FEMA
  • Liberalized Remittance Scheme (LRS)
  • Borrowing And Lending
  • Acquisition of Immovable Property – FEMA
  • Banking Accounts

Who is eligible to remit funds outside India under Liberalized Remittance Scheme(LRS)?

Ans. Resident individualsare eligible to avail benefit of LRS. Also, persons other than individuals are eligible to avail benefits of LRS but only for few transactions subject to limits and conditions as specified in FEMA. The person must be a person resident in India as per FEMA. Once anindividual is a resident under FEMA, he is eligible to avail benefits of LRS, whether or not he is an Indian citizen.

What is the limit specified in LRS which can be utilized by a resident Indian to remit funds outside India?

Ans. A resident Indian can remit funds to outside India up to USD 250,000 per financial year per person (including minor individuals) subject to limits and conditions.

What are the permissible current account transactions under LRS for individuals?

Ans. Individual can avail of foreign exchange facility for the following purposes within the limit of USD 250,000 only. Any additional remittance in excess of the said limit for the following purposes shall require prior approval of RBI:

(i) Private visits to any country (except Nepal and Bhutan)
(ii) Gift or donation
(iii) Going abroad for employment
(iv) Emigration
(v) Maintenance of close relatives abroad
(vi) Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up.
(vii) Expenses in connection with medical treatment abroad
(viii) Studies abroad
(ix)    Any other current account transaction

Which current account transactions are the exceptionsas specified in the above Q.3?

Ans. Expenses in connection with the Emigration, medical treatment abroad and studies abroad are the exceptions as mentioned in the above Q.3. Individual may avail of exchange facility for an amount in excess of USD 250,000 as prescribed under LRS, if it is so required by a country of emigration, medical institute or the university respectively.

There is no monetary ceiling fixed by the Reserve Bank for remittances by use of international credit cards towards meeting expenses while such person is on a visit outside India. Use of ICC for payment in foreign exchange in Nepal and Bhutan is not permitted. Can remittances under the facility be consolidated in respect of family members?

Ans. Remittances under LRS can be consolidated in respect of family members (including minors) subject to the individual family members complying with the terms and conditions of the Scheme.

Can a resident Indiangive a loan abroad by using LRS?

Ans. Yes, a resident Indian can give a loan abroad to a close relative by using LRS as giving of loans is a permissible capital account transaction.

Can an individual, who has availed of a loan abroad as an NRI repay the same on return to India, under this scheme as a resident?

Ans. Yes.

Who are close relatives as per the above FAQ?

Ans. Close relatives include:

(a) Members of your Hindu undivided family; or
(b) Your spouse
(c) You are related to the beneficiary in any of the manners indicated below:

Who are close relatives as per the above FAQ?

What remittances are permissible under LRS for persons other than individuals?

Ans. Persons other than individuals can make remittances for:

i)    Donations for educational institutions;
ii)    Commissions to agents abroad for sale of residential flats/commercial plots in India;
iii)    Remittances for consultancy services and
iv)    Remittances for reimbursement of pre-incorporation expenses

within the limit and conditions laid down therein.

Persons other than individuals (such as corporates, trusts; etc.) can remit upto USD 2.50,000 under LRS Facility for any current account transaction as mentioned above.

Which capital account transactions are permitted for resident individuals under LRS?

Ans. The permissible capital account transactions by an individual under LRS are:

i)    Opening of foreign currency account abroad with a bank;
ii)    Purchase of property abroad;
iii)    Making investments abroad;
iv)    Setting up Wholly owned subsidiaries and Joint Ventures abroad;
v)    Extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013.

What is the procedure to remit funds under the LRS?

Ans. 1. Approach the Bank and notify them that you would like to engage in an outward remittance via demand draft, under LRS.
2. Form A2 will be presented to you in addition to the demand draft documentation. Form A2 is a declaration form. Under the form, you are required to attest that you have not breached the limit of USD 250,000 per financial year and state the purpose of the remittance. Form 15CA / CB is not mandatory for LRS transactions.
3. A Declaration form is required to be submitted to an Indian bank where a Resident Individual maintains the bank account from where the funds are to be remitted. (Application cum Declaration).
4. Apart from above, request for release of foreign exchange is to be given to AD Bank in case of transfer of funds overseas. (Application to Release forex)

We can help you to prepare and submit above documents and co-ordinate with AD bank for remittance.

What are the restrictions on the end use of the funds borrowed by a NRI from a resident close relative?

Ans. The loan shall be utilised for meeting the NRI’s personal requirements or for his own business purposes in India. It shall not be utilised for any of the activities in which investment by persons resident outside India is prohibited, namely in;

a)    the business of chit fund, or
b)    Nidhi Company, or
c)    agricultural or plantation activities or in real estate business, or construction of farm houses, or
d)    trading in Transferable Development Rights (TDRs).

Are there any restrictions on end use of the borrowed funds(in rupees) by a resident from an NRI/PIO?

Ans. The resident who has borrowed in rupees shall utilize such borrowed funds 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 re-lending.

However, RBI may permit resident entities to use such funds for on lending/relending to infrastructure sector or for keeping in FD’s with Indian Bank’s pending utilization by them for permissible end uses.

*The business of chit fund, as Nidhi Company, agricultural or plantation activities or real estate business; or construction of farm houses, or trading in TDRs.

Can an individual resident repay loans of close relative NRIs to banks in India?

Ans. Yes, where a Bank in India has granted loan to a NRI such loans may also be repaid by resident close relative of the NRI by crediting the borrower's loan account through the bank account of such relative.

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.

What are the conditions as per FEMA when an individual resident borrows from an NRI relative?

Ans. The following conditions are to be complied with:

a) The minimum maturity period of the loan should be one year;
b) The loan should be free of interest; and
c) Loan amount should not be remitted outside India.
d) Loan amount should be credited to the NRO account.
e) The repayment shall be made by way of inward remittance or debit to NRO/NRE/FCNR account or out of sale proceeds of shares/securities/immovable property against which such loan was granted.
f) The loan amount should be used for borrower’s personal requirements  or for his business purpose in India
g) The loan amount should be within the LRS Limit
h) Loan amount should not be used in business of chit fund/Nidhi Company/ agricultural or plantation activities or in real estate business, or construction of farm houses/trading in Transferable Development Rights (TDRs).

What are the conditions as per FEMA when an individual resident borrows from a NRI / PIO on non-repatriation basis?

Ans. A resident Indian may borrow in rupees on non-repatriation basis from a NRI / PIO resident outside India subject to the following conditions:

a) Loan shall be received by way of inward remittance from outside India or out of NRE / NRO / FCNR account of the NRI maintained with a Bank in India.
b) The period of the loan shall not exceed 3 years
c) Rate of interest shall not exceed 2% over the prevailing bank rate on the date of availing such loan.
d) The borrowed amount is not permitted to be repatriated outside India by the resident.

The payment of interest and repayment of loan shall be credited to the NRO account of the NRI.

Does an NRI / PIO who has acquired immovable property in India have to file any documents with the Reserve Bank of India (RBI)?

Ans. No documents needs to be filed.

Can a PIO obtain immovable property by way of inheritance / gift?

Ans. A PIO may acquire any immovable property (other than agricultural land/ plantation property / farm house) in India by way of gift from a person resident in India or an NRI or a PIO resident outside India.

A PIO may acquire any immovable property in India by way of inheritance from a person resident in India or a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force or FEMA regulations, at the time of acquisition of the property.

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

Ans. The PIO 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.

To whom can a PIO transfer a property by way of gift?

Ans. A PIO may transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India, who is a citizen of India or to a PIO resident outside India.

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

Ans. Yes, he can acquire or transfer immovable property in India, on lease, not exceeding five years. In such cases, there is no requirement of taking any permission of /or reporting to the RBI.

Can the branch / liaison office of a foreign company purchase immovable property in India?

Ans. A foreign company which has established a Branch office or Project office in India can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity, subject to certain conditions. A declaration is required to be submitted to RBI, in the prescribed Form.

However, if the foreign company has established a liaison office in India, it cannot acquire immovable property. They can acquire property by way of a lease not exceeding 5 years.

Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, HongKong and Macau  and who have set up Branch Offices in India would require prior approval of RBI.

Is there any lock in period for sale of residential / commercial property purchased out of inward remittance / debit to NRE / FCNR (B) account?

Ans. There is no lock in-period applicable for sale of such properties.

What are the restrictions placed on a Power of Attorney (POA) holder relating to NRE Bank account?

Ans. POA holder cannot open an NRE account on behalf of an NRI. POA holder can make payments local payments,make investments or remit to the account holder . The POA holder cannot give gift, repatriate or transfer to another NRE account.

What are the permitted credits to NRE account?

Ans. a) Proceeds of remittances to India in any permitted currency.Proceeds of personal cheques drawn by the account holder on his foreign currency account. Proceeds of foreign currency/bank notes tendered by account holder during his temporary visit to India. Transfers from other NRE/FCNR accounts
b) Interest accruing on the funds held in the account. Credits of current income.
c) Interest on Government securities and dividend on units of mutual funds
d) Maturity proceeds of Government securities. Sale proceeds of foreign investment in India where purchase consideration was paid out of such NRE / FCNR account.
e) Refund of share/debenture subscriptions
f) Refund of application/earnest money made by the house building agencies on account of non-allotment of flat/plot, together with interest(net of taxes)
g) Any other credit if covered under general or special permission granted by Reserve Bank.

What are the permitted debits to NRE account?

Ans. a) Local disbursements
b) Remittances outside India
c) Transfer to NRE / FCNR accounts
d) Investment in shares / securities / commercial papers of an Indian company or immovable property.
e) Any other transaction if covered under general or special permission granted by Reserve Bank.

Can an NRI overdraw his NRE account?

Ans. Banks may at their discretion allow over drawings in NRE savings bank accounts 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 two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.

Who can open an NRO account?

Ans. Any person resident outside India can open an NRO account in India.

What are the restrictions on opening NRO account by certain persons?

Ans. Opening of NRO accounts by individual/ entities of Pakistan and entities of Bangladesh require prior approval of Reserve Bank of India.

What are the permissible debits to NRO accounts?

Ans. a) All local payments in rupees including payments for investments as specified by the Reserve Bank
b) Remittance outside Indiaof current income like rent, dividend, pension, interest, etc., in India net of applicable taxes, of the account holder.

What are the permissible debits and credits in FCNR (B) accounts?

Ans. Same as NRE account.