Person resident outside India “personresident outside India” means a person who is not resident in India; [As per FEMA Sec 2(w)]
A person (Individual) resident in India A person (being an individual) residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include(A) A person who has gone out of India or who stays outside India, in either case— (a)for or on taking up employment outside India, or (b)for carrying on outside India a business or vocation outside India, or (c)for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) A person who has come to or stays in India, in either case, otherwise than— (a) for or on taking up employment in India, (b) for carrying on in India a business or vocation in India, (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
Two Conditions must-ResidentHe should be residing in India for at least 183days during the preceding financial yearHe should have come to India or is staying inIndia either for taking up employment or carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period.
An Example Mr.Paul came to India on 1 Sep 07 for taking up an employment in India. Financial Year 2006-07 Financial Year 2007-08
For the Financial Year 2006-2007, he was not in India. As such, for the financial year 2007-2008 he is not resident of India. For the Financial Year 2007-2008, he was in India for more than 182 days. As such, he is resident of India for the financial year 2008- 2009.
An Example Mr.Eberhardt came to India on 1 Sep 07 as a tourist and since then he is in India till today.
For the Financial Year 2006-2007, he was not in India. As such, for the financial year 2007-2008 he is not resident of India. For the Financial Year 2007-2008, he was in India for more than 182 days. However, he is not in India for any of the purposes listed in the second condition. As such, he is not a resident of India for the financial year 2008- 2009 too.
An Example Mr. Ashok, born and brought up in India, goes to the USA for taking up an employment on 15-5-2007. Determine his residential status under the Act for the F.Y. 2007-2008.
An Example Mr.Bharat, born and brought up in India, goes to USA on 10-4-2007 to look after his mother, who is suffering from a chronic disease , with the intention to stay in the USA till his mother recovers. Determine his residential status under the Act for the financial year 2007-2008 and 2008-2009.
Mr. Ashok shall be treated a Resident of India till 14-5-2007.With effect from 15-5-2007, he shall be treated aNon-Resident as he is covered by one of theexceptions listed in sub-clause (A) to section 2(v).
An Example Mr. Bharat is going to USA (on 10.04.07) neither for employment nor for business nor for any purposes which indicate his intention to stay there for an uncertain period. Thus, his physical presence in India during the preceding F. Y.; i.e., 2006-2007 shall have to be considered and as he was in India for 365 days during the F. Y. 2006-2007 he would be treated Resident of India for the financial year 2007-2008. If he continues to stay in USA, say, till 31-3-2009, his stay in India during the preceding financial year; i.e., 2007-2008 would be less than 183 days and hence he would be treated Non-Resident for the financial year 2008-2009 as the first condition of the physical stay in India is not fulfilled.
Not Permanently Resident Means a person resident in India for the employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years.
Not Permanently Resident(NPR)- Facilities enjoyed Remittance for maintenance of close relatives abroad, exceeding net salary (after deduction of taxes, contribution to provident fund and other deductions). Can acquire or sale any foreign security without any procedures or formalities or permission out of his foreign currency resources outside India He can possess without limit, foreign currency in the form of currency notes, bank notes and traveller’s cheques, if such foreign currency was acquired, held or owned by him when he was resident outside India and has been brought into India in accordance with the regulations made under the Act.
Restrictions on dealing in ForeignExchange Section 3 of FEMA provides for a blanket restriction on dealing in foreign exchange by any person unless it is permitted Under the provisions of the Act Under the provisions of the Rules made under the Act Under the provisions of the Regulations framed under the Act By General or special permission of RBI
Restrictions on dealing in ForeignExchangeClause (a) prohibits any person To deal in foreign exchange or foreign security To transfer any foreign exchange security to any person other than an authorised person.Clause (b) prohibits every person for making any payment to or to the credit of a person resident outside India in any manner.
Illustrations: Restrictions on dealing inForeign Exchange(1) Can Mr. Pandya, a resident of Canada, instruct his brother staying in Mumbai to make a payment of Rs. 5,000 to Mr. Joshi, his close friend. Ans: No. Such payment is not permitted under clause (b) of section 3 of the Act(2) Mr. Rakesh, a resident of UK asks his Chartered Accountant in India to form a Pvt. Ltd. Co. and proposes to reimburse all the expenses after the formation of the company. Whether, the Indian Chartered Accountant, can spend for the above purpose on behalf of Mr. Rakesh ? Ans: No, as such payment is not permitted under clause (b) of section 3 of the Act.
Restrictions on dealing in ForeignExchange Clause (c) prohibits every person for receiving any payment from or on behalf of a person resident outside India except by way of an inward remittance, from a place outside India through an authorised person. Clause (d) prohibits a person to enter into any financial transaction in India as consideration for acquisition, creation or transfer of a right to acquire any asset outside India by any person. The clause would affect a transaction in the nature of “Hawala Transaction”.
Restrictions on Indian Resident Section 4 provides for a blanket prohibition on a person resident in India to acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India except as permitted under the Act, Rules or Regulations made thereunder Exceptions to section 4…..
Exceptions to section 4….. Section 6(4) of the Act permits a person resident in India to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person resident outside India. Illustration Mr. Patel, who was resident of USA for many years, now permanently returns to India . He continues to hold some immovable property, foreign security and other foreign exchange assets in USA. Can he hold such assets outside India?
Bank Accounts The FEM ( Deposit) Regulations, 2000www.taxper tpro.com
By : CA. Sudha G. Bhushan Foreign Currency AccountRupee Account
By : CA. Sudha G. BhushanRupee Account Non resident (External) Rupee Accounts (NRE Accounts) Ordinary Non resident Rupee Account (NRO Accounts)
Difference between NRONRE Accounts Interest rate on NRO account is much higher than NRE account. NRE accounts are tax free whereas NRO accounts are not. Upto a Million Dollars is repatriable in NRO Account.
NRIs/PIOs to transfer by way of gift sharesResident individuals, held by them in Indian companies andpartnership/proprietorship to transfer by way of gift immovablecan avail interest bearing rupee loans from property held by them in India subject toNRIs/PIOs out of funds remitted by them compliance with other applicablefrom abroad or out of funds held in their rules/regulations including the provisions ofbank accounts in India, on non repatriation Foreign Contribution Regulations Act, 1976basis. by the charitable trust/organisation concerned. Domestic public/private sector mutual funds can issue Units to NRIs/PIOs on both repatriation as well as non-repatriation basis
NRIs/PIOs to place deposits withIndian firms, on non-repatriation NRIs/PIOs for sale of sharesbasis and with Indian companies acquired under directincluding Non-banking financial investment Schemes on stock companies on non-repatriation exchanges in India. basis out of domestic sources. NRIs/PIOs for sale of shares NRIs /PIOs for transfer of shares, acquired under direct by way of sale under private investment Schemes on stock arrangement to exchanges in India. another NRI or to a resident
Investment in Immovable PropertyInvestment in Proprietary and Partnership Firm Portfolio Investment (PIS) Foreign Direct Investment (FDI) Lending in Rupees Lending in Foreign Currencies (ECB)
Investment in Immovable Property (IP) in India NRI who is either a citizen of India or a Person of Indian Origin can purchase or sell IP in India under automatic route. A citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan cannot acquire IP in India other than lease not exceeding 5 years. Citizen of foreign countries who are not PIO cannot acquire any IP in India without RBI Permission. Permitted Immovable Property can be residential or commercial other than an agricultural property, plantation, or a farm house. CA Sudha G. Bhushan
Repatriation of sale proceeds Sale of IP other than agricultural land/farm house /plantation property in India -repatriation of the sale proceeds permitted subject to conditions as under: The IP was acquired as per Exchange Laws The amount to be repatriated does not exceed the original amount invested (i.e. capital gain if any cannot be repatriated). In case of residential houses, the repatriation is restricted to two such houses. US$ 1 million scheme-for IP held in India CA. Sudha G. Bhushan
Investment in Firm or Proprietary Concern Permitted to NRIs/PIOs PIOs who are not citizen of Bangladesh, Pakistan or Sri Lanka Firm should not undertake- Print Media, Agricultural/ Plantation & dealing in land and immovable property Capital invested cannot be repatriated Income can however be repatriated
Foreign Direct Investment Investment inCapital - equity, preference, convertible preference, Convertible debentures. Automatic Route Government Approval Route Investment on repatriation basis- sale proceeds net of taxes eligible for repatriation out of India CA Sudha G. Bhushan
FE(Transfer or issue of security by aperson resident outsideIndia)regulations, 2000 Schedule III Schedule IVPurchase/sale ofshares and /or Purchase and sale ofconvertible debentures Shares/convertibleby a NRI on a stockexchange in India on debentures by a NRIrepatriation and/or on non repatriationnon repatriation basisunder portfolio basisinvestment Scheme
Portfolio Investment by NRIs Limit of 5% by single NRI, 10% by all NRIs (can be increased to 24%) to be maintained Payment to come from NRE/FCNR or NRO (in case of non repatriable investment) Delivery based purchase and sale permitted OCBs are not permitted after 29/11/2001 to invest in PIS CA Sudha G. Bhushan
Schedule IV Chit Fund or a Nidhi company or real estate business Agricultural/plantation shall not include activities or real estate development of business or township, construction construction of farm of residential/ houses or dealing in commercial premises, Transfer of roads, bridges, etc. Development Rights. by way of inward The amount invested remittance through in shares or convertible normal banking debentures under this channels or out of Scheme and the funds held in capital appreciation NRE/FCNR /NRO thereon shall not be account maintained allowed to be with an authorised repatriated abroad. dealer
Business of chit fund, or ii) Nidhi company, or iii) Agricultural or plantation activities, or iv) Real estate business* or construction of farm houses, or v) Trading in Transferable Development Rights (TDRs).* Real estate business" does not include construction ofhousing / commercial premises, educational institutions,recreational facilities, city and regional levelinfrastructure,townships
Investment in Shares/CD’s onnon-repatriation basis by NRIs Scheme applies to investment other than PI NRIs may acquire without any limit, shares under public issue, private placement or right issue The Condition of Central Govt., approval if investor has previous JV or technical collaboration or trade mark agreement in the same or allied field has been done away with Not permitted- investment in companies engaged in chit fund/nidhi, agricultural/plantation or real estate business or construction of farm house or dealing in TDRs CA Sudha G. Bhushan
Investment in securities other thanshares or CDs by Non Resident Investment on Investment on Non repatriation basis in Repatriation basis by Dated Govt., NRIs in – units of money securities/treasury bills, market funds in India or National Plan/Saving NCD and Units of Certificates. Domestic MF Bonds issued by Public sector undertaking
Lending in Indian Rupees by NRI Non Corporate entity can borrow from NRI or PIO on non-repatriation basis subject to following conditions: The period of loan should not exceed 3 years the rate of interest on the loan shall not exceed 2% over the Bank rate prevailing on the date of availment of loan; CA Sudha G. Bhushan
Lending in Foreign Currency by NRI An individual resident in India may borrow a sum not exceeding US $ 250,000/- form his close relatives outside India, subject to the conditions that the minimum maturity period of the loan is one year the loan is free of interest; and Close relative means relative as defined in Section 6 of the Companies Act, 1956 At the end of the term loan amount can be repatriated. CA Sudha G. Bhushan
THANKS…..CA. Sudha G. BhushanTaxpert Professionals Private Limitedwww.firstname.lastname@example.org@taxpertpro.com