorised Dealer/bank may permit overdraft in the account of the account holder subject totheir commercial judgement and in compliance with the interest rate etc. directives. 9. Change of resident status of account holder (a) From Resident to Non-resident (i) When a person resident in India leaves India for a country (other than Nepal or Bhutan) fortaking up employment or for carrying on business or vocation outside India or for any otherpurpose indicating his intention to stay outside India for an uncertain period, his existing accountshould be designated as a Non-Resident (Ordinary) Account. When a person resident in Indialeaves for Nepal or Bhutan for taking up employment or for carrying on business or vocation or forany other purposes indicating his intention to stay in Nepal or Bhutan for an uncertain period, hisexisting account will continue as a resident account. Such account should not be designated asNon-Resident (Ordinary) Account (NRO). (ii) Foreign nationals who come to India on employment and become residents in terms ofsection 2(v) of FEMA, 1999 and are eligible to open/hold a resident savings bank account arepermitted to re-designate their resident account maintained in India as NRO account on leavingthe country after their employment to enable them to receive their legitimate dues subject tocertain conditions. (b) From Non- resident to Resident NRO accounts may be re-designated as resident Rupee accounts on return of the account holderto India for taking up employment, or for carrying on business or vocation or for any otherpurpose indicating his intention to stay in India for an uncertain period. Where the account holderis only on a temporary visit to India, the account should continue to be treated as non-residentduring such visit. 10. Treatment of loans /overdrafts in the event of change in the resident status of theborrower In case of a person who had availed of loan or overdraft facilities while resident in India and whosubsequently becomes a person resident outside India, the Authorised Dealer/bank may at theirdiscretion and commercial judgement allow continuance of the loan/overdraft facilities. In suchcases, payment of interest and repayment of loan may be made by inward remittance or out oflegitimate resources in India of the person concerned. 11. Payment of funds to Non-resident/Resident nominee
  31. 31. 31 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m The amount due/payable to non-resident nominee from the NRO account of a deceased accountholder shall be credited to NRO account of the nominee with an Authorised dealer/bank in India.The amount payable to resident nominee from the NRO account of a deceased account holdershall be credited to resident account of the nominee with a bank in India. 12. Operation of NRO account by Power of Attorney holder Powers have been delegated to the authorized dealers/banks to allow operations on an NROaccount by Power of Attorney granted in favour of a resident by the non-resident individualaccount holder provided such operations are restricted to: (i) All local payments in Rupees including payments for eligible investments subject tocompliance with relevant regulations made by the Reserve Bank; and (ii) Remittance outside India of current income in India of the non-resident individual accountholder, net of applicable taxes; (iii) The resident Power of Attorney holder is not permitted to repatriate outside India funds heldin the account other than to the non-resident individual account holder nor to make payment byway of gift to a resident on behalf of the non-resident account holder or transfer funds from theaccount to another NRO account. 13. Facilities to a person going abroad for studies Persons going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible forall the facilities available to NRIs. Educational and other loans availed of by them as residents inIndia will continue to be available to them as per FEMA Regulations. 14. International Credit Cards Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO,without prior approval of Reserve Bank. Such transactions may be settled by inward remittance orout of balances held in the cardholder’s FCNR (B)/NRE/NRO Accounts. 15. Income-Tax The remittances (net of applicable taxes) will be allowed to be made by the Authorised Dealerbanks on production of an undertaking by the remitter and a certificate from a CharteredAccountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance,Government of India vide their Circular No. 10/2002 dated October 9, 2002 [cf. A.P. (DIR Series)Circular No. 56 dated November 26, 2002]. Annex-1 Statement/returns to be submitted to the Reserve Bank
  32. 32. 32 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mParticulars of statement Periodicity Relevant instructionsFacilities to NRIs/PIO and Foreign Nationals –Liberalisation – Remittance from NRO account. QuarterlyA.P. (DIR Series) Circular No.12 dated November 16, 2006 Annex-2 Operational Instructions for Authorised Dealer Banks 1. General Authorised Dealer banks may carefully study the provisions of the Act/Regulations/Notificationsissued under Foreign Exchange Management Act, 1999 (the Act). Reserve Bank will not prescribe the documents which should be verified by the Authorised Dealerbanks while permitting remittances for various transactions. In terms of the provisions contained in sub-section 5 of Section 10 of the Act, before undertakingany transaction in foreign exchange on behalf of any person, Authorised Dealer is required toobtain a declaration and such other information from the person (applicant) on whose behalf thetransaction is being undertaken that will reasonably satisfy him that the transaction is notdesigned to contravene or evade the provisions of the Act or any of the Rules or Regulationsmade or Notifications or directions or orders issued under the Act. Authorised Dealer banksshould preserve the information/documents obtained by them from the applicant beforeundertaking the transactions for verification by the Reserve Bank. In case the person on whose behalf the transaction is being undertaken refuses or does not givesatisfactory compliance of the requirements of an Authorised Dealer bank, he shall refuse inwriting to undertake the transactions. Where an Authorised Dealer bank has reasons to believethat a contravention or evasion of the Act or the Rules or Regulations made or Notificationsissued thereunder was contemplated in the transaction that he has refused to undertake, he shallreport the matter to the Reserve Bank. With a view to maintaining uniform practices, AuthorisedDealer banks may consider requirements or documents to be obtained by their branches toensure compliance with the provisions of sub-section (5) of Section 10 of the Act. 2. Opening of accounts by Bangladesh/Pakistan individuals/entities. Opening of accounts by individuals/entities of Bangladesh/Pakistan nationality/ownership requiresprior approval of the Reserve Bank. All such requests may be referred to the Chief GeneralManager-in-Charge, Foreign Exchange Department, (Foreign Investment Division), ReserveBank of India, Central Office, Mumbai-400 001. 3. Remittance of current income Remittance outside India of current income like rent, dividend, pension, interest, etc. in India ofthe account holder is a permissible debit to the NRO account.
  33. 33. 33 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m Authorised Dealer banks may allow repatriation of current income like rent, dividend, pension,interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriatecertification by a chartered accountant, certifying that the amount proposed to be remitted iseligible for remittance and that applicable taxes have been paid/provided for. 4. Restrictions (a) The remittance facility in respect of sale proceeds of immovable property is not available tocitizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. (b) The facility of remittance of sale proceeds of other financial assets is not available to citizensof Pakistan, Bangladesh, Nepal and Bhutan. 5. Tax Compliance Authorised Dealer banks can allow remittances to non-residents only on production of anundertaking by the remitter and a certificate from a Chartered Accountant in the formatsprescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India videtheir Circular No. 10/2002, dated October 9, 2002. [cf. A.P. (Dir Series) Circular No. 56, datedNovember 26, 2002]. APPENDIX List of notifications/circulars which have been consolidated in this Master Circular – Non-Resident Ordinary Rupee (NRO) Account http://www.rbi.org.in/Scripts/BS_ApCircularsDisplay.aspx http://www.rbi.org.in/Scripts/Bs_FemaNotifications.aspxSl. No. Circular No. Date1. Notification No. FEMA 62/2002-RB May 13, 20022. Notification No. FEMA 97/2003-RB July 8, 20033. Notification No. FEMA 119/2004-RB June 29,20044. Notification No. FEMA 133/2005-RB April 1, 20055. Notification No. FEMA 156/2007-RB June 13, 20071. A.P. (DIR Series) Circular No.45 May 14, 20022. A.P. (DIR Series) Circular No.1 July 2, 20023. A.P. (DIR Series) Circular No.5 July 15, 20024. A.P. (DIR Series) Circular No.19 September 12, 20025. A.P. (DIR Series) Circular No.26 September 28, 20026. A.P. (DIR Series) Circular No.27 September 28, 20027. A.P. (DIR Series) Circular No.56 November 26, 20028. A.P. (DIR Series) Circular No.59 December 9, 20029. A.P. (DIR Series) Circular No.67 January 13, 200310. A.P. (DIR Series) Circular No.43 December 8, 200311. A.P. (DIR Series) Circular No.45 December 8, 200312. A.P. (DIR Series) Circular No.62 January 31, 2004
  34. 34. 34 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m13. A.P. (DIR Series) Circular No.43 May 13, 200514 .P. (DIR Series) Circular No.12 November 16, 200615. A.P. (DIR Series) Circular No.64 May 25, 200716. A.P. (DIR Series) Circular No.70 June 09, 201117. A.P. (DIR Series) Circular No.17 September 16, 201118. A.P. (DIR Series) Circular No.18 September 16, 201119. A.P. (DIR Series) Circular No.117 May 7, 2012 NOTE • For the convenience of Authorised Dealers, a table of Statements/Returns to be submitted toReserve Bank and Operational Guidelines have been given in Annex-1 & 2, respectively. • It is also clarified for information of all users that the Master Circular need not necessarily beexhaustive and a reference to the relevant A.P.(DIR Series) Circular is needed wherever furtherinformation/ clarification is required.2.2 Conditions for Opening of NRO accounts by individuals of Bangladesh Nationality without RBIapprovalRBI/2012-13/414A.P.(DIR Series) Circular No. 82 February 11, 2013ToAll Authorised Dealer banks and Authorised banksMadam / Sir,Opening of NRO accounts by individuals of Bangladesh NationalityAttention of all the Authorised Dealer banks and Authorised banks (Authorised banks) is invited toParagraph 1 of Schedule-3 of Foreign Exchange Management (Deposit) Regulations, 2000 contained inNotification No. FEMA.5/2000-RB dated May 3, 2000, as amended from time to time, in terms of whichopening of Non-Resident Ordinary Rupee (NRO) accounts by individuals/ entities of Bangladesh/Pakistan nationality/ ownership requires approval of Reserve Bank.2. The extant instructions have been reviewed and it has been decided that henceforth, Authorised bankswould be permitted to open NRO account of individual/s of Bangladesh nationality without the approval ofthe Reserve Bank subject to the following conditions:i. The bank concerned should satisfy itself that the individual is holding valid visa and validresidential permit issued by Foreigner Registration Office (FRO)/Foreigner Regional RegistrationOffice (FRRO) concerned;ii. The Authorised bank should put in place a system of quarterly reporting whereby each branch of theAuthorised bank shall maintain a record of the bank accounts opened by individual/s of Bangladeshnationality and details of such account shall be forwarded to their Head Office. The Head Office of thebank shall furnish details of such accounts on quarterly basis to the Under Secretary (Foreigners),Ministry of Home Affairs, NDCC-II Building, Jai Singh Road, New Delhi – 110 001. E Mail.iii. The report shall contain details of Name/s of the Individual/s, Date of arrival in India, Passport No. andPlace/Country of issue, Residential permit reference and date and place of issue, Name of the FRO/
  35. 35. 35 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mFRRO concerned and the Complete address and contact number of the branch where the bankaccount is being maintained.3. Opening of accounts by entities of Bangladesh ownership shall continue to require approval of ReserveBank, as hitherto.4. Necessary amendments to the Notification No. FEMA.5/2000-RB dated May 3, 2000 have been issuedvide Notification No.FEMA.253/2013-RB dated January 02, 2013.5. Authorised banks may bring the contents of this circular to the notice of their constituents andcustomers concerned.6. The directions contained in the circular have been issued under sections 10(4) and 11(1) of theForeignExchange Management Act, 1999 (FEMA) (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.Yours faithfully,(Rudra Narayan Kar)Chief General Manager3. Non-Resident (External) Rupee Account (NRE Account) NRE account may be in the form of savings, current, recurring or fixeddeposit accounts. Such accounts can be opened only by the non-resident himself and not throughthe 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 andWealth tax, respectively. Authorised dealers/authorised banks may at their discretion/commercial judgement allow for aperiod of not more than two weeks, overdrawing in NRE savings bank accounts, up to a limit ofRs.50,000 subject to the condition that such overdrawings together with the interest payablethereon are cleared/repaid within a period of two weeks, out of inward remittances throughnormal 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 domesticsavings 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 16thDecemer,2011with a view to providing greater flexibility to banks in mobilizing non-resident deposits and also inview 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 (theinterest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are alreadyderegulated). Accordingly, banks are free to determine their interest rates on both savingsdeposits and term deposits of maturity of one year and above under Non-Resident (External)
  36. 36. 36 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mRupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO)Accounts with immediate effect. However, interest rates offered by banks on NRE and NROdeposits 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 therange of 6.50 to 9.50%., earlier is was 3.25%. RBI direction is applicable for all Commercial andScheduled Banks, Foreign Banks and Regional Rural Banks functioning in India with the licenseof RBI The interest rates offered is almost at par with resident fixed deposits Permissible credits to NRE account are inward remittance to India in permitted currency,proceeds of account payee cheques, demand drafts / bankers cheques, issued againstencashment of foreign currency, where the instruments issued to the NRE account holder aresupported by encashment certificate issued by AD Category-I / Category-II, transfers from otherNRE / FCNR accounts, interest accruing on the funds held in such accounts, interest onGovernment securities/dividends on units of mutual funds purchased by debit to theNRE/FCNR(B) account of the holder, certain types of refunds, etc. Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligibleto open such accounts, remittance outside India, investments in shares / securities/commercialpaper of an Indian company, etc. Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either tothe depositors or third parties. Such accounts can be operated through power of attorney in favour of residents for limitedpurpose of withdrawal of local payments or remittances through normal banking channels to theaccount holder himself.
  37. 37. 37 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m4. Foreign Currency Non Resident (Bank) Account – FCNR (B) AccountFCNR accounts can be opened only as term deposits (fixed deposits/cash certificates).FAQ - FCNR AccountWhat is an FCNR account?An FCNR account is a term deposit account that can be maintained by NRIs and PIOs in foreigncurrency. Thus, FCNRs are not savings accounts but fixed deposit accounts.What foreign currencies can one maintain in FCNR accounts?Prior to 2011, FCNR deposits were allowed to be maintained in six currencies: US dollar, Pound Sterling(GBP), Euro, Japanese Yen, Australian dollar and Canadian dollar. However, in October 2011, the RBIdecided that authorised dealer banks in India may be permitted to accept FCNR deposits in any permittedcurrency. Permitted currency for this purpose would mean a foreign currency which is freely convertibleand popularly include Danish Krone, Swiss Frank and Swedish Krona among others.How can one transfer funds to FCNR accounts?The funds in an FCNR account must necessarily come from your overseas funds. There are several waysin which you can open an FCNR account.-You can transfer funds from your overseas bank account directly to open an FCNR account. You can dothis either as a wire transfer or a cheque transaction-You can transfer funds from an existing NRE account-You can open an FCNR account using foreign currency notes or travelers cheques when you visit IndiaWhat terms are available?You can open an FCNR account for a minimum term of 1 year and maximum term of 5 years.Is premature withdrawal available?Yes, you can withdraw your FCNR before completion of the selected term. Premature withdrawal is
  38. 38. 38 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o msubject to a penal interest of 1%. Moreover, no interest is payable if the deposit is closed within a year.What is the current interest rate on FCNR account?The interest rates vary between terms and from currency to currency. Rates may also vary betweenbanks. For instance, the rate for a 1 year FCNR deposit in US dollar would be in the range of 2.5-3%while the same for a deposit in Australian dollar would be 5-6%.It is important to note that this interest is tax free in India. However, you may be subject to tax in thecountry of your residence for such interest.Are balances in the FCNR accounts freely repatriable?Yes, balances in FCNR can be freely repatriated outside India.Can funds in the FCNR account be used for local India payments?Yes, you can use the balance in FCNR account for making local payments in India."However, as FCNR can be maintained only as term deposits, it would be more convenient to makepayments after transferring the balance to NRE account," explains Rajesh Dhruva, a charteredaccountant and Chief Executive of Femaonline.com.Can you hold FCNR accouns jointly?Yes, the RBI, in 2011, permitted NRIs to hold FCNR accounts jointly with other NRIs or with residentswho are close relatives. In this case, the resident relative can operate the account as a power of attorneyholder.Is nomination facility available?Nomination facility is available in FCNR accounts and the nominee can be either an NRI or a residentIndian."The balance in FCNR deposit of a deceased NRI can be credited to an NRI nominees FCNR accountand such funds can be freely repatriated," Dhruva adds.Can NRIs avail loans against FCNR deposits?Rupee loans and foreign currency loans can be taken in India against the security of the deposit."Presently such loans are restricted to Rs 10 million. These loans can be repaid out of maturity proceeds
  39. 39. 39 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mand/or local resources. Banks may also give loans to resident individuals, firms or companies againstcollateral security of FCNR deposits," says Dhruva.What is the procedure for opening FCNR account?You can open an FCNR deposit from overseas. You would need to submit the following documents to thebank:-The account opening form with the signature verified by your overseas bank or the Indian embassy/consulate/ high commission or a notary public-Passport size photos-Copies of your passport and visa duly attested-Proof of foreign address-Initial remittanceSeveral other documents such as cancelled cheque, overseas bank statement, income documents maybe required. Document requirements may also vary between countries. Check with your bank for details.5.NRE Current AccountsTransfer 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 theshares offered to the employees of a company, wherein promoters decide to dilute theirstake. Employees are often given a share of the business after a certain length ofemployment or they can buy shares at any time. issued by Indian companieso Repatriate your principal and interest amount fullyo Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, TelegraphicTransfers and Cheque / Draft for freeo Utilise account balance for repatriable investments as well as local payments in Indiao Deposit your overseas earnings in the non-interest bearing Rupee accounto Avail of free ATM Card for the mandate holder in Indiao Get an International Debit Cardo Get a personalized cheque booko Operate your account, anywhere, anytime with convenient banking channels like
  40. 40. 40 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mNetBankingo To deposit money in your NRE Current Account, you can:o Transfer funds from abroad in a freely convertible foreign currency These are foreigncurrencies that can be exchanged easily with other currencies and are recognized by theinternational market.o Present foreign currency notes/travellers cheques brought in by you or another NRIduring a visit to Indiao Directly remit the amount to uso Transfer funds from an existing NRE/FCNR Account held in other BanksFees and Charges Normally you need to maintain an Average Quarterly Balance (AQB) of Rs.5,000 - 25,000/- (thisconditions varies from banks to bank) In case your Average Quarterly Balance (AQB) dips belowthe required amount, a fee of Rs 500 - 1000 per quarter (varies from banks to bank) will becharged.Documents Requiredo Photocopy of the pages of the passport containing passport details and personal detailsof all applicantso Copy of valid visa / work permito One passport photograph of each applicanto One document confirming either the overseas or Indian address. The address on thedocument 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 FATFcountry, all photocopies of the above documents to be attested by Indian Embassy or by aNotary.In case, you cannot go to any branch for account opening and you reside in a FATF country, theneither all photocopies of the above documents to be attested by an Indian Embassy or Notary orby a Banker overseas If the documents are not certified then all documents need to be selfsigned and submitted along with one additional documents required by the respective banksEligibility 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
  41. 41. 41 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mequivalent in foreign currency( this minimum amount varies from banks to bank). You would berequired 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? 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 purposessuch 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 myexisting NRE Current Account? Travellers Cheques can be used to credit/open the account. If the foreign currency notes broughtby you exceed USD 5,000/- or the combined value of Travellers Cheques and notes exceed USD10,000/-, then you have to submit a Currency Declaration Form (CDF) to the customs authoritieson arrival in India. You must produce the CDF for endorsement by the Bank when you submit themoney 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 toprovide the mandate holder with an ATM Card.k) What are the payment services available for my NRE Current Account? With Banks advanced Payment Services, you can bid goodbye to queues and paper work. Ourrange 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.
  42. 42. 42 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m6. NRO Current Accounto Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, TelegraphicTransfers and Cheque / Drafto Deposit your Rupee earnings in the non-interest bearing Rupee accounto Open an account jointly with an Indian residento Utilise account balance for repatriable investments as well as local payments in Indiao Operate your account, anywhere, anytime with convenient banking channels Transferring money to and from your accountTo deposit money in your NRO Current Account, you can:o Transfer funds from abroad in a freely convertible foreign currency These are foreigncurrencies that can be exchanged easily with other currencies and are recognised by theinternational market.o Present foreign currency notes / travellers cheques brought in by you or another NRIduring a visit to Indiao Directly remit the amount to uso Transfer funds from an existing NRE/FCNR Account held in other bankso Make local payments in India Documents requiredo Photocopy of the pages of the passport containing passport details and personal detailsof all applicantso Copy of valid visa / work permito One passport photograph of each applicanto One document confirming either the overseas or Indian address. The address on thedocument 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 FATFcountry, then either all photocopies of the above documents to be attested by an Indian Embassyor Notary or by a Banker overseas. If the documents are not certified then all documents need tobe self signed and submitted along with one additional document required by the bank. Eligibilityo 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.
  43. 43. 43 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mo NRO account can be held in Rupees onlyo NRO accounts can be held jointly with Residentso In case of change of status from Resident to Non-Resident, the existing ResidentAccount has to be designated as an NRO Account FAQsa) 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 itsequivalent in foreign currency. You would be required to maintain an Average Quarterly Balanceof 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 Accounte) 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 representinglegitimate 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 befreely 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 inNRO Accounts subject to payment of applicable taxes. The limit of USD 1 million per yearincludes 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 balanceperiod in eligible investments. (more details about the repatriation of money abroad is providedin 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, youcan 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 myexisting NRO Current Account?Travellers Cheques can be used to credit/open the Account. If the foreign currency notes brought
  44. 44. 44 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mby you exceed USD 5,000/- or the combined value of Travellers Cheques and notes exceed USD10,000/-, then you have to submit a Currency Declaration Form (CDF) to the customs authoritieson arrival in India. You must produce the CDF for endorsement by the bank when you submit themoney 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 PhoneBanking7. Resident Foreign Currency Accounts (RFS Accounts)A scheme known as Resident Foreign Currency Accounts (RFC accounts) Scheme has beendrawn up by Reserve Bank in pursuance of Government of India Notification No. F.10/22/90/NRICell dated 17th July 1992 and Reserve Bank Notifications Nos. FERA.116, 117 and 118 /92-RBdated 7th September 1992 to enable eligible returning Indians to open and maintain foreigncurrency accounts with authorised dealers in India. Reserve Bank has also granted exemptionfrom the prohibition imposed under Section 24 of FERA 1973 in respect of gift of foreignexchange held in India/abroad or of any property held abroad in certain cases referred to in itsNotification 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) orterm deposit accounts and held singly or jointly only in the names of eligible personsNote A -Persons who returned to India prior to 18th April 1992 after having been residentoutside India for a continuous period of not less than one year are also eligible to open RFCaccounts if (a) they are holding valid specific permission/licence from Reserve Bank as on17th July 1992 to maintain foreign accounts or to hold other foreign currency assets abroador (b) they are in receipt of pension or other monetary benefits from their overseasemployers subsequent to their return to India even if they did not maintain foreign currency
  45. 45. 45 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o maccounts or hold other foreign currency assets abroadNote B - Persons holding RIFEE permits or Reconversion facility have been given option tocontinue those facilities or avail of RFC account facility (cf. paragraph 12.13). These optionscan be exercised at one stroke or in part amounts during the validity period of RIFEE permitor Reconversion facility. Accordingly, holders of RIFEE permit or Reconversion facility arealso eligible to open RFC accountsUnder the scheme, persons of Indian nationality or origin, who, having been resident outsideInida for a continuous period of not less than one year, have become persons resident inIndia on or after 18th April 1992 are eligible to open and maintain the accounts withauthorised dealers in India in any freely convertible foreign currency. Authorised dealersmay, on receipt of an application in form RFC, open RFC accounts in the names of eligiblepersons. Persons who returned to India after a short assignment of less than one yearabroad desiring to have RFC accounts should apply through authorised dealers to ReserveBank in form RFC. RFC accounts opened with the specific approval of Reserve Bank will begoverned 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, shortvisits to India on personal grounds like meeting family members/relatives or on healthgrounds which do not indicate the persons intention to stay in India for an indefinite periodmay be ignored.
  46. 46. 46 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o mExplanation: 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,orii) he or either of his parents or any of his grand parents was a citizen of India by virtue of theConstitution of India or the Citizenship Act, 1955 (57 of 1955),oriii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizenof Pakistan or Bangladesh).Eligible AssetsAssets acquired or held otherwise than in contravention of the Act by an eligible person ,while he wasresident outside India(non-resident), in the form of deposits in banks outside India, investments in foreigncurrency 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 outsideIndia taken up or commenced by such person while he was resident outside India.CreditsUndernoted credit transactions may be allowed in RFC Accounts by authorised dealers.(a) Remittance in convertible foreign currency from outside India through normal banking channelsrepresentingi) Funds in bank accounts outside India forming part of eligible assets held by theeligible person.ii) Income such as dividend, interest, profit, rent, etc. earned on eligible assets held bythe eligible person.iii) Sale proceeds of eligible assets.
  47. 47. 47 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m(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 theeligible 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, providedthat where the amount tendered exceeds US$ 10,000 or its equivalent or where the value offoreign currency/bank notes exceeds US$ 5,000 or its equivalent they have been declared onthe 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 inthe erstwhile Bilateral Group countries which have been funded in non-convertible rupees) inthe name of the eligible person standing to his credit at the time of his arrival in India. Nopenalty 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 byReserve Bank(h) Unspent foreign exchange surrendered by the RFC accountholders provided authorised dealeris satisfied that the concerned foreign exchange/currency had in fact been released for traveletc. abroad by debit to the same RFC accounts and the amount of foreign exchange/currencyis surrendered within the stipulated period as required under the Exchange Control regulations.
  48. 48. 48 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currencybalances including any restriction on investment in any form outside India.Debits(i) The funds in the RFC account may be allowed to be freely utilised by the accountholder for any bona fide remittance outside India through normal banking channels including for investmentsabroad provided the cost of such investments and/or any subsequent payments required therefor are metout of RFC account.(ii) Withdrawals/payments from such accounts, other than for remittances outside India, orfor payments in foreign currency authorised to be made in India by Reserve Bank, shall be permitted by theauthorised dealer only in equivalent Indian rupees.Rate of InterestRate of interest payable on the funds held in RFC accounts may be decided by authorised dealers on thebasis 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 tonominees to the extent of his/their entitlement, if on the date of death of the account holder such nomineesare resident outside India. To the extent any nominee is a person resident in India on the date of the deathof account holder, the amount may be paid to him in equivalent Indian rupees.Reserve RequirementsFunds held in RFC accounts are exempt from CRR/SLR requirements.Loans/Overdrafts against the DepositsNo 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
  49. 49. 49 | P a g e N R I G u i d e 2 0 1 3 V e r 3 . 0 0 w w w . y o u r o w n a d v i s e r . c o m 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 othercases.If the individual subsequently goes abroad to become an NRI, the balance in the RFC account can beconverted to NRE/FCNR account. Interest income from RFC is exempt from income-tax till such time theReturning Indian maintain the status of Resident but Not Ordinarily Resident (NOR). Hence, if theReturning 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 toRFC Account on the change of the status of the NRE or FCNR Account holder from a Non-Resident to aResident. Under the current FEMA regulations the Non-Resident Indian is not required to satisfy aminimum period of stay of one year. A person can maintain an RFC Account, once he becomes aresident for any length of time as long as he remains to be a resident. If his status changes once againfrom Resident to Non-Resident, the funds held in RFC account are allowed to be freely remitted abroador credited to fresh NRE or FCNR account. However the current regulation under FEMA is silent aboutthe above provision.The treatment of deducting tax at source on interest on RFC Account is similar to Domestic TermDeposits. However it is possible for a person, whose status under the Income Tax Provision is Residentbut not Ordinarily Resident to claim that the interest on Term deposits is not liable to tax under theprovisions of Section 10 of the Income Tax Act, 1961. The individual should furnish Form 15AA if he doesnot require the bank to deduct tax at source.FAQ – RFC AccountWho can open?You can open an RFC account if you return to India permanently after residing abroad for a continuousperiod of one year or more. In order to calculate this continuous period, any short trips to India forpersonal visits would be ignored. Any authorised dealer or bank will help you open your account.CurrenciesYou can open an RFC account in any freely convertible foreign currency. These are foreign currenciesthat can be exchanged easily with other currencies and are recognized by the international market.Type and form of accountRFC accounts can be opened as savings or term deposit accounts and can be held singly or jointly in thenames of those who are eligible. No loans are available against the RFC account.InterestInterest is credited quarterly and is taxable. However, if you are a Resident but not Ordinary Resident,then you will be able to avail of a tax exemption on the interest on RFC accounts for the two year periodwhen you hold this status.Currently RFC term deposit rates are in the range of 2.5-3.5% for terms over 1 year for the US dollar.Interest rates vary by term and by currency.

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