FEMA
  • Liberalized Remittance Scheme
  • Borrowing And Lending
  • Acquisition and Transfer of Immovable Property – FEMA
  • Banking Accounts
  • Scheme for Foreign Nationals

What is LRS?

Ans. LRS is a scheme introduced by RBI as liberalization measure to facilitate Resident Individuals (RI) to remit funds upto USD 2,50,000/- outside India without any RBI permission.

Who is eligible to remit funds outside India under LRS?

Ans. RIs are eligible to avail benefit of LRS. The person must be a person resident in India as per FEMA. Once an individual is a resident under FEMA, he is eligible to avail benefits of LRS, whether or not he is an Indian citizen.

However, LRS is not available to corporates, partnership firms, HUF, Trusts, etc.

What are the permissible Current account transactions under LRS?

Ans. The following are permissible current account transactions under LRS:
a.Private visit (other than Nepal & Bhutan)
b.Gift or Donation including rupee gift to Non Resident Indian (NRI)/ Person of Indian Origin (PIO), who is a close relative.
c. Emigration
d. Overseas business trip
e. Medical treatment abroad
f. Pursuing studies outside India
g. Going outside India for employment
h. Maintenance of close relatives abroadAny other current account transaction which are not prohibited

Which Capital account transactions are permissible under LRS?

Ans. The following are the permissible Capital account transactions under LRS:
a. Opening of foreign currency a/c abroad with a bank outside India
b.Purchase of property abroad
c.Investments in shares, securities, Mutual Funds, etc abroad 
d.Setting up Wholly owned subsidiaries (WOS) and Joint Venture (JV) abroad for bonafide business subject to stipulated terms and conditions
e.Extending loans in INR to NRIs who are relatives as defined in Companies Act, 2013.

Can bankers open foreign currency accounts in India for residents under LRS?

Ans. No.

Can exchange facility be availed in excess of USD 2,50,000/- ?

Ans. RI may avail facility in excess of the limit prescribed for purpose of emigration, medical treatment and studies outside, if it is so required by the country of emigration, medical institute offering treatment or the university respectively but subject to certain conditions.
In other cases, prior RBI permission is required to remit funds exceeding USD 2,50,000/-

Can remittances be made only in US Dollars?

Ans. The remittances can be made in any freely convertible foreign currency.

Is LRS in addition to use of International Credit Card by a resident?

Ans. Yes, LRS is in addition to use of International Credit Card. There is no monetary ceiling fixed by RBI for remittances by use of International Credit Card towards meeting expenses while such person is on a visit outside India. However, use of International Credit Card for payment in foreign exchange in Nepal and Bhutan is not permitted.

Is there any restriction on number of remittances during a FY?

Ans. There is no restriction on frequency or number of transactions during a FY. However, total amount of foreign exchange remitted through, all sources in India under LRS  during the current FY should be within LRS limit (currently at USD 250,000/-).

Can a remittance under the LRS be made by a minor?

Ans. Yes, LRS facility is available to all RIs including minors. In case of remitter being a minor, Form A2 may be required to be countersigned by minor’s natural guardian.

A UK passport holder and British Citizen (not of Indian origin), is permanently residing in India for carrying on business. Will he be eligible for availing the LRS even though he is not an Indian citizen?

Ans. Since he is carrying on business in India and living in India, he shall be treated as a person resident in India under FEMA. Hence, he would be eligible for availing LRS even though he is not an Indian citizen.

An Indian passport holder is residing in Singapore for his employment since the last 20 years. Will he be eligible for availing LRS?

Ans. Since he has left India for employment purpose, he shall be treated as a person resident outside India under FEMA. He would not be eligible for availing LRS even though he is an Indian citizen.

Can remittances under LRS be consolidated in respect of family members?

Ans. Remittances under LRS can be consolidated in respect of family members (including minors) subject to individual family members complying with LRS terms and conditions. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank a/c/ investment/ purchase of property, if they are not the co-owners/ co-partners of overseas bank a/c, investment/ property.

Is the AD required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

Ans. AD will be guided by the nature of transaction as declared by the remitter in Form A2 and will thereafter certify that the remittance is in conformity with the instructions issued by the RBI in this regard from time to time. However, the ultimate responsibility is of the remitter to ensure compliance to the extant FEMA rules/regulations.

Is it mandatory for RI to have PAN for outward remittance under LRS?

Ans. Yes, it is mandatory for the RI to provide his/her PAN for all transactions under LRS made through AD Bank.

What is not permitted under LRS?

Ans. The remittance facility under the scheme is not available for the following purpose:
• Remittance for any prohibited activities such as margin trading, lottery, etc.
• Remittance for purchase of Foreign Currency Convertible Bonds issued by Indian Companies in the overseas secondary market.
• Remittance for trading in foreign exchange abroad.
• Capital Account remittances, directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “Non co-operative countries and territories”, from time to time.
• Remittance directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the RBI to the banks.

A RI, intends to give loan abroad under LRS? Can he do so?

Ans. Yes, a RI can give loan to relatives (as defined under the Companies Act) abroad by under LRS as extension of loans is a permissible capital account transaction. 

Are RI under LRS required to repatriate back to India the accrued interest/ dividend on deposits/ investments abroad, over and above the principal amount?

Ans. No, the investor can retain and reinvest the income earned from portfolio investments made under LRS. However, a RI who has made overseas direct investment in equity shares and compulsorily convertible preference shares of a Joint Venture or Wholly Owned Subsidiary outside India, within the LRS limit, then he/she shall have to comply with terms and conditions as prescribed under FEMA.

A RI has gifted an amount of USD 1,50,000 to his daughter in USA in October 2018. He intends to gift another amount of USD 1,00,000 to his son in UK before March 2019. Can he do so?

Ans. Yes, since the RI has partly utilized the limit of USD 250,000/-, he can gift an additional amount of up to USD 1,00,000/- before 31st March 2019. No further remittances shall be permitted in FY 2018-19 since the LRS limit has been utilized. 

A RI has gifted an amount of USD 250,000 to her daughter in USA in December 2018. She intends to remit additional amount of USD 50,000/- to her daughter for her maintenance before March 2019. Can she do so?

Ans. No. In accordance with regulations governing current account transactions remittance for maintenance of close relative abroad has also been subsumed under the LRS limit. She cannot remit additional amount of USD 50,000/- to her daughter (a close relative) since the LRS limit has been utilized. 

A RI intends to gift another RI in foreign currency by credit to latter’s foreign currency a/c held abroad, under LRS. Can he do so?

Ans. No. A RI cannot gift to another RI in foreign currency, for the credit of latter’s foreign currency a/c held abroad under LRS.

What is the procedure to remit funds under LRS?

Ans. i. RI has to approach AD Bank and notify them that he/she would like to engage in an outward remittance under LRS. (The applicant should maintain a bank account with the AD bank for a minimum period of one year prior to the remittance  for capital account transaction)
ii. RI has to furnish Form A2 (declaration form). Under the form RI is required to attest that they have not breached the limit of USD 2,50,000/- per FY and state the purpose of remittance. Form 15CA/CB is not mandatory under LRS transactions.
iii. PAN is mandatory to make remittance under LRS for all transactions.
iv. RI has to submit other supporting documents as required by the AD Bank.

To whom can a RI remit for the purpose of "maintenance of close relatives"?

Ans.

Funds can be remitted to below mentioned relatives as defined in the Companies Act:

·         Members of Hindu undivided family; or

·         RI’s spouse

·         RI is related to the beneficiary in any of the manners indicated below:

 

1.Father (including step-father)

2.Mother (including step-mother)

3.Son (including step-son)

4.Son's wife

5.Daughter

6.Daughter's husband

7.Brother (including step-brother)

8.Sister (including step-sister)


RI (but not permanently resident in India) can remit up to net salary after deduction of taxes. However, if he has exhausted the limit of USD 2,50,000/- as net salary remittance and desires to remit any other income under LRS is it permissible as the limit will be over and above USD 2,50,000?

Ans. RI (but not permanently resident in India) who have remitted their entire earnings and salary and wish to further remit ‘other income’ may approach RBI with documents through their AD bank for consideration.

Whether credit facilities (fund or non-fund based) in Indian Rupees or foreign currency can be extended by AD banks to RI?

Ans. LRS does not envisage extension of fund and non-fund based facilities by the AD banks to their RI customers to facilitate remittances for capital account transactions under LRS.

However, AD banks may extend fund and non-fund based facilities to RIs to facilitate current account remittances under LRS.

Can a sole proprietor remit funds under LRS?

Ans. In a sole proprietorship business, there is no legal distinction between the individual / owner and as such the owner of the business can remit USD up to the permissible limit under LRS. If a sole proprietorship firm intends to remit the money under LRS by debiting its current account then the eligibility of the proprietor in his individual capacity has to be reckoned. 

Can a RI make a rupee loan to a NRI/PIO who is a close relative of RI, by of crossed cheque/ electronic transfer?

Ans. A RI is permitted to make a rupee loan to a NRI/PIO who is a close relative of the RI (as per the Companies Act, 2013) by way of crossed cheque/ electronic transfer as per the stipulated conditions.

Can a RI make a rupee gift to a NRI/PIO who is a close relative of RI, by of crossed cheque / electronic transfer?

Ans. A RI can make a rupee gift to a NRI/PIO who is a close relative of the RI [relative’ as defined in Section 2(77) of the Companies Act, 2013] by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 250,000 per FY as permitted under the LRS for a RI. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances made by the donor during the financial year including the gift amount have not exceeded the limit prescribed under LRS.

Can RI lend money to his close relative NRI/PIO?

Ans.   Yes, a RI can lend money in Rupees to his NRI relative (as defined by Companies Act) by way of crossed cheque /electronic transfer within the overall limit of USD 2,50,000/- per FY under LRS. The loan should be interest free and have a maturity of minimum 1 year. Repayment of loan shall be made by way of inward remittances from outside India or by debit to NRE/NRO/FCNR (B) a/c of the NRI relative or out of the sale proceeds of shares/securities/immovable property against which such loan was granted.   


What are the restrictions on the end use of the funds that a RI has lent to NRI relative?

Ans. The loan in Rupee shall be utilised for meeting the NRI relative’s personal requirements or for NRI relative’s own business purposes in India. It shall not be utilised for any of the activities in which investment by a NRI is prohibited, namely:

the business of chit fund, or
Nidhi Company, or
agricultural or plantation activities or in real estate business*, or construction of farm houses, or
trading in Transferable Development Rights.

*restriction on real estate does not include development of townships, construction of residential/ commercial premises, roads or bridges.

In the above case, who is responsible to ensure that amount of loan is within limits prescribed under LRS during the FY?

Ans. It would be the responsibility of the lender (i.e. RI) to ensure that amount of loan is within the limits prescribed under LRS during the FY.

Further, to the above question are there any restrictions on end use of the borrowed funds?

Ans.

Funds borrowed in rupees from NRI close relative shall be utilized by Resident Indian for his own business purpose only other than certain specified businesses*. He is not permitted to utilize the loan funds for any investment, whether by way of capital or otherwise, in any company/ partnership firm/ proprietorship concern or any entity, or for relending.
* the business of chit fund, as Nidhi Company, agricultural or plantation activities or real estate business; or construction of farm houses, or trading in Transferable Development Rights. 
Provided that RBI may permit such resident entities/ companies to use such borrowed funds:
(a) For on lending/ re-lending to the infrastructure sector; or
(b) For keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses.

Can a NRI avail loan from AD Bank in India?

Ans. Yes, NRI is permitted to avail loan from AD Bank in Rupee subject to certain specified restrictions and:
-against the security of shares and others held in name of NRI, or
-against security of immovable property (other than agricultural land / plantation property / farm house) held by NRI in accordance with RBI regulations


Can a RI repay loans of close relative NRI to AD Banks in India?

Ans.

Yes, where a Bank in India has granted loan to a NRI such loans may also be repaid by any relative (as defined under the Companies Act), of NRI by crediting the borrower's loan a/c through the bank a/c of such relative.

Can a RI borrow money in Rupee from NRI?

Ans. A RI may borrow in Rupee from NRI relative on non-repatriation basis after satisfying the following terms and conditions:
-Loan shall be received by way of inward remittance from outside India or out of NRE/ NRO/ FCNR (B)/NRNR/NRSR a/c of NRI maintained with an authorised dealer or an AD Bank in India.
 -The period of loan shall not exceed 3 years and rate of interest shall not be more than 2% above the bank rate prevailing on date of availment of loan.
-The repayment of loan amount along interest thereof shall be made only to the NRO account of the NRI
-The borrowed amount is not permitted to be repatriated outside India.

Can a RI borrow money in foreign currency from NRI?

Ans. Yes, an individual resident Indian can borrow in foreign currency, a sum not exceeding USD 250,000/- or its equivalent from his close relatives NRE outside India, subject to following conditions:
 -minimum maturity period of loan is 1 year;
-loan is free of interest; and
-amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to NRE/FCNR a/c of NRI. 


A NRI wants to avail loan against her NRE FDs. Is she permitted to do so?

Ans. She can freely avail loan/ overdraft against securities of her NRO/NRE FDs in India without any monetary ceiling subject to end-use conditions as specified under FEMA.

Can a RI and a friend of NRI take loans against the NRO FD of NRI?

Ans. Third-party being RI, firms or companies resident in India can avail loan/overdraft against security of NRO deposits for personal/business purposes, subject to stipulated terms and conditions.However, loan amount cannot be utilized for relending, agricultural/plantation activities or real estate business. 



Can NRI obtain loan from their Banks for acquiring ESOPs?

Ans. Yes, NRI is permitted to acquire loan in INR from the Bank till the extent of 90% of the purchase price in INR of the ESOPs or Rs. 20 lakhs per NRI employee whichever is lower. The loan amount shall be directly paid to the company and should not be credited to NRI’s non-resident a/c in India. Additional conditions have been laid down by RBI for the same.


When a NRI uses his credit card, will it be considered as borrowing in India?

Ans. It is clarified that use of credit card in India by a person resident outside India shall not be deemed as borrowing or lending in rupees.

Can INR loan/ overdraft granted to RI who subsequently becomes a person resident outside India be continued?

Ans. An AD Bank may allow continuance of loan/ overdraft granted to a person resident in India who subsequently becomes a person resident outside India, subject to following terms and conditions:
• AD Bank is satisfied, according to his/ its commercial judgment, about the reasons to continue the loan or overdraft;
• The period of loan or overdraft shall not exceed the period originally fixed at the time of granting the loan/ overdraft;
• So long as the borrower continues to a remain a person resident outside India, the repayment shall be made either by inward remittance from outside India through normal banking channels or from the funds held in NRE/ FCNR(B)/ NRNR/ NRO/ NRSR a/c of the borrower.

Can INR loan be continued in the event of change in residential status of the lender?

Ans. In case INR loan was granted by a person resident in India to another person resident in India and the lender subsequently becomes a non-resident, the repayment of loan by the resident borrower should be made by credit to NRO a/c of the lender maintained with AD bank in India, at the option of the lender.

Can Indian Companies borrow from NRIs?

Ans. No. As per FEMA provisions, Indian Company is not permitted to avail loan from NRI. Alternatively, NRIs can provide deposits to Indian company or invest in Non-convertible Debentures offered by the Company.


Whether NRIs and OCIs can acquire and transfer immovable property in India without prior approval of RBI (i.e. under general permission)?

Ans.


Particulars

From/To

Purchase from (other than agricultural land/ farmhouse/ plantation etc.)

Resident/ NRI/ OCI

Acquire as gift (other than agricultural land/ farmhouse/ plantation etc.)

Resident/ NRI/ OCI - who is a relative

Acquire (any IP) as inheritance

a. Any person who has acquired it under laws in force;
b. Resident

Sell (other than agricultural land/ farmhouse/ plantation etc)

Resident/ NRI/ OCI

Sell (agricultural land)

Resident

Gift (other than agricultural land i.e. residential/ commercial property )

Resident/ NRI/ OCI

Gift (agricultural land)

Resident

 

How can NRI / OCI make payment for purchase of residential/commercial property in India?

Ans. Payment can be made by NRI / OCI only out of funds remitted to India through normal banking channels or funds held in NRE / FCNR / NRO a/c maintained in India. Payments cannot be made through travellers’ cheque or foreign currency note.

Whether any documents are required to be filed by NRI/OCI with the RBI for acquisition of any immovable properties as mentioned in above table?

Ans. NRI/OCI who has acquired immovable property in India under general permission is not required to file any documents with RBI.

How many immovable properties can NRI / OCI acquire under the general permission?

Ans. There are no restrictions on the number of immovable properties that can be acquired. However, they can repatriate sales proceeds of only 2 residential properties outside India.

Can a non-resident inherit immovable property in India?

Ans. Yes, a person resident outside India (NRI/OCI) can inherit and hold immovable property in India from a person resident in India or Person resident outside India.
However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong and Democratic People’s Republic of Korea should seek specific approval of RBI.

A non-resident has inherited an agricultural land in India from his father who was also a non-resident. Is he permitted to inherit such land from a non-resident?

Ans. Yes, he is permitted to inherit agricultural land property from his father who was also a non-resident provided the father had acquired the property in accordance with the Foreign Exchange laws in force.

Suppose a NRI/OCI acquired agricultural land by way of inheritance, to whom can such property be transferred?

Ans. The NRI/OCI may transfer agricultural land/ farm house/ plantation property in India, by way of gift or sale to a person resident in India, who is a citizen of India.

Can a NRI sell immovable property other than agricultural land in India?

Ans. Yes, he may sell to a person resident in India/ NRI/ OCI.

Can NRI be eligible to sell an agricultural land, in case the same was purchased by him while he was a Resident?

Ans. Yes, he is eligible to sell an agricultural land to a person resident in India, even if the same was purchased by him while he was a Resident.

Can a foreign national of non-Indian origin and resident outside India purchase immovable property in India?

Ans. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he may take immovable property on lease provided the period of lease does not exceed 5 years. In such cases, there is no requirement of taking any permission of or reporting to RBI. However, he is permitted to acquire one immovable property (other than agricultural land / plantation property / farm house) jointly with his spouse, provided the spouse is NRI or OCI and otherwise not prohibited from such acquisition and their marriage should have been registered and subsisted for a continuous period of not less than two years immediately preceding the acquisition of such property.

Can a foreign national being employed in India, and thus being a person resident in India as per FEMA acquire an immovable property in India?

Ans. Yes, a foreign national who is a ‘person resident in India’ as per FEMA can acquire immovable property in India. However, Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or Democratic People’s Republic of Korea (DPRK) would require prior approval of RBI.

Can a NRI/ OCI/ Foreign national acquire immovable property in India by way of gift?

Ans. Yes, NRIs/OCI can freely acquire immovable property (residential and commercial properties only) by way of gift either from a person resident in India, a NRI or OCI who is a relative defined in section 2(77) of the Companies Act,2013. However they are not permitted to acquire an agricultural land / plantation property / farm house in India by way of gift.

A foreign national of Non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

Can a NRI/ OCI gift his immovable properties?

Ans. Residential /Commercial property: NRI / OCI may gift residential/ commercial property to a person resident in India, NRI or OCI who is a relative as defined in section 2(77) of the Companies Act, 2013.

Foreign national of non-Indian origin requires prior approval of RBI for gifting the residential / commercial property.

Agricultural land / a plantation property / a farm house: NRI / OCI can gift agricultural land / a plantation property / a farm house only to a person resident in India who is a citizen of India. A foreign national would require prior approval of RBI.

Can NRI / OCI avail housing loan from an AD / registered non-banking financial company (NBFC) or financial institutions in India?

Ans. Yes, NRI/ OCI are permitted to obtain housing loans from AD, registered NBFC and other financial institutions as specified from RBI from time to time.

The loan shall be subject to the policy laid down by the Board of Directors of the AD and in compliance with prudential guidelines of RBI or terms and conditions as prescribed by RBI from time to time. The borrowed funds are not to be used for restricted end uses such as under:

a. In the business of chit fund or Nidhi Company;
b. Investment in capital market including margin trading and derivatives;
c. Agricultural or plantation activities;
d. Real estate activity or construction of farm houses; and
e. Trading in Transferrable Development Rights (TDR), where TDR shall have the meaning as assigned to it in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2015.

Can NRI avail of housing loan in rupees from his employer in India?

Ans. Yes, subject to certain terms and conditions.

Can residential / commercial property be mortgaged?

Ans.

Ø   NRI/ PIO can mortgage to: 

         i.  AD Bank/ registered NBFC/housing finance institution in India- without RBI approval

        ii.  A party abroad- with RBI prior approval 

 

Ø  A company outside India in which NRI/OCI is a director, can avail loan from the overseas lender of the Indian AD Bank against mortgage of an immovable property in India owned by such NRI/OCI, subject to certain terms and conditions.

 

Ø  A foreign national of non-Indian origin can mortgage only with prior approval of RBI

 

Ø  A foreign company which has established a Branch Office or other place of business in accordance with FERA/ FEMA regulations has general permission to mortgage the property with an AD Bank in India.

NRI has acquired residential/ commercial property in India by way of inward remittances through normal banking channel or by debit to NRE /FCNR/ NRO a/c. Can he repatriate the sale proceeds of the same? If yes, is there any limit on the quantum?

Ans. Yes, he may repatriate sale proceeds of immovable property subject to below conditions:

Amount to be freely repatriated should not exceed amount paid for acquisition of residential/ commercial property in foreign exchange, received through normal banking channel or by debit to FCNR a/c or NRE a/c.
In case of residential property, repatriation of sale proceeds is restricted to 2 such properties
Sale proceeds of residential/ commercial property in India acquired by way of debit to NRO a/c cannot be freely repatriated and sale proceeds should be credited to NRO a/c only. However, such sale proceeds can be transferred from NRO a/c to NRE a/c/ overseas a/c subject to the limit of USD 1 million per FY 

Is there requirement of minimum holding period for sale of residential/ commercial property purchased out of inward remittance/ debit to NRE/ FCNR / NRO A/c?

Ans. There is no requirement of minimum holding period applicable for sale of such property.

NRI acquired an immovable property by way of gift. Can the funds received on sale of said immovable property be repatriated abroad?

Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO a/c only. From balance in NRO a/c, NRI/OCI may remit up to USD 1 million, per FY, subject to satisfaction of AD Bank and payment of applicable taxes.

If immovable property was received as inheritance by NRI/OCI from a person resident in India, can he repatriate the sale proceeds?

Ans. Yes, general permission is available to repatriate such sale proceeds. The amount of repatriation is restricted to USD 1 million per FY, subject to satisfaction of AD Bank and payment of applicable taxes.

In case of a foreign national, sale proceeds can be repatriated in similar manner if the property is inherited from a person resident in India.

Repatriation of sale proceeds in foreign exchange to Nepal and Bhutan is not permissible.


If the immovable property was received as inheritance by foreign national from a person resident outside India, can he repatriate the sale proceeds?

Ans. Yes, but only with prior RBI approval.

Can NRI / OCI rent residential/ commercial property purchased from foreign exchange/ rupee funds?

Ans. Yes, NRI/OCI can rent the property without RBI approval. 

Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of RBI continue to hold the same?

Ans. Yes, they may continue to hold the immovable property under holding license obtained from RBI.

Can foreign nationals of non-Indian origin who had earlier acquired immovable property in India in accordance with foreign exchange laws at the time of acquisition or with general or specific permission of the RBI sell such property when he leaves India without prior RBI permission?

Ans. Yes, such foreign national on becoming person resident outside India can transfer such property to a person resident in India provided transaction takes place through banking channel in India and the resident is not otherwise prohibited from such acquisition.

To transfer such property to a Non-resident, foreign national would require prior RBI permission.


What accounts can an NRI open in India?

Ans. NRI may hold bank accounts in India with AD or AD bank. The AD Bank in India may accept deposits from NRI under the following schemes:
i. Non-Resident (External) Account (NRE) Scheme in Indian Rupees
ii. Non-Resident (Ordinary) Account (NRO) Scheme in Indian Rupees
iii. Foreign Currency Non-Resident (FCNR) in Foreign Currency 
iv.Special Non-Resident Rupee Account (SNRR)

  F    Features of various Deposit Schemes available to NRIs:

Particulars

FCNR A/c

NRE A/c

NRO A/c

SNRR A/c

Who can open an account?

NRI & PIO1

NRI & PIO1

Any person resident outside India1

Any person resident outside India

(who has business interest in India)

Type of Account

Term Deposit only

Savings, Current, Recurring, Fixed Deposit

Savings, Current, Recurring, Fixed Deposit

Current A/c

Nomination

Permitted

Permitted

Permitted

Permitted

Repatriation

Freely repatriable

Freely repatriable

Current income is freely repatriable, provided all taxes are duly paid. Amounts other than current income can be repatriated to the extent of USD  1 million per FY

Repatriable subject to payment of applicable taxes

Taxability on Interest earned

Interest earned exempt under section 10(15) (iv) (fa) of the Act.

Interest earned is exempt under section 10(4) of the Act.

Interest earned is Taxable. TDS @ 30.9% or as per DTAA rate whichever is beneficial, provided mandated documents are submitted.

Not an Interest bearing account.

Currency

 

Any permitted currency i.e. Foreign Currency which is freely convertible

Rupees

Rupees

Rupees

Rate of

Interest

Rate of interest are in the accordance with the directions issued by the RBI from time to time

Change in residential status from Non-resident to resident

FCNR (B) deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by the account holder.

 

Authorised dealers should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at the option of the account holder.

NRE accounts should be designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts, at the option of the account holder

NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his intention to stay in India for an uncertain period.

 

Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account.

SNRR A/c may be designated as resident rupee account on the account holder becoming resident.


1
For the purpose of the said FEMA regulation, PIOs do not include nationals of Pakistan, Bangladesh or such country as may be specified by Government. 

Can a Bangladeshi/ Pakistani national or an entity owned/ controlled from Bangladesh/ Pakistan have an account in India?

Ans. Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership requires prior approval of RBI.

However, individuals of Bangladesh nationality can open an NRO A/c subject to the individual(s) holding a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned.

NRI holds NRO, NRE and FCNR a/c with a AD Bank. He intends to add his sister a resident Indian as a joint holder. Is it permissible?

Ans. Yes. NRO a/c can be maintained jointly with a resident of India on former or survivor basis. On the other hand, NRE and FCNR a/c can be maintained jointly with resident relative (as per Companies Act) only i.e. a resident non-relative cannot be a joint holder. 


Whether 2 or more NRI / PIOs jointly hold NRE/NRO/FCNR A/cs in India?

Ans. Yes.

Can the NRI’s sister operate his Bank accounts?

Ans. No, the sister shall be eligible to operate the a/c only if she is a POA holder as per the instructions of NRI account holder. Operations in FCNR, NRE and NRO a/c by his sister as a POA holder is restricted to the following:

• Withdrawals for permissible local payments including payments for eligible investments subject to relevant compliances
• Remittance to the account holder himself (i.e. NRI in this case) through normal banking channels


Whether NRO, NRE and FCNR a/c can be opened by a resident POA holder?

Ans. No. NRO, NRE and FCNR a/c cannot be opened by resident POA holder in India on behalf of NRI. 


Are NRIs permitted to be joint holders in accounts held by resident Indians?

Ans. Yes. Relatives (as per Companies Act) who are NRIs are permitted to be joint holders in existing / new resident bank accounts with the resident account holder on “Either or Survivor” basis as per the conditions prescribed.

Can NRI account holders avail Rupee loans in India from Banks against security of funds held in their FCNR and NRE a/c?

Ans. Yes. Under FEMA regulations, NRIs can avail loan from Banks for himself or for Third Party i.e. RI/Firms/Company in India against the collateral of funds held in FCNR and NRE A/c without any ceiling subject to usual margin requirements. The loan amount can be utilized by NRI only for the following purposes:

•  Personal purposes or for carrying on business activities. The loans cannot be utilized for the purpose of ‘relending’ or for carrying on agriculture, plantation activities or for investment in real estate business.
•  Capital contribution in Indian firms / companies.
•  Acquisition of flat / house in India for his ‘own’ residential use. 

Can NRI account holders avail Rupee loans in India from Banks against security of funds held in their NRO a/c?

Ans. Yes. Under FEMA regulations, loan can be availed in favor of the A/c holder (NRI in this case) or to third party i.e. RI/Firms/Company in India against the collateral of funds held in NRO A/c. the loan can be utilized for personal and business purposes except for the purpose of ‘relending’ or for carrying on agriculture, plantation activities or for investment in real estate business.

Can NRIs avail loans outside India against security of funds held in their FCNR / NRE a/c?

Ans. Yes, NRIs can avail loan from branches/correspondent bank outside India in his favor or request the branch/correspondent bank outside India to provide loan to a third party outside India. However, the amount shall be utilized for bonafide purposes.

Can a NRI overdraw his NRE A/c?

Ans. AD Banks may at their discretion/ commercial judgment allow over drawings in NRE A/c up to a limit of Rs. 50,000/- subject to the condition that such over drawings together with the interest payable thereon are cleared/repaid within a period of 2 weeks, out of inward remittances through banking channels or by transfer of funds from other NRE/ FCNR A/c.

What are permissible transactions in NRE a/c and FCNR a/c:

Ans.

Permissible Credits

Permissible Debits

· Remittances to India in any permitted currency

· Personal cheques drawn, traveller’s cheques, bank drafts in permitted currency

· Proceeds of foreign currency/bank notes during temporary visit to India   

· Transfers from other NRE/ FCNR a/c

· Interest accruing on the funds held in the account

· Current income in India (subject to tax payment)

· Maturity proceeds of any permissible investment originally made from NRE/ FCNR a/c

· Refund of share/ debenture subscriptions of to new issues of Indian companies if original subscription was made from NRE/FCNR a/c

· Refund of application/ earnest money/ purchase consideration on non-allotment/cancellation from builder/ developer (with interest) provided original payment was made from NRE/FCNR a/c

· Any other credit if covered under general or special RBI permission

· Local disbursements

· Remittances outside India

· Transfer to NRE/ FCNR a/c of   the account holder or any other person

· Investment in shares/securities/ commercial paper of an Indian company or for purchase of immovable property in India

· Any other transaction if covered under general or special RBI permission

 

What are the permissible transactions in NRO a/c:

Ans.

Permissible Credits

Permissible Debits

· Proceeds of remittances received in any permitted currency from outside India

· Permitted currency tendered during his temporary visit to India or transfer from Rupee accounts

· Legitimate dues in India

· Transfers from other NRO accounts

· Any amount received in accordance with RBI regulations

 

· All local payments in rupees including payments for investment subject to compliance with RBI regulations  

· Remittance outside India of current income in India of the account holder net of applicable taxes

· Transfers to other NRO a/c

· Settlement of charges on International Credit Card issued by AD Banks (subject to limits for repatriation)

What are conditions and permissible transactions in SNRR A/c:

Ans.
SNRR A/c can be opened only by a person resident outside India who has business interest in India.

Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of RBI.

The SNRR A/c should carry the nomenclature of the specific business and balances in such A/c should commensurate with the operations.

The operation of such A/c should not result in the account holder making available foreign exchange to a resident of India against reimbursement in rupees.

The debits and credits in SNRR A/c should be specific/ incidental to the business proposed to be done by the account holder.

Transfers from NRO A/c to SNRR A/c are prohibited.

The tenure of SNRR A/c should be concurrent to the tenure of contract/ period of operation/ business of the account holder and in no case the period should exceed 7 years from the date of opening of the account.

Transactions in SNRR A/c should be reported to RBI as per directions issued

Can AD banks issue International Credit cards to NRIs/ PIOs without prior approval of RBI?

Ans. Yes, AD Banks can issue International Credit Cards to NRIs/ PIOs without prior approval of RBI. Such transactions may be settled by inward remittance or out of balances held in the NRI/PIO’s NRO/ NRE/ FCNR A/c.

Can foreign tourists on short visit open a bank a/c in India?

Ans. Yes. Foreign tourists of non-Indian origin during their short visit to India can open a NRO a/c (Current / Savings) with AD Bank. Further, the balance in the NRO account may be paid to the account holder at the time of his departure from India 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 credits can be made to such a/cs?

Ans. Funds remitted from outside India through banking channels or funds obtained by sale of foreign exchange brought by tourists to India can be credited to NRO a/c.

Can the NRO a/c be used for making local payments?

Ans. Yes. Tourists can freely make local payments through NRO a/c.

Can foreign tourists repatriate the balance held in their NRO a/c at the time of departure from India?

Ans. AD Banks have been allowed to convert the balance in account for payment to the account holder at time of departure from India into foreign currency, provided the account has been maintained for a period not exceeding 6 months and account has not been credited with any local funds, other than interest accrued thereon.

Can foreign nationals resident in India open a resident a/c?

Ans. Yes. Foreign nationals employed in India holding valid visas can open and maintain a resident Rupee a/c in India subject to conditions.

Can AD Banks remit proceeds on closure of resident a/c opened by a foreign national resident in India to his overseas a/c?

Ans. Yes, AD Banks can remit proceeds of resident a/c opened by a foreign national resident in India (subject to payment of taxes). However, AD Banks should ensure that the funds to be repatriated outside India were either received from abroad or they are repatriable in nature or permissible by RBI.In order to facilitate such foreign nationals to collect their pending dues, AD Banks may, permit foreign nationals to re-designate their resident a/c maintained in India as NRO a/c on leaving the country after their employment to enable them to receive their pending bonafide dues, subject to conditions.

How much foreign exchange can be brought in while visiting India?

Ans. A person coming to India from abroad can bring foreign exchange without any limit. However, if aggregate value of foreign exchange in the form of currency notes, bank notes or traveller’s cheques brought in exceeds USD 10,000 or its equivalent and/ or the value of foreign currency alone exceeds USD 5,000 or its equivalent, it should be declared to Customs Authorities at the Airport in Currency Declaration Form (CDF) on arrival in India.