- What are the bank term deposit options available in India to Non-resident Indians (NRIs) and what are their features?
NRIs can have both foreign currency and rupee deposits with banks. The foreign currency deposits are FCNR (B) Account [Foreign Currency Non-Resident (Bank)] Account. Such deposits can be opened in Foreign currencies, such as, USD, GBP, Euro and Japanese Yen. These are term deposits for term ranging from 1 to 3 years, carrying market determined interest rates and offer the facility of full repatriation to the depositor on maturiy.
NRI rupee deposit schemes are NRE [Non-Resident (External)] Rupee Account, which is repatriable and NRO Account [Non-Resident Ordinary Account], which is non-repatriable. These can be opened as Savings, recurring, current accounts and term deposits. Current accounts do not carry any interest. Other deposits carry interest as determined by Banks. The interest is repatriable in both NRE and NRO accounts.
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- Can NRIs invest their funds in Government securities or Units of Unit Trust of India (UTI)?
Yes. In terms of the regulations framed under the Foreign Exchange Management Act, 1999 (FEMA), NRIs can invest their funds in Government securities or Units of Unit Trust of India (UTI), subject to the relevant terms and conditions of such funds.
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- Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
Yes. NRIs can invest in National Savings Certificates issued by Post Offices in India, on non-repatriation basis.
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- Can Government securities/units be freely transferred or sold among NRIs and resident Indians?
In terms of paragraph 4 of Schedule 5 under Notification FEMA.20 / 2000 RB dated 3rd May 2000, NRIs who purchase Government Securities/ units of Mutual Funds may sell such securities through registered stock broker through recognised Stock exchange or tender them back to the issuers for re-purchase or on maturity for repayment.
Transfer to another NRI is not barred by FEMA, if the purchase of such securities / units was made on repatriation basis.
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- Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?
NRIs can repatriate the sale proceeds of Government securities / Units of domestic mutual funds, provided the purchase consideration was by inward remittance of foreign exchange through normal banking channels or out of funds held in NRE/FCNR (B) accounts of the purchaser.
The sale proceeds of National Savings Certificates issued by Post Offices in India are non-repatriable.
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- Are NRI’s permitted to invest in proprietary/partnership concerns in India and shares/debentures of Indian companies?
Yes. NRIs are permitted to invest in proprietary/ partnership concerns in India, on non-repatriation basis, subject to the regulations contained in Notification. No.FEMA 24/2000 RB dated 3rd May 2000.
NRIs are allowed to invest in shares / debentures of Indian Companies in terms of Notification No.FEMA 20/2000 RB dated 3rd May 2000. This Notification covers three different investment avenues. (I) Foreign Direct Investment Scheme (FDI) under Schedule 1 and Portfolio Investment Scheme under Schedule 3 on repatriation basis. NRIs can also invest on non-repatriation basis in terms of Schedule 4 without any percentage ceiling. However NRI investments in Companies engaged in Agricultural/ plantation / Real Estate business / Chit fund and Nidhi business are not permitted.
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- Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non- repatriation basis?
Schedule 4 of Notification No.FEMA 20/2000 RB dated 3rd May 2000 gives general permission for NRIs to invest in proprietary/partnership concerns on non-repatriation basis. Therefore, no permission from RBI is necessary for such investments.
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- Is permission of Reserve Bank required for making investments in new issues of Indian companies on non- repatriation basis?
No permission of RBI is required for making investments in new issues of Indian Companies on non-repatriation basis.
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- Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?
No formality has been prescribed for getting the benefit of the general permission to NRIs, covered under queries nos 7 & 8.
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- Can NRIs make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institution on non/repatriation basis?
Notification No.FEMA 20/2000 RB - Schedule 5 paragraph 2 permits NRI investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks, without limit, on non-repatriation basis.
Investment in public/private sector financial institution on non/repatriation basis is permitted as stated in query 8 above.
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- Can Overseas Corporate Bodies make similar investments in mutual funds on non-repatriation basis?
Yes. In terms of Paragraph 2 of Schedule 5(4) of Notification FEMA.20 / 2000 RB dated 3rd May 2000, Overseas Corporate Bodies (OCBs) may invest in units of domestic mutual funds, on non-repatriation basis.
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- Can NRIs make investments in non-convertible debentures of Indian companies?
Yes. Indian Companies are allowed to borrow from NRIs in Indian Rupees by issue of Non-convertible Debentures (NCDs), both on repatriable and non-repatriable basis, subject to the terms and conditions of Notification FEMA 4/2000 RB dated 3rd May 2000. Repatriation is allowed on those NCDs, where the investment is made from out of funds from abroad / NRE or FCNR balances.
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- Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?
The resident holder of securities in an Indian Company will have to inform the company about his change of status to non-resident. The Company, in turn, shall apply to RBI for recording in its book the residential status / address of the shareholder, in terms of Proviso to Regulation 4 of Notification FEMA 20/2000 RB dated 3rd May 2000.
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- Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?
Yes. Income / interest earned on investments / deposits held in India by NRIs on non-repatriation basis is ‘current income’ and is allowed to be repatriated outside India, net of taxes.
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- What is the procedure to be followed for seeking repatriation in such cases?
NRIs seeking repatriation of income may approach bankers for repatriation. NRIs, who are liable to pay tax in India, shall furnish a Chartered Accountant Certificate that the applicable taxes have been paid in India. In case NRIs have no taxable income in India, they shall submit a declaration to this effect, in duplicate to their bankers for repatriating the income.
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- What are the schemes available to NRIs for direct investments in India with repatriation benefits? What are the details of such schemes?
NRIs are allowed to invest in business in India under Foreign Direct Investment scheme, subject to the regulations contained in Schedule 1 of Notification FEMA.20 / 2000 RB dated 3rd May 2000.
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- How does an NRI obtain permission of Reserve Bank for investment under the above schemes?
In terms of compliance and procedures, the Foreign Direct Investment is divided into two parts:
1) Prior Government approval is required only for industries listed in Annexure A to the Notification FEMA.20 / 2000 RB dated 3rd May 2000.
2) No prior permission is required for investment made in industries covered in Annexure B, to the above Notification, subject to the sectoral cap prescribed therein. In such cases, only post-investment declaration is prescribed for the company.
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- Can NRIs make investments in companies engaged in real estate development in India?
Yes. Notification FEMA.20 / 2000 RB dated 3rd May 2000, in Annexure B permits NRI investment in companies engaged in housing and real estate development up to 100 per cent of share capital of the company.
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- What is the procedure for obtaining Reserve Bank permission in this regard?
Since investment in companies engaged in housing and real estate development is placed under Foreign Direct Investment, no permission is required from RBI. In such cases, only post-investment declaration is prescribed for the company.
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- Will repatriation of the original investment and/or dividend income be freely permitted?
Investments in respect Foreign Direct Investment covered under Schedule 1 to Notification FEMA.20 / 2000 RB dated 3rd May 2000 is repatriable. Repatriation of sale proceeds of such investments is subject to compliance with Regulation 9 and 10 of the above Notification. Dividend, being current income, is repatriable in all cases.
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- Are there any restrictions on repatriation of the investment made under this scheme or income earned thereon?
Once the investment is permitted on repatriation basis, there are no restrictions on repatriation of the investment. Income (or dividend), being current income, are freely allowed to be repatriated, net of taxes.
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- Can NRIs invest in non-convertible debentures on repatriation basis?
Yes. NRIs can invest in Non-convertible debentures on repatriation basis, subject to the conditions laid down in Regulation 5 of Notification No.4/2000-RB dated 3rd May 2000.
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- What is the procedure to be followed for making investment in the schemes of domestic Mutual Funds or public sector bonds with repatriation benefits?
NRIs who makes investment in domestic Mutual Funds or Public Sector Bonds, with repatriation benefits shall make payment either by inward remittance through normal banking channels or out of funds held in NRE/FCNR account.
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- Can NRIs invest in 100% Export Oriented Units on repatriation basis?
Yes. NRIs can invest in 100% Export Oriented Units on repatriation basis, provided such investment is within the sectoral ceilings prescribed in Annexure B to Notification FEMA 20/2000 RB dated 3rd May 2000.
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- Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Yes. Sale of shares by Public Sector Enterprises (PSEs) to NRIs is a sale by a resident in favour of a non-resident, and as such, shall comply with the procedure prescribed under Regulation 10A of Notification FEMA 20/2000 RB dated 3rd May 2000. In terms of this Regulation such sale require prior Government approval for transfer and thereafter, RBI approval is also required. Also, shares in PSE s being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.
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- Can NRIs obtain loans abroad against the collateral of share/debentures of Indian companies?
There is no prohibition under FEMA in NRIs obtaining loans abroad against the security of shares in Indian companies, provided the said shares are held by them on repatriable basis.
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- Can sale proceeds of the shares/debentures be remitted abroad for liquidation of outstanding against such loans/overdrafts?
Yes. Shares / debentures, purchased on repatriation basis can be free sold and repatriated out of India. Use of such sale proceeds for liquidation of outstanding loans is not governed by FEMA, and NRIs may make use of such funds for any purpose, including liquidation of outstanding loans.
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- Can NRIs keep deposits with companies in India with repatriation benefits?
Yes. NRIs can invest in deposits with companies in India, on repatriable basis, under general permission given under Regulation 7 (1) of Notification FEMA 5 / 2000-RB dated 3rd May 2000. The conditions subject to which such deposits could be held is set out in Schedule 6 to the above notification, which include that the amount for such deposits has to be remitted from abroad or the deposit has to be made out of repatriable funds like NRE/ FCNR deposits in banks held by investing NRIs.
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- Do NRIs need permission of Reserve Bank for placing funds in fixed deposits with firms/companies on non- repatriation basis?
No.
NRIs do not need permission of Reserve Bank for placing funds in
fixed deposits with firms/companies on non-repatriation basis.
General permission has been given for such deposits in terms of
Regulation 7(2) of Notification No. 5 / 2000-RB dated. 3rd
May 2000. The conditions subject to which such deposits could be held
are set out in Schedule 7 which include that companies accepting
these deposits shall not utilise the amount of deposits for
undertaking agriculture / plantation activities or real estate
business. Such companies shall not invest in any other concern or
firm or company engaged in or proposing to engage in agriculture /
plantation activities or real estate business.
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- Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies?
Yes. NRIs are
permitted to invest in Commercial Paper (CP) issued by Indian
companies as per Regulation 8 of Notification No. 5 / 2000 RB dated
3rd May 2000. The issue of such CP should be in compliance with
Non-Banking (Acceptance of Deposits through Commercial Paper)
Directions, 1989, issued by the RBI. The CP is non-transferable and
the amount invested in CPs is not eligible for repatriation.
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- Can NRIs bring gold into India and if yes, how often?
NRIs are allowed to bring (import) gold (including ornaments) into India upto 10 Kgs, subject payment of Customs Duty, under Baggage Rules of the Government of India when they return to India.
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- In what form can the gold be brought into India?
NRIs, when they return to India, can import Gold into India in the form of Jewellery ornaments or gold bars.
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- Are NRIs required to pay customs duty on the gold brought by them into India?
Yes. The customs duty is payable in convertible currency at the rate of Rs. 250 per 10 grams, if the imported gold is in the form of tola bars. However, if the imported gold is in the form of gold bar (other than tola bars) bearing the manufacturer’s or refiner’s engraved serial numbers and weight expressed in metric units, and on gold coins, the duty will be Rs.100 per 10 gms.
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- Is it necessary that the NRI should have stayed abroad at least for a minimum period of six months prior to his return to India for being eligible to bring gold?
Yes. It is necessary that the NRI should have stayed abroad for a period not less than six months for being eligible to bring gold into India.
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- Can NRIs bring silver into India?
Yes. NRIs can bring 100 Kgs of silver (including ornaments) into India, if they come to India after a period of not less than six months of stay abroad.
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- What is the rate of duty payment on such import?
Customs duty at the rate of Rs.500 per Kg is payable by importer-NRI in convertible currency.
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- Can they bring both gold and silver?
Yes. NRIs can bring both gold and silver as per applicable Baggage Rules, indicated above.
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- Can NRIs sell gold/silver imported by them to residents?
Yes. NRIs can sell the gold and silver brought by them into India to residents and such sale proceeds cannot be repatriated outside India and can only be credited to the Non-repatriable bank accounts (NRO) of the selling NRIs.
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