Status on a temporary visit

Under FEMA, intention of stay is relevant. Accordingly, it could be opined that if the intention is for a temporary visit / stay, the person would continue to be a non-resident. Section 2(v) of Foreign Exchange Management Act, 1999 (‘FEMA’).

Bank account status if NRI becomes resident

NRE accounts would have to be redesignated as resident accounts or converted into RFC (Resident Foreign Currency) Accounts.

Clause 7 of Schedule 1 of Regulation 5(1)(i) of Foreign Exchange Management (Deposit) Regulations, 2000.

FCNR(B) Accounts can be retained in their present form upto maturity and thereafter converted into RFC Accounts.

Clause 10 of Schedule 2 of Regulation 5(1)(i) of Foreign Exchange Management (Deposit) Regulations, 2000.

NRO Accounts have to be redesignated as resident accounts.

Clause 8(b) of Schedule 3 of Regulation 5(1)(i) of Foreign Exchange Management (Deposit) Regulations, 2000.

NRIs who return to India can freely maintain and operate their foreign currency accounts with banks abroad, but are restricted from opening new ones.

Section 6(4)) of FEMA

Foreign currency account outside India

There is a general restriction on opening new FC accounts outside India. However, it could be opined that if the foreign currency is inherited, then it may be possible to open a new account.

Specified classes of persons such as an exporter who has undertaken construction / turnkey contracts outside India, exporting services on deferred payment basis, studying in foreign countries, are allowed to open foreign currency accounts abroad, subject to certain conditions. Any other person on specific permission may be allowed to open a bank account outside India, if he is able to substantiate the need for the same. Clauses (5) to (8) of Regulation7 of FEM (Foreign Currency Accounts) Regulations, 2000

Status of securities/immoveable property acquired abroad

A person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was

• acquired, held or owned by such person when he was resident outside India or

• inherited from a person who was resident outside India.

Section 6 of the FEMA and FEM (Transfer or Issue of Foreign Security) Regulations,2000.

Details of RFC account

NRIs are permitted to open, hold and maintain a Resident Foreign Currency (RFC) Account to keep their foreign currency with Banks in India.

The balances in NRE/FCNR (B) accounts and other foreign exchange funds brought in by the NRI at the time of return and subsequently from the assets maintained abroad can be freely invested in RFC accounts.

What can be credited

• Payments received in foreign currency for services not arising from any business or anything done in India (pension received from abroad).

• Unspent amount from travel abroad

• Gift from a non-resident

Permitted debits

• Payments for current account and permitted capital account transactions in accordance with FEMA regulations (eg. Investment outside India, payment of obligations, etc ).

• No restriction on payments in Rupees.

(Regulation 5A FEM (Foreign Currency Accounts by a Person resident in India) Regulations, 2000)

If the Returning Indian subsequently goes abroad to become an NRI, the balance in his RFC account can be converted to an NRE/FCNR(B) account. Tax on the interest income from RFC account is exempted till such time as the Returning Indians maintain the status of 'Resident but Not Ordinarily Resident'.

RFC account can be maintained in any foreign currency (other than currency of Nepal or Bhutan) with permission from RBI.