Femaquickguidefornriscompatibilitymode 124676839438 Phpapp01

Foreign Exchange Management Act
Quick Guide for NRIs

CA Vinit V Deo
Chartered Accountant
Overview
Overview of Opportunities in FEMA
Definition of NRI
Possession & Surrender of Foreign Exchange
Bank Accounts
Loans to NRIs
Loans by NRIs Loans by NRIs
Investment in Immoveable Property
Investments in India
Starting a Business
Insurance Policies
Derivative Contracts
Remittance of Assets
Special Cases of Residents
Person Resident Outside India
Means a Person who is not a Resident in
India
Vinit V Deo
Definitions - NRI
Means a person resident outside India
who is a citizen of India or a person of
Indian Origin
Exception: Applicable only under the Foreign Exchange
Management (Remittance of Assets) Regulations
Means a person resident outside India
who is a citizen of India
Vinit V Deo
Case Study
Mr Kulkarni, a Senior Citizen, goes to USA for
medical treatment in March 2007. The Doctors
advise him that the medical treatment will last for
10 months and he decides to stay with his son in
California. He comes back in Jan 07. What his California. He comes back in Jan 07. What his
residential status for:
FY 2006-07
FY 2007-08
FY 2008-09
Vinit V Deo
Case Study
Pravin Shah, a software engineer is deputed by
his Company for an overseas assignment in
Australia for a period of 200 months starting 1
st
Jan 2007. What is his residential status for:
FY 2007-08
FY 2008-09
Would it make a difference if he was not deputed
by his company but went on his own accord to
work for the Company in Australia?
Vinit V Deo
Not Permanantly Resident
Means a Person resident in India:
For employment of a specified duration
(irrespective of the length), OR
for a specific job or assignment of a duration not for a specific job or assignment of a duration not
exceeding 3 years
Special Feature:
Can retain currency without limit travellers
cheques etc acquired/owned when he was a
resident outside India and brought into India
Vinit V Deo
Definitions - PIO
Means a citizen of any country other than of a
Prohibited Country,if
a) He at any time held Indian Passport: or
b) He or either of his parents or any of his grand- b) He or either of his parents or any of his grand-
parents were a citizen of India by virtue of the
Constitution of India or the Citizenship
Act,1955.or
c) The person is a spouse of an Indian citizen or
a person referred to in sub-clause (a) or (b).
Vinit V Deo
Prohibited Countries
Indian Citizens who are now taken citizenship / carry passport of the
following countries are not considered as PIOs i.e. they get the same
treatment as Foreigners under FEMA.
Regulation Prohibited Countries
Borrowing or Lending in Rupees Bangladesh,Pakistan
Remittance of Assets Bangladesh,Pakistan
Non Resident Accounts Bangladesh,Pakistan
Investment in Shares Bangladesh,Pakistan, Sri Lanka
Acquisition and Transfer of
Immoveable Property
Bangladesh,Pakistan, Sri Lanka,
Afghanistan, China,Iran,Nepal,
Bhutan
Vinit V Deo
PIO Card
Privileges
No Visa Required to come to India
No separate Student / Employment Visa
Exempt from registration requirement if single stay in India does
not exceed 180 days
Parity with NRIs in facilities in Economic, Social and Financial
field field
Validity 15 Years from the date of issue
How to Apply
Submit the prescribed Form accompanied by documentary
evidence that person is PIO
Form to be submitted to the Indian Embassy where the person is
a Resident
Fee is Rs 15,000 for (Rs 7,500 for children upto 18 years of age)
Vinit V Deo
Possession & Surrender of
Foreign Exchange Foreign Exchange
Vinit V Deo
Brining and Retention of Foreign
Exchange in India
Brining Foreign Exchange
ANY PERSON can at ONE TIME get the following amounts to India:
USD 5,000 of foreign currency
USD 10,000 in currency and travellers cheques including the
currency mentioned above
(Amounts in excess of above: Currency Declaration Form)
Retention of Foreign Exchange Retention of Foreign Exchange
PERSON RESIDENT IN INDIA can AT ANY GIVEN TIME retain
upto USD 2,000 only if the same are acquired are as follows:
Unspent amount out of foreign exchange purchase for foreign
travel
Payment for services outside India, if the services are not arising
from any business or anything done in India
Gift, Honorarium, payment for services or settlement received
from a Person Resident Outside India visiting India
Gift or Honorarium while on a visit outside India
Vinit V Deo
Surrender of Foreign Exchange
Periods of Surrender
180 days from:
In case of Receipt Date of Receipt
In case of any amount is unused Date of
Purchase Purchase
In case of unspent Date of return to traveller
Exchange brought back can be utilised for
next visit
Unspent exchange can also be deposited
in RFC (D) Account
Vinit V Deo
Bank Accounts
Vinit V Deo
Bank Accounts Which One?
NRE NRO
Used for international Used for local receipts Used for international
receipts and payments
Used for local receipts
and payments
Fully Repatriable Non-Repatriable (Now
repatriation allowed for certain types of
payments upto USD 1 Mn per year)
Vinit V Deo
Permissible Credits
NRE/FCNR (B) NRO
-Remittances from abroad
-Cheques, travellers cheques,
currency etc. deposited during
temporary visit to India
-Transfer from other NRE/FCNR
Account
- Remittances from Abroad
- Legitimate dues in India of the
Account holder
-Interest on funds in the Account
-Interest and maturity of Govt
securities and units of MFs if they
were bought in Foreign Currency
-Refund of share/debenture
subscription if original payment
made from NRE
-Refund of amount paid for flat
booking if paid in foreign currency
Permissible Debits
NRE / FCNR (B) NRO
-Local disbursements
-Remittances outside India
-Transfer to NRE / FCNR Account
of self or any other person
-Investment in shares,securities,
-Payment of local expenses
-Investments
-Remittance of current income out
of India net of taxes
-Investment in shares,securities,
commercial paper of Indian
company
-Purchase of immoveable property
Vinit V Deo
Bank Accounts - I
Non-Resident
(External)
Rupee Account
Foreign
Currency (Non
Resident) Bank
Account
Non Resident
Ordinary
Account
Popularly known
as
NRE Account FCNR (B)
Account
NRO Account
Currency in
which the
Account can be
maintained
Rupees Rupees
Pound Sterling,
US Dollar,
Deutsche Mark,
Japanese Yen,
Euro
Who Can Open NRI / PIO NRI / PIO Any Person
Resident outside
India (i.e. even
Foreigners)
Vinit V Deo
Bank Accounts - II
Non-Resident
(External)
Rupee Account
Foreign
Currency (Non
Resident) Bank
Account
Non Resident
Ordinary
Account
Type of Account
Current Account,
Savings Account,
Term (Fixed)
Deposit
Current Account,
Savings Account, Savings Account,
Recurring
Deposit, Fixed
Deposit
Deposit
Period of Fixed
Deposit is
between 1 and
3 years only
Savings Account,
Recurring
Deposit, Fixed
Deposit
Joint Accounts Only Between
NRIs / PIOs
Only Between
NRIs / PIOs
Account be held
jointly with
Residents
Vinit V Deo
Bank Accounts - III
Non-Resident
(External)
Rupee Account
Foreign
Currency (Non
Resident) Bank
Account
Non Resident
Ordinary
Account
When the Non
Resident
becomes a
- Account to be
redesignated as
Resident Account
NRI can ask for
redemption of the
deposit, or
Account to be
redesignated as
Resident Account
becomes a
Resident
Resident Account
i.e. normal bank
account in India,
or
- Funds in the
Account can be
transferred to
Resident Foreign
Currency Account
deposit, or
Deposit is allowed
to continue till its
due date and then
redeemed
Deposit is
converted into
resident Foreign
Currency Account
on maturity
i.e. normal bank
account in India
Vinit V Deo
Issues Bank Accounts
What happens to the Savings Bank Accounts when a resident
becomes a Non-Resident?
What happens to the NRE/NRO/FCNR Accounts when a non-
resident becomes a resident?
Can one open more than one Accounts:
With different branches of the same Bank
With different banks With different banks
Is money freely transferable between:
NRE to NRO and vice versa
NRE to FCNR and vice versa
NRO to FCNR and vice versa
Can the Accounts be opened and operated by a Power of Attorney
(POA) holder? Are there any restrictions on the transactions that a
POA holder can undertake?
Vinit V Deo
Remitting Money to India
Q:Are there restrictions / limits on sending
money to India?
A:No. They can send money in any form
without limit. without limit.
Exception: Loans to relatives in India
(Maximum Amount is USD 250,000)
Vinit V Deo
Loans to NRIs
Vinit V Deo
Loans to NRIs
Personal Loans
Loan for personal use against Shares,
Property etc.
Housing Loans Housing Loans
To purchase residential and commercial
property
Loans against Bank Accounts
Temporary Overdraft
NRI Employees of Indian Companies
Vinit V Deo
Personal Loans - I
Types:
Against Security
Security of shares or securities
Security of immoveable property other than Security of immoveable property other than
agricultural land, plantation or farm house
Other Loans
Vinit V Deo
Personal Loans Against Security
Purpose
Own personal requirements or for own business
purpose
Not to be utilised for business of chit fund, nidhi
company, trading in TDR, agricultural or real estate
business business
Loan amount not to be credited to NRE Account
Loan amount not to be remitted outside India
Repayment from
Remittance from outside India
Debit to NRE / FCNR / NRO Account of borrower
Sale of property against which loan is availed
Vinit V Deo
Other Loans I
Purpose
Any purpose as per the Loan Policy laid down
by the Board of Directors of the Authorised
Dealer except: Dealer except:
Chit Fund, Nidhi Company
Agricultural Loans, Plantation, Real Estate, Farm
House
Trading in TDR
Investment in Capital Market including margin
trading and derivatives
Vinit V Deo
Other Loans II
Other Conditions
Amount not to be credited to NRE / FCNR Accounts
Loan amount not to be remitted outside India
Repayment:
Remittance from outside India Remittance from outside India
Debit to NRE / FCNR / NRO Account of borrower
Sale of property against which loan is availed
Vinit V Deo
Housing Loans
Purpose: Purchase of Residential Property
No. of Properties: No Limit
Amount of Loan: No Limit
From Whom Can they Loans be availed From Whom Can they Loans be availed
Banks (SBI, ICICI etc) or Financial Institutions
(HDFC)
Bank Account in India: Not Required
Mortgage: Compulsory. In addition, Bank can
also take lien of borrowers other assets
Vinit V Deo
Housing Loans II
Repayment: The loan can be repaid in any
of the following 4 ways:
Transferring the amounts from your Bank
account outside India
Making the payments out of funds in NRE /
FCNR / NRNR / NRO Accounts in India
Rental Income of property which you have
acquired
Asking a relative in India to make the payment
on your behalf
Vinit V Deo
Housing Loans - III
Can Banks keep different terms and
conditions for NRI?
No. The quantum, repayment period and
margin money have to be same for margin money have to be same for
Residents and NRIs
Exception: Rate of Interest can be different
Vinit V Deo
Loans Against Bank Accounts
NRE / FCNR (B) NRO
To Account Holder / Third
Parties in India
Allowed
(Against security of FD
and for specified
Purposes as given in
next slide)
Allowed
(Against security of FD
and for specified
Purposes as given in
next slide)
Vinit V Deo
Foreign Currency Loan to
Account Holder / Third
Party outside India
Allowed (Against
security of funds held in
Account for any
bonafide purpose)
Not Allowed
All the above loans are now restricted to Rs 20 Lacs
General Features of Loans in India
General Features of Loans in India
Purpose of Loan
Personal or Business purposes
Investment in firms and companies on non-repatriation basis
Purchase of residential house for own use
Loan cannot be used for Relending, Agricultural /
plantation activities, Real estate business
Third Party can be Individual, Firms or Companies
No consideration e.g. commission can be paid to NRI for
agreeing to pledge his deposits
Vinit V Deo
Temporary Overdraft
NRE / FCNR (B) NRO
Maximum Amount Rs 50,000 As per Banks
judgement
Vinit V Deo
Period Maximum 2 Weeks As per Banks
judgement
NRI Employees of Indian
Companies
A Body Corporate registered in India or Indian Company
can grant loans to employees who are NRI / PIO
Loan to be accordance with the Staff Welfare Scheme /
Staff Housing Loan Scheme ie conditions to be same
Amount to be credited to NRO Account
Vinit V Deo
Amount to be credited to NRO Account
Repayment to be made by borrower himself through
remittance outside India or debit to NRE / FCNR / NRO
Account
Loans can be also given for buying ESOP subject to:
Maximum of Rs 20 Lacs
Loan amount not to exceed 90% of purchase price of shares
Questions
What happens to the Loan / Overdraft
given by the Bank to a Resident if he
become a Non-Resident?
How does one repay a Loan if the Lender
Vinit V Deo
How does one repay a Loan if the Lender
becomes a Non-Resident?
What happens when the borrower
becomes a Non-Resident
Solutions
An Authorised Dealer may allow continuance of
the loan subject to:
Period of the loan cannot exceed the period originally
granted
Repayment is made by inward remittances or from
Vinit V Deo
Repayment is made by inward remittances or from
NRE/FCNR/NRO Accounts
If the Lender becomes Non-Resident, amount
should be paid to his NRO A/c
If the Borrower becomes Non-Resident, he can
repay out of NRO / NRE Account
Loans by NRIs
Loans by NRIs
Loans to Individuals
Loans to Relatives
Loans to Companies
Loans against Bank Accounts Loans against Bank Accounts
As discussed in the Bank Accounts section
Loans to Individuals
NRI can given loan to any Resident
Principal is not repatriable
Loan to be given out of remittance outside
India or from NRE/NRO/FCNR Account
Vinit V Deo
India or from NRE/NRO/FCNR Account
Maximum Period of Loan: 3 Years
Interest: 2% over the Bank Rate
Loans to Relatives
Indian Resident can borrow only from Close
Relatives
Minimum maturity is 1 Year
Maximum Amount is USD 250,000
Loan is Free of Interest Loan is Free of Interest
Loan received from remittance outside India or
debit to NRE / FCNR Account
Loan amount if fully repatriable
Vinit V Deo
Loans to Companies
Company must be incorporated in India
Repatriation and Non Repatriation basis
Company is borrowing by way of Non-Convertible
Debentures issued by way of Public Offer
Rate of Interest :SBI PLR + 3%
Borrowing Company does not carry out activities of
agriculture, real estate, chit fund, nidhi fund
Period: Not less than 3 years
Vinit V Deo
Period: Not less than 3 years
Additional Conditions
Non-Repatriation basis: Remittance from outside India / NRE /
FCNR / NRO Account
Repatriation Basis
NRO Account not allowed for investment
Percent holding by all NRIs should be within FDI Limit
Immoveable Property
Immoveable Property - Eligibility
Definition of Person of Indian origin
excludes citizens of:
Pakistan
Bangladesh
Vinit V Deo
Bangladesh
Sri Lanka
Afghanistan
China
Iran
Nepal
Non-Resident India
What can be Acquired Any immoveable property other
than Agricultural property,
plantation or farm house
Payment Mode Remittance from outside India
or debit to non-resident account
Transfer of Agricultural Land, Only to person resident in India Transfer of Agricultural Land,
Plantation or Farm House
Only to person resident in India
Transfer of Any Other Property To:Person Resident in India
i.e. Indian Citizen, NRI, PIO,
Foreigner
Vinit V Deo
PIO Acquisition of Property
Type of Property Mode of
Acquisition
Status of Transferor
Any immoveable property
other than Agricultural
property, plantation or farm
house
Any Mode other
than Gift and
Inheritance
Resident (Indian and
Foreign Citizen)
NRI
PIO
Any immoveable property Gift Resident (Only Indian
Vinit V Deo
house
Gift Resident (Only Indian
Citizen)
NRI
PIO
Any Property Inheritance Resident (Indian and
Foreign Citizen) NRI
PIO
PIO Transfer of Property
Type of Property Mode of
Transfer
Status of Transferee
house
Sale Person Resident in
India ie. Resident. PIO
Foreign Citizen
Resident in India
Agricultural property, Gift, Sale Indian Citizen Agricultural property,
plantation or farm house
Gift, Sale Indian Citizen
Resident in India
Residential or Commercial
Property
Gift Resident
NRI
PIO resident outside
India
Foreign Citizen
Resident in India
Vinit V Deo
Remittance of Sale Proceeds
Purchase in Foreign Currency
Amount cannot exceed the remittance
originally made to acquire the property
In case of residential property, the remittance
Vinit V Deo
In case of residential property, the remittance
is restricted to 2 such properties
Purchased out of Rupee Funds
Entire amount, subject to a maximum of USD
1 Mn can be remitted
Investment in Securities
Definition of Securities
Shares, Stocks
Bonds
Debentures
Units of Mutual Fund
Vinit V Deo
Government Securities
Savings Certificates
Investment in Listed Cos.
Share / Convertible Debentures of an Indian Company
Through Registered Broker on a recognised Stock Exchange
Single NRI can invest upto 5% of Total Paid up value of shares /
debentures
Aggregate investment by all NRIs not to exceed 10% of Total
Paid up Value
This limit can be increased to 24% by the Company by passing a
Special Resolution in General Meeting
NRI has to take delivery of shares
Vinit V Deo
NRI has to take delivery of shares
Repatriation Basis: Payment must be made out of foreign
remittance, NRE, FCNR Account
Non-Repatriation Basis: Payment can be made out of NRO
Account
Investment in Listed or Unlisted Cos.
Shares / Convertible Shares of listed or unlisted
company
Shares can be issued by Public Issue or Private
Placement
Company cannot be chit fund, nidhi fund, real estate,
agriculture or plantation business
Vinit V Deo
Company cannot be chit fund, nidhi fund, real estate,
agriculture or plantation business
No limit on % of holding and amount of investment
Payment must be made out of foreign
remittance,NRE,FCNR, NRO Account
Amount of sale consideration, net of taxes to be credited
to NRO Account
Principal and gains are not repatriable
Housing & Real Estate
Only NRIs are allowed to invest upto
100% in the following:
Development of serviced plots and
construction of residential premises construction of residential premises
Development of townships
City & Regional level Infrastructure facilities
including roads and bridges
Manufacture of building materials
Vinit V Deo
Investment in Other Securities
NRI can without limit on Repatriation or
Non-Repatriation basis invest in:
Government dated securities, Treasury Bills,
Vinit V Deo
Bonds issued by PSU
Shares in PSU disinvestment
NRI can invest without limit on Non-
Repatriation basis:
National Plan / Certificates
Transfer of Shares
NRI can transfer shares or convertible
debentures only to other NRI by way of Sale
or Gift
If the Transferee has other venture or tie up or
collaboration etc in India in the same, prior
permission of Central Government required
The above permission is not required for
Vinit V Deo
The above permission is not required for
companies in IT sector
NRIs need prior permission of RBI to transfer
shares to person resident in India
Starting a Business in India
Proprietary Concern / Firm
NRI / PIO can invest in the capital of
Proprietary Concern / Firm on the
following conditions:
Amount received by inward remittance or
though non-resident Bank Account though non-resident Bank Account
Firm is not in the agricultural or plantation
activity or in real estate or Print Media
Amount invested is not eligible for repatriation
Vinit V Deo
Insurance Policies
Insurance Policies
General / Life Insurance Policies taken by a
Person when he was a Non-Resident can
continue after he becomes a Resident
If the premium has been paid by remittance
from India, the maturity proceeds have to be from India, the maturity proceeds have to be
brought back to India through Banking channel
within 7 days of receipt
Vinit V Deo
NRI can enter into Rupee Forward Contract to
hedge:
Dividend due on shares held in Indian Company
Balances held in FCNR and NRE Accounts
Investment made under the Portfolio Investment
Vinit V Deo
Scheme
Cross currency exposure in FCNR Account
Investment made in India since 1
st
Jan 93
Proposed Foreign Investment in India
Which assets can be remitted:
Deposit with Bank, Firm or Company
Provident Funds, Superannuation benefits
Maturity proceeds / claims from insurance
Vinit V Deo
Maturity proceeds / claims from insurance
company
Sale proceeds of shares or securities
Sale proceeds of immoveable property
Sale proceeds of any other assets held in
accordance with FEMA Regulations
Normal Remittance NRI / PIO
Upto USD 1 Million (Approx Rs 4 Crs) can be
remitted out of:
Balance in NRO Account
Sale proceeds of Assets
Assets acquired by way of legacy or inheritance
Vinit V Deo
If remittance is made in multiple installments, all
of them to be made through the same
Authorised Dealer
Some Provisions Applicable to
Residents Residents
Special Case:Indians going out
Amounts that can be freely taken out:
Immigration : USD 100,000 of the limit
prescribed by the destination country
Employment: USD 100,000
Vinit V Deo
Education: USD 100,000 per academic year
or estimate from the Educational Institution,
whichever is higher
Resident Foreign Currency A/c
Who can Open: A person Resident in India (ie all categories
including Firms, Companies etc.)
Type: Current or Term Deposit
Permissible Credits
Foreign Exchange Received:
As pension/any superannuation/other monetary benefits
On realised on conversion of assets referred in sub-section 6(4) &
repatriated to India repatriated to India
FE received as gift or inheritance
FE received as proceeds of Life Insurance claims / maturity /
surrender values
Permissible Debits: This A/c is free from all the restrictions
regarding utilisation of FC balance including any restriction on
investment in any form, by whatever name called outside India
Vinit V Deo
Resident Foreign Currency (Domestic)
Who can Open: Resident Individual (ie No Firms, Companies etc.)
Currency : Any foreign currency
Type: Current Account without interest
Permissible Credits
Only in the form of currency notes or travellers cheques received by
way of:
While on a visit abroad, payment for services not arising from any business
in India
Payment received as honorarium,gift or settlement of lawful obligation from
a person on a visit to India
Hororarium or Gift received on a visit outside India
Vinit V Deo
Hororarium or Gift received on a visit outside India
Unspent amount of foreign exchange taken for foreign travel
Gift from a close relative
Earning from Export of Goods or Services, Honorarium, Royalty or any other
lawful means
Disinvestment proceeds from sponsored ADR/GDR issue
Insurance claim or maturity value of life insurance policy
Permissible Debits
All Current and Capital Account transactions
No ceiling on amount of balance in the Account
USD 200,000 Scheme
A Resident Individual can freely remit
abroad upto USD 200,000 per financial
year
Purpose can be any capital or current Purpose can be any capital or current
account transaction
Resident can open a Bank Account with a
foreign bank for this purpose
Vinit V Deo
Thank You
Vinit Deo
+91 9822088313
vinitdeo@gmail.com

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Foreign Exchange Management Act

Quick Guide for NRIs

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