Nri deposit

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Nri deposit

  1. 1. FEMA Bank Deposits Regulations CA N.C. Hegde 14 December 2013
  2. 2. Person resident in India www.simpletaxindia.net 2 © 2013 Deloitte Haskins & Sells
  3. 3. Person resident in India Section 2(u) of FEMA Act Person includes: (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding subclauses, and (vii) any agency, office or branch owned or controlled by such person www.simpletaxindia.net 3 © 2013 Deloitte Haskins & Sells
  4. 4. Person resident in India Section 2(v) of FEMA Act Person resident in India means: (i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include(A) 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; www.simpletaxindia.net 4 © 2013 Deloitte Haskins & Sells
  5. 5. Person resident in India (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, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India (iii) an office, branch or agency in India owned or controlled by a person resident outside India (iv) an office, branch or agency outside India owned or controlled by a person resident in India “Person resident outside India" means a person who is not resident in India www.simpletaxindia.net 5 © 2013 Deloitte Haskins & Sells
  6. 6. Illustrations A person comes to India for taking a job on 1 December 2013. He has never been to India before. What is the residential status under FEMA for FY 2013-14?  Person resident in India A person who is an Indian resident, takes up a job in the USA 1 November 2013. What is the residential status under FEMA for FY 2013-14?  Person resident outside India A person has come to India on 1 June 2013 for medical treatment and stays for 150 days. What is the residential status under FEMA for FY 2013-14?  Person resident outside India www.simpletaxindia.net 6 © 2013 Deloitte Haskins & Sells
  7. 7. Non Resident Indian (NRI) & Person of Indian Origin (PIO) www.simpletaxindia.net 7 © 2013 Deloitte Haskins & Sells
  8. 8. NRI & POI NRI PIO • Indian Citizen or PIO • Person who has held Indian passport previously • Person resident outside India • Who is presently holding another country’s citizenship/ nationality • Holds an Indian Passport i.e. he/she is holding foreign passport • Whose ancestor was an Indian national and • Who is spouse of NRI or PIO www.simpletaxindia.net 8 © 2013 Deloitte Haskins & Sells
  9. 9. Returning NRI & PIO • Returning NRIs/PIOs may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India • The income and sale proceeds of assets held abroad need not be repatriated. www.simpletaxindia.net 9 © 2013 Deloitte Haskins & Sells
  10. 10. Resident Foreign Currency Account • Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts. • Proceeds of assets held outside India at the time of return can be credited to RFC account. • The funds in RFC accounts are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form outside India. • RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases. • RFC accounts are permitted to be held jointly with the resident close relative(s) as defined in the Companies Act, 1956 as joint holder (s) in their RFC bank account on ‘former or survivor basis’. However, such resident Indian close relative, now being made eligible to become joint account holder shall not be eligible to operate the account during the life time of the resident account holder. www.simpletaxindia.net 10 © 2013 Deloitte Haskins & Sells
  11. 11. Types of Bank Accounts www.simpletaxindia.net 11 © 2013 Deloitte Haskins & Sells
  12. 12. Types of Bank Accounts NRI & PIO can open, hold and maintain: • Non-Resident Ordinary Rupee Account (NRO Account) • Non-Resident (External) Rupee Account (NRE Account0 • Foreign Currency Non-Resident (Bank) Account (FCNR Account) Without permission of RBI Through Authorized Dealer in India Individual/entities of Bangladesh & Pakistan – Prior approval of RBI www.simpletaxindia.net 12 © 2013 Deloitte Haskins & Sells
  13. 13. Types of bank accounts NRO NRE FCNR Form Savings, current, recurring, fixed deposit Savings, current, recurring, fixed deposit Term deposits of 1 to 5 years Currency Indian Rupee Indian Rupee Freely convertible currency Who can open NRI or PIO jointly with Resident NRI or PIO himself NRI or PIO himself (not through POA (not through POA holder) holder) Repatriation of principal Limit per year of 1 million Freely repatriable without limit Freely repatriable without limit www.simpletaxindia.net 13 © 2013 Deloitte Haskins & Sells
  14. 14. Types of bank accounts NRO Account NRE Account FCNR Account Local payments, remittance of interest, rent, pension etc. outside India Transfer to other NRE Account, investment in shares, mutual funds of Indian Companies Same as NRE Account Permissible credits Legitimate earnings such as interest, dividend Sale proceeds of FDI investments, dividends etc Same as NRE Account Taxability of interest earned Taxable Not taxable Not Taxable Interest rate As decided by bank Permissible debits Within ceiling rate of LIBOR/SWAP rates plus 125 basis points www.simpletaxindia.net 14 © 2013 Deloitte Haskins & Sells
  15. 15. Types of bank accounts NRO Account Loans NRE Account FCNR Account Loans to nonresidents account holders and third parties may be granted in Rupees against security of deposits Loans upto Rs. 100 lakhs to depositors and third parties may be granted against security of NRE funds Loans upto Rs. 100 lakhs to depositors and third parties may be granted against security of FCNR funds www.simpletaxindia.net 15 © 2013 Deloitte Haskins & Sells
  16. 16. Change in residential status – R to NR • Shares • Existing bank accounts / New bank accounts • Loans / Overdrafts availed when he was a Resident • Can they be continued? • Payment of interest & repayment of loans • Immovable property • Insurance policies • Directorship / Trustee / Karta www.simpletaxindia.net 16 © 2013 Deloitte Haskins & Sells
  17. 17. Change in residential status – NR to R • Foreign bank account • Foreign shares • Foreign property • Foreign currency • Income earned on assets held abroad by NRIs who have returned to India permanently? www.simpletaxindia.net 17 © 2013 Deloitte Haskins & Sells
  18. 18. Person resident in India going abroad Gone abroad for studies or on visit to a foreign country: • may open, hold and maintain a Foreign Currency Account with a bank outside India • provided, the balance in the account is repatriated to India on return to India Gone abroad for trade fair / exhibition: • may open, hold and maintain a Foreign Currency Account with a bank outside India • provided, the balance in the account is repatriated to India within one month Short visits to India before completion of studies – not considered as return to India www.simpletaxindia.net 18 © 2013 Deloitte Haskins & Sells
  19. 19. Foreign Tourists Can foreign tourists open a bank account in India during their short visit?  Yes. Foreign tourists during their short visit to India can open a Non-Resident (Ordinary) Rupee (NRO) account (Current / Savings) with any Authorized Dealer bank dealing in foreign exchange. Such account can be opened up to a maximum period of 6 months. What credits can be made to such accounts?  Funds remitted from outside India through banking channel or those obtained by sale of foreign exchange brought by the tourists to India can be credited to the NRO account. Can the NRO account be used for making local payments?  Yes. Tourists can freely make local payments through the NRO account. All payments to residents exceeding INR 50,000 can be made only by means of cheques / pay orders / demand drafts. www.simpletaxindia.net 19 © 2013 Deloitte Haskins & Sells
  20. 20. Foreign Tourists Can foreign tourists repatriate the balance held in their NRO account at the time of departure from India?  Authorized Dealer banks have been allowed to convert the balance in the account for payment to the account holder at the time of departure from India into foreign currency, provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon. What can be done to repatriate the proceeds of an account that has been maintained for more than six months?  In such cases, applications for repatriation of balance may be made on plain paper to the Foreign Exchange Department of the Regional Office concerned of the Reserve Bank through the Authorized Dealer bank maintaining the account. Can foreign nationals resident in India open resident account?  Yes. Foreign nationals resident in India can open and maintain a resident Rupee account in India in terms of Notification No.5/2000-RB dated May 3, 2000 viz., Foreign Exchange Management (Deposit) Regulations, 2000, as amended from www.simpletaxindia.net time to time. © 2013 Deloitte Haskins & Sells 20
  21. 21. Loans to / from relatives Can an individual resident Indian borrow money from his close relatives outside India? Yes, an individual resident Indian can borrow sum not exceeding USD 250,000 or its equivalent from his close relatives staying outside India, subject to the conditions that: • the minimum maturity period of the loan is one year; • the loan is free of interest; and • the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR(B) account of the NRI. Can an individual resident lend money to his close relative NRI / PIO? Yes, an individual resident can lend money by way of crossed cheque /electronic transfer within the overall limit of USD 200,000 per financial year under the Liberalized Remittance Scheme, to meet the borrower’s personal or business requirements in India, subject to conditions. The loan should be interest free and have a maturity of minimum one year and cannot be remitted outside India. Can an individual resident repay loans of close relative NRIs to banks in India? Yes, where an authorized dealer in India has granted loan to a non-resident Indian such loans may also be repaid by resident close relative (relative as defined in Section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower's loan account www.simpletaxindia.net through the bank account of such relative. 21 © 2013 Deloitte Haskins & Sells
  22. 22. Loans from banks • Banks can grant Loans in India to NRIs. Loans can be against: ‒ Shares ‒ Immovable property • For meeting Personal / Business purposes • Not in restricted sectors – Agriculture / real estate business / trading in TDR • Loan credited to NRE/FCNR/NRNR A/c cannot be remitted abroad • Repayment - NRO/ NRE/FCNR/ Inward Remittance or by a close relative resident in India www.simpletaxindia.net 22 © 2013 Deloitte Haskins & Sells
  23. 23. Gifts to / from relatives Can a resident individual give rupee gifts to his visiting NRI/PIO close relatives? Yes, a resident individual can give rupee gifts to his visiting NRI/PIO close relatives by way of crossed cheque/electronic transfer within the overall limit of USD 75,000 per financial year for the resident individual and the gifted amount should be credited to the beneficiary’s NRO account. Can a person resident in India transfer shares by way of gift to a person resident outside India? An application would have to be made to RBI, providing details of transferor and transferee, reasons for making the gift, etc. The gift should not exceed 5 per cent of the paid up capital of the Indian company/ each series of debentures/ each mutual fund scheme. The applicable sectoral cap/ foreign direct investment limit in the Indian company should not breached. www.simpletaxindia.net 23 © 2013 Deloitte Haskins & Sells
  24. 24. Liberalised Remittance Scheme (LRS) • All resident individuals, including minors, are allowed to freely remit up to USD 75,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. • LRS facility is in addition to those already available for private travel, business travel, studies, medical treatment, etc., as described in Schedule III • Remittances for gift and donation cannot be made separately and are subsumed under the limit available under this LRS. Accordingly, resident individuals can remit towards gifts and donations up to USD 75,000 per financial year under the Scheme. www.simpletaxindia.net 24 © 2013 Deloitte Haskins & Sells
  25. 25. Questions Can a resident individual holding a savings bank account include nonresident close relative as a joint account holder?  Yes, individuals resident in India are permitted to include non-resident close relative(s) as a joint holder(s) in their resident bank accounts on ‘former or survivor’ basis. However, such non- resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder. Can Exchange Earners Foreign Currency (EEFC) accounts be held jointly with a -resident Indian?  Yes, EEFC account of a resident individual can be held jointly with a resident close relative on a ‘former or survivor’ basis. However, such resident Indian close relative will not be eligible to operate the account during the life time of the resident account holder. www.simpletaxindia.net 25 © 2013 Deloitte Haskins & Sells
  26. 26. Authorised Dealer Person authorised to deal in foreign currency Category Entities Major Activities Authorised Dealer – • Commercial Banks Category I • State Co-op Banks • Urban Co-op Banks All current and capital account transactions according to RBI directions issued from time-to-time. Authorised Dealer – • Upgraded FFMCs Category II • Co-op. Banks • Regional Rural Banks (RRBs) • Others Specified non-trade related current account transactions as also all the activities permitted to Full Fledged Money Changers. www.simpletaxindia.net 26 © 2013 Deloitte Haskins & Sells
  27. 27. Authorised Dealer Person authorised to deal in foreign currency Category Entities Authorised Dealer – • Select Financial and Category III other Institutions FFMC • Dept. of Posts • Urban Co-op. Banks • Other FFMCs Major Activities Transactions incidental to the foreign exchange activities undertaken by these institutions. Purchase of foreign exchange and sale for private and business visits abroad. www.simpletaxindia.net 27 © 2013 Deloitte Haskins & Sells
  28. 28. Thank You www.simpletaxindia.net 28 © 2013 Deloitte Haskins & Sells

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