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NRI (Non Resident Indian)
An Indian citizen who stays abroad for employment/carrying on business or vocation outside India or stays under circumstances indicating an intention for an uncertain duration of stay abroad is a non resident. Students going abroad for studies are also treated as NRIs.
Person of Indian Origin (PIO)
A foreign citizen (not being a citizen of Pakistan and Bangladesh) is deemed to be of Indian origin if- (a) He/She, at any time , has held Indian passport, or (b) He/She or either of his parents or any of his/her grandparents was a citizen of India by virtue of the Constitution of India or Citizenship Act,1955.
A spouse (not being a citizen of Pakistan and Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purpose provided the bank account are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses.
NRI ACCOUNTS
NRE Account (Non Resident External Account):

  • Rupee dominated Current, Saving, Fixed and Recurring deposits.
  • Principal and Interest fully repatriable
  • Can be opened jointly with NRI only
  • Exempted from Indian Income Tax
  • Term of Fixed deposits from 12 months to 10 years
  • Interest rate for TDs: LIBOR + 75 bps
  • Interest rate for SB: Six months USD LIBOR

FCNR Account ( Foreign Currency Non Resident Account):

  • Foreigh Currency Fixed deposit account in USD, GBP, EURO, CAD, AUD and JPY.
  • Principal and interest are fully repatriable.
  • Can be opened jointly with NRI only
  • Exempted from Indian Income Tax
  • Term of Fixed deposits from 12 months to 5 years
  • Interest Rate : LIBOR - 25 bps

NRO Account (Non Resident Ordinary Account):

  • Rupee dominated Current, Saving, Fixed and Recurring deposits.
  • Interest is repatriable and subject to TDS @ 30% + Surcharge, if applicable + Education Cess @ 2%.
  • Can be opened jointly with resident Indian (resident as second account holder).
  • Term of Fixed deposits from 7 days to 10 years
  • Interest rate is same as domestic deposits.

PIS (Portfolio Investment Schemes):

  • Investments in secondary market through a registered stockbroker on a recognized exchange.
  • All transactions through only one designated branch of a bank.
  • Exclusive NRE savings bank account & NRE Demat account for investments on repatriable basis.
  • Exclusive NRO savings bank account & NRO Demat account for investments on Non-repatriable basis.
  • Capitan Gain taxed on short-term investments.

FCTM Account (Foreign Currency Triple M-Money Multiplier Mode):

  • Rupee Fixed deposit with a forward contact in USD, GBP, EURO, CAD, AUD and JPY.
  • Depending on Market conditions optimizes yields vis-s-vis FCNR.
  • Crystallizes the yield in foreign currency, upfront.
  • Principal and Interest are fully repatriable.
  • Can be opened jointly with NRI only
  • Exempted from Indian Income Tax.
  • Term of Fixed Deposit generally for 1 year.
  • Liquidity through loans against such deposits.

RFC Account (Resident Foreign Currency Account):

  • For returning NRIs-(permanent settlement in India).
  • Foreign Currency SB/CS/TD accounts in USD, GBP, CAD, AUD and EURO.
  • Principal and Interest are fully repatriable.
  • Term of Fixed Deposit from 30 days to 5 years.

Features of various bank deposit schemes available to NRIs

Particulars

FCNR

NRE A/c

NRO A/c

Currency

USD,GBP,EURO,CAD,AUD and JPY

Indian Rupee

Indian Rupee

Type of Account

Term Deposits Only

Savings, Current, Recurring, Fixed Deposit

Savings, Current, Recurring, Fixed Deposit

Term(Fixed) Deposit

Min 1 year to Max 5 years

Min 1 year to Max 10 years

Min 7 days to Max 10 years

Who can open an account

NRIs/POIs*

NRIs/POIs*

Any person resident outside India*

Joint Account

In the names of two ot more non resident individuals

In the names of two or more non resident individuals

May be held jointly with residents-Legitimate dues of NRI can only be credited into this account

Loan/OD against TDs

Available in Foreign Currency and INR

Available in INR

Available in INR

Nomination Facility

Available

Available

Available

Repatriability

Principal & Interest fully Repatriable

Principal & Interest fully Repatriable

Principal not repatriable, Interest repatriable after payment of applicable taxes.Conditional repatriablility permited for bonafied purposes.

Minimum Balance Requirement

USD 1000/- or equivalent

SB: INR 5000
CA: INR 10000
TD: INR 10000
RD: INR 500

SB: INR 5000
CA: INR 10000
TD: INR 10000
RD: INR 500

SHARES
NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.
REPATRIABLE INVESTMENTS
NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24% scheme/51% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies. Non-resident investors are not required to apply for permission to invest. The company concerned will have to file a declaration in Form ISD together with the required documents to Reserve Bank within 30 days from the date of issue.
24% Scheme
Under the 24% Scheme, Indian companies engaged or proposing to engage in any activity including finance, hire purchase, leasing, trading or other services, establishment of schools/colleges, etc. (except agricultural/plantation activities) are allowed to issue shares/debentures to NRIs with repatriation benefits to the extent of 24% of the new issue.
51% Scheme
Under the 51% Scheme, NRIs/OCBs are permitted to subscribe to new issues of equity/preference shares and convertible debentures of any new or existing company on repatriation basis provided

  • The issue of equity/preference shares and convertible debentures to NRIs/OCBs with repatriation benefits does not exceed 51 per cent of the face value of each new issue of the company.
  • The shares of the company are not listed on any stock exchange, and
  • The company is engaged in manufacturing activity not being an activity specified in Annexure III to the Statement of Industrial Policy 19991 of Government of India amended from time to time.

    Investment under this scheme can be made for setting up new manufacturing projects or for expansion/diversification of their existing manufacturing activities.

There is no ceiling or restriction on the amount of remittable dividend under the 24% and 51% schemes. Remittance of interest/dividend to NRI investors will be allowed by authorised dealers under the powers delegated to them.
100% Scheme
Under 100% Scheme, NRIs are permitted to invest in high priority industries listed in Annexure III to the Statement on Industrial Policy dated 24th July 1991 of the Government of India up to 100% of the new issue. Dividend/interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is required to be balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. This requirement is enforced for a period of seven years from the commencement of commercial production.
The NRI investor need not apply to Reserve Bank for investment under the 24%, 51% or 100% schemes. Indian companies have been permitted to issue shares/convertible debentures to NRIs/OCBs.
Revival of sick industrial units
Other than above three schemes, NRIs are permitted to undertake revival of sick industrial units by making bulk investment in them to the extent of 100 per cent either by way of purchase of existing equity shares or in the form of subscription to new equity issues. The capital brought into India for revival of the sick unit can be repatriated.
Application for necessary permission to undertake revival of sick industrial units should be made by the Indian company to the Central Office of Reserve Bank in Mumbai in form RSU.
Investment by foreign collaborators
Under the existing Industrial Policy, investment by foreign collaborators upto 50%/51%/74% of the equity is allowed by Reserve Bank on repatriation basis in certain high priority industries. NRIs can take up the balance 50%/49%/26% equity in such cases on repatriation basis.
Investments in the new issue of equity shares/convertible debentures
Investment upto 100% in the new issue of equity shares/convertible debentures of Indian companies engaged in the following areas is allowed –

  • Development of serviced plots and construction of built up residential premises;
  • Real estate covering construction of residential and commercial premises (including business centres and offices;
  • Development of township;
  • City and region level urban infrastructure facilities including roads and bridges;
  • Manufacture of building material;
  • Financing of housing development.

Application for the purpose should be made by the concerned Indian company to the Central Office of Reserve Bank in Mumbai [in Form ISD(R)].
Repatriation of original investment
Repatriation of original investment will be permitted after a lock-in period of three years from the date of issue of the equity shares/convertible debentures. In addition, OCBs will be permitted to repatriate net profit (upto 16 per cent) arising from the sale of such investment after the lock-in-period of three years. (This facility is, however, not available to individual NRIs.) Annual dividend/interest on equity shares/debentures can, be freely remitted subject to payment of tax, however rate of dividend on preference share shall not exceed 300 basis points over the Prime Lending Rate of State Bank of India prevailing as on the date of the Board meeting of the company in which issue of such shares is recommended.
Investment in carrying on Air Taxi operations
Investments upto 100% equity participation for carrying on Air Taxi operations are permitted in terms of the guidelines issued by the Director General of Civil Aviation for Air Taxi operations. Reserve Bank has granted general permission to Indian companies engaged in Air-Taxi operations to issue shares subject to certain conditions. The concerned company should file a declaration in form ISD(R) within 30 days from date of issue to Reserve Bank.
Investment in non-convertible debentures
NRIs can invest in non-convertible debentures on repatriation basis. Application for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD(R).
Investment  in Mutual Funds
Reserve Bank has granted general permission to domestic mutual funds to issue units/similar instruments to NRIs/OCBs on both repatriation basis and non-repatriation basis.
Investment in Export Oriented Units
NRIs will be permitted to invest up to 100% in 100% Export Oriented Units subject to obtaining approval from the Government of India, Ministry of Industries (SIA) for setting up the EOU.
Acquisition of shares of PSEs
Reserve Bank has granted general permission to NRIs to acquire shares of PSEs on their bids being successful provided the holding of a single NRI investor does not exceed one per cent of the paid up capital of the PSE concerned, the purchase consideration/bid money is paid by way of remittance from abroad or by debit to his NRE/FCNR accounts.
Rights entitlement to NRIs
For issue of rights entitlement to NRIs, the concerned company should approach Reserve Bank for issue of rights entitlement to NRIs in the prescribed form if on repatriation basis. However, rights entitlement on non-repatriation basis would be covered by the general permission.
For renunciation of rights entitlement, NRIs can make an application to Reserve Bank by a letter detailing therein the folio number of the shares held and the manner in which the rights are being sold.
Issue of bonus shares
For issue of bonus shares, the concerned Indian company should approach Reserve Bank for issue of bonus shares to NRIs if the original investment is on repatriation basis. Issue of bonus shares in respect of investment on non-repatriation basis is covered by general permission.
Loans/overdrafts
Authorised dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis. Proceeds of the shares/debentures can be remitted abroad for liquidation of outstandings against such loans/overdrafts subject to payment of Income tax, Capital Gains tax etc. payable, if any.
NON REPATRIABLE
NRI or a Person of Indian Origin resident outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India, provided that

  • The amount invested is received either by inward remittance through normal banking channels or out of an account maintained with an authorised dealer/authorised bank by the non-resident Indian or the person of Indian origin in accordance with the relevant Regulations.
  • The firm or the proprietary concern is not engaged in any agricultural/plantation activity or real estate business, i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom
  • The amount invested shall not be eligible for repatriation outside India.
  • Where investment is made out of NRSR account of the non-resident investor, the income earned on investment or proceeds of investment shall be credited only to the NRSR account of the investor.

NOTE: A firm or a proprietary concern in India may make payment to such person by way of profit on such investment.
Indian companies have been granted general permission to accept investments on non-repatriation basis from NRIs, in shares/convertible debentures by way of new/rights issue provided the investee company is not engaged in agricultural/plantation activity or real estate business (excluding real estate development i.e. development of property and construction of house) or chit fund or is not a Nidhi company.
There are no formalities required to be completed by NRIs for getting the benefit of investment in new issues of Indian companies on non-repatriation basis. However, the firms/companies concerned are required to file declarations with Reserve Bank in form DIN giving particulars of the investments made, within ninety days from the date of the investment.
NRI/OCBs can make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institutions on non-repatriation basis.
NRIs can make investments in non-convertible debentures of Indian companies.
Purchase and sale of shares/convertible debentures by a Non-resident Indian (NRI) or an Overseas Corporate Body (OCB), on non-repatriation basis under following conditions -

  • Prohibition on purchase of shares/convertible debentures of certain companies

No purchase of shares or convertible debentures of an Indian company shall be made under this Scheme if the company concerned is a Chit Fund or a Nidhi company or is engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.
Explanation: For the purpose of this paragraph, real estate business shall not include development of township, construction of residential/ commercial premises, roads, bridges, etc.

  • Permission to purchase and/or sell shares/convertible debentures of an Indian company

Non-resident Indian or an Overseas Corporate Body may, without any limit, purchase on non-repatriation basis, shares or convertible debentures of an Indian company issued whether by public issue or private placement or right issue (Subject to provisions as per 1 above).

  • Method of payment for purchase of shares/convertible debentures

The amount of consideration for purchase of shares or convertible debentures of an Indian company on non-repatriation basis, shall be paid by way of inward remittance through normal banking channels from abroad or out of funds held in NRE/FCNR /NRO/NRSR/NRNR account maintained with an authorised dealer or as the case may be with an authorised bank in India. Provided that in the case of an NRI/OCB resident in Nepal and Bhutan, the amount of consideration for purchase of shares or convertible debentures of an Indian company on non-repatriation basis, shall be paid only by way of inward remittance in foreign exchange through normal banking channels.

  • Sale/Maturity proceeds of shares or convertible debentures

The sale/maturity proceeds (net of applicable taxes) of shares or convertible debentures purchased under this Scheme        shall be credited only to NRSR account where the purchase consideration was paid out of funds held in NRSR account        and to NRO or NRSR account at the option of the seller where the purchase consideration was paid out of inward        remittance or funds held in NRE/FCNR/NRO/NRNR account.
The amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad.
Reserve Bank has granted general permission to companies in India to enter the overseas addresses of the shareholders in their books in such cases provided the companies obtain undertakings from the holders that they will not seek repatriation of any sale proceeds of the security. So if you are a resident, and intend to become a non-resident, you needn't worry about the securities you currently hold.
Income/interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation as below -

  • Up to U.S. $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95;
  • Up to U.S. $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96;
  • The entire income earned during the financial year 1996-97 and onwards.

    The investment/principal amount of deposits made/held on non-repatriation basis (will, however, not be allowed to be repatriated abroad. Further funds held in NRSR accounts and/or interest/income accrued on funds held in these accounts will not be be allowed to be repatriated abroad.

In order to repatriate such income, NRIs should designate a branch of an authorised dealer through whom the remittance of income is to be made and make an application in form RCI to the designated branch giving details of incomes earned during the previous financial year along with a Chartered Accountant's Certificate. The designated branch will allow the remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant.
INSURANCE
Foreign currency
It means any currency other than the currencies of India, Nepal and Bhutan.
Currencies in which policies can be issued
Policies can be issued to:
(i) Residents in rupees
(ii) Non-residents in rupee or foreign currency
(iii) Returning Indians in foreign currency
Holding of a foreign-currency policy
A permanent resident of India cannot hold a foreign currency policy. However, a person resident in India but not permanently resident may continue to hold any insurance policy issued to him by an insurer outside India, if the premium on such policy is paid out of foreign currency resources outside India.
Maximum insurance cover allowed to NRIs
There is no limit. In case of foreign nationals of Indian origin, the cover is restricted to Rs 20 lakh for all policies taken together.
Payment of the premium by NRI
The manner of payment of premia under a policy are as follows:
a) For rupee policies on NRIs

  • By direct remittance from abroad through banking channels in approved manner or by remittances through postal channels like foreign money order.
  • By payment out of funds held in non-resident (external) account or foreign currency (non- resident) account with a bank in India.
  • By rupees derived by policy-holder by sale of foreign exchange such as foreign currency travellers cheques, demand drafts etc, provided encashment certificate issued by an authorised dealer in foreign exchange is provided.
  • By cheques drawn by non-resident policy-holder on bank accounts held in India in his own name (either solely or jointly with another member of the family) whether or not the account has been designated as non-resident.
  • By cheque drawn on account maintained by resident parent or spouse of policy-holder in their own name or joint names with other close relatives.
  • By the absolute assignee in India wherever such policies have been absolutely assigned to a resident in India.
  • By the employers in respect of policies issued to their employees who have been deputed abroad by them.
  • premia can be paid in cash by a resident parent or spouse of the non-resident policy-holder subject to his / her submitting a letter stating the relationship with the policy-holder.
  • premia due on policies issued to Indian students who have gone abroad for higher studies may be collected in rupees out of the resident bank account in India or any of their representatives in India by cash or cheques.

Note:
In respect of premia collected in cash from sources mentioned in 3 to 9, it should be noted that the policy moneys cannot be paid abroad in foreign exchange but has to be paid in India only.
b) For policies held on foreign register of LIC
Premia on foreign-currency / rupee policies issued by overseas branches of LIC and held on their foreign register should be collected only in foreign currency.
Loans permitted to NRIs on policies
Yes, loans are permitted. The rules governing settlement of claims apply on payment of loan as well.
Rules governing settlement of claims
The basic rule is that the payment of claims or surrender value in foreign currency will be permitted when

  • The claimant is permanently resident outside India and
  • All the premia under the policy have been paid in foreign currency or by remittances from abroad through approved channels.
  • Where the premia have been paid partly in Indian rupees and partly in foreign currency, the payment in foreign currency is in proportion to the amount of premia paid by remittance from

Payment of claim amount
Payment claim amount can be made freely in India (a) to the policy-holders themselves during their temporary visit to India (b) to the policy-holders' close relatives in India (c) by crediting the amount to policy-holder's resident or non-resident account with an authorised dealer in India.
Transfer of Records out of India
Records of a rupee life insurance policy cannot be transferred from an office in India to an office outside India without prior approval of the Reserve Bank. Such transfers are authorised only if transfer of actuarial reserves is not involved or the policy-holder is eligible for a capital transfer from India.
Taking of the policy document out of the country
A policy document cannot be exported out of the country without the permission of Reserve Bank of India, as a life insurance policy is regarded as security in terms of foreign exchange regulations.
Assignment of policy
Assignment is permitted if it is without any monetary consideration in favour of the policy-holder's non-resident wife or other dependent relatives. In other cases, permission from Reserve Bank is necessary.

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