NRIs whether they are Indian pass port holders or foreign
passport holders, including second, third and fourth generation
NRIs have made the country proud by their hard work and achievements
in their adopted countries. Many of the NRIs who had left
the shores of India with only education provided by the country
and inherent entrepreneurial capabilities, have established
themselves as prominent citizens in their adopted countries
as entrepreneurs, businessmen, professionals and skilled workmen.
However, their ties with their motherland are strong and they
have the desire to contribute to the economic and social development
of their motherland. NRIs have the potential for investment
and providing entrepreneurial and professional skills for
the economic development of India.
India embarked on the path of liberalisation in 1991. Since
then the Government has been progressively liberalising the
industrial policy, the foreign collaboration policy, trade
policy and bringing in economic and financial reforms to attract
investments. Appreciating the role of Non-Resident Indians
in the economic development of the country, the Government
has progressively announced various schemes to facilitate
investment by Non-Resident Indians.
The following paragraphs attempt to highlight special facilities
provided by the Government of India and Reserve Bank of India
to Non-resident Indian Nationals, Persons of Indian Origin
and Overseas Corporate Bodies.
For the purpose of investments in India, a Non-Resident Indian
(NRI) means persons resident outside India or who is a citizen
of India or is a person of Indian Origin.
Person of Indian Origin (PIO) means a citizen of any country
other than Bangladesh, Pakistan or Sri Lanka, if
a) he at any time held Indian passport; or
b) he or either of his parent or any of his grand-parents
was a citizen of India by virtue of the Constitution of India
or the Citizenship Act, 1955 (57 of 1955); or
c) the person is spouse of an Indian citizen or a person referred
to in sub-clause (a) or (b);
Overseas Corporate Body (OCB) means a company, partnership
firm, society and other corporate body owned directly or indirectly
to the extent of at least sixty per cent by Non-resident Indians
and includes overseas trust in which not less than sixty per
cent beneficial interest is held by Non-resident Indians directly
or indirectly but irrevocably.
With the recent liberalisations in foreign direct investment
policies announced, foreign direct investments including NRI
investments up to 100% with repatriation benefits can be made
without any prior approval except where: -
· Industrial Licence is required,
· Certain specified activities like banking, civil
· FDI is sought in excess of specified sectoral caps,
· Locational criteria is attracted,
· The foreign entity has previous tie-ups in India
A trading company incorporated in India may issue shares/convertible
debentures up to 51%. In the case of items reserved for Small
Scale Sector, or companies registered as Small Scale Units,
shares/convertible debentures up to 24% only can be issued.
In addition, the following special schemes are available for
· Export Oriented Units
· Free Trade Zone/Export Processing Zones
· Software Technology Parks
· Electronic Hardware Technology Parks
· Special Economic Zones
The investment by the NRI/OCB can be either through inward
remittance through normal banking channels or from the NRE/FCNR
(B) account of the investor.
The Indian company is required to give a report in form FC-GDR
with relevant documents, within 30 days of issue of shares.
Where the company is not eligible for automatic approval,
prior approval from the Secretariat for Industrial Assistance/Foreign
Investment Promotion Board of the Government of India is required.
Indian Company can, with the approval of the Ministry of Finance,
issue American Depository Receipts/Global Depository Receipts.
Special facilities are available for investment by NRIs and
100% investment with repatriation benefits is allowed in the
following areas: -
· Development of serviced plots and construction of
· Investment in real estate covering construction of
residential and commercial premises including business centres
· Development of townships
· City and regional level urban infrastructure facilities
including both roads and bridges
· Investment in manufacture of building materials
· Investment in participatory ventures in the above
· Investment in Housing Finance institutions
NRI/OCB holding up to 40% permitted including equity participation
by other foreign investors. Foreign banking companies or finance
companies including multilateral financial institutions permit
foreign investment up to 20%. Multilateral institutions are
allowed to invest within the overall foreign direct investment
cap of 40% in case of shortfall in investment by NRIs.
Prior permission is required for such investments.
100% investment by NRIs/OCBs is permitted. Prior permission
is required for such investments.
NRI or OCB may without any limit purchase on non-repatriation
basis shares or convertible debentures of an Indian company
issued by public issue or private placement or right issue.
The amount invested in shares or convertible debentures and
the capital appreciation thereon shall not be allowed to be
Note: Purchase of shares or convertible debentures of an Indian
company engaged in agricultural/ plantation activities or
real estate business or construction of farm houses or dealing
in Transfer of Development Rights and Nidhi companies and
chit funds shall not be permitted.
Non Resident Indian Nationals and Persons of Indian Origin
resident outside India may invest by way of contribution to
the capital of a firm or proprietary concern in India provided:
a) Amount invested is received either by inward remittance
through normal banking channels or out of permissible accounts
maintained with an authorised dealer/bank.
b) The firm or proprietary concern is not engaged in agricultural/plantation
activity or real estate business.
c) Amount invested shall not be eligible for repatriation.
d) Where investment is made out of NRSR account the income
earned on investments or proceeds of investments shall be
credited only to the NRSR account.
The Indian Company/Firm/Proprietary concern is required to
file a declaration with the Reserve Bank of India in form
DIN, within 90 days.
· A Non-resident Indian or an Overseas Corporate Body
may, without limit, purchase on repatriation basis -
a) Government dated securities (other than bearer securities)
or treasury bills or units of domestic mutual funds;
b) Bonds issued by a public sector undertaking (PSU) in India;
c) Shares in Public Sector Enterprises being disinvested by
the Government of India, provided the purchase is in accordance
with the terms and conditions stipulated in the notice inviting
· A Non-resident Indian or an Overseas Corporate Body
may, without limit, purchase on non-repatriation basis, dated
Government securities (other than bearer securities), treasury
bills, units of domestic mutual funds, units of Money Market
Mutual Funds in India or National Plan/Savings Certificates.
NRIs may purchase/sell shares and/or convertible debentures
of an Indian company, through a registered stock broker on
a recognised stock exchange, subject to the following conditions:
a) The NRI designates a branch of an authorised dealer for
routing his/its transactions relating to purchase and sale
of shares/convertible debentures under the schemes and route
all such transactions only through the branch so designated.
b) The paid up value of shares of an Indian company purchased
by each NRI both on repatriation and on non-repatriation basis
does not exceed 5% of the paid up value of shares issued by
the company concerned.
c) The paid up value of each series of convertible debentures
purchased by each NRI both on repatriation and non-repatriation
basis does not exceed 5% of the paid up value of each series
of convertible debentures issued by the company concerned.
d) The aggregate paid up value of shares of any company purchased
by all NRIs does not exceed 10% of the paid up capital of
the company and in the case of purchase of convertible debentures
the aggregate paid up value of each series of debentures purchased
by all NRIs does not exceed 10% of the paid up value of each
series of convertible debentures. Provided that the aggregate
ceiling of 10% may be raised to 24% if a special resolution
to that effect is passed by the General Body of the Indian
e) The NRI investor takes delivery of the shares purchased
and gives delivery of the shares sold.
f) Payment for purchase of shares and/or debentures is made
by inward remittance in foreign exchange through normal banking
channels or out of funds held in NRE/FCNR Account maintained
in Indian if the shares are purchased on repatriation basis
and by inward remittance or out of funds held in NRE/FCNR/NRO/NRNR/NRSR
account of the NRI concerned maintained in India where the
shares/debentures are purchased on non repatriation basis.
g) The OCB informs the designated branch of the authorised
dealer immediately on the holding/interest of NRIs in the
OCB becoming less than 60%.
The net sale/maturity proceeds of shares and/or the designated
branch of the authrorised dealer may allow debentures of an
Indian company purchased by NRI/OCB under this scheme: -
a) To be credited to NRSR account of the NRI/OCB investor
where the payment for purchase of shares and/or debentures
sold was made out of funds held in NRSR account, or
b) To be credited to his/its NRO/NRSR account where the shares
and/or debentures were purchased on non-repatriation basis,
at the investors option, or
c) To be remitted abroad or credited to his/its NRE/FCNR/NRO/NRSR
account where the shares and/or debentures were purchased
on repatriation basis at the investor's option.
General permission has been granted for transfer of shares/convertible
debentures by a person resident outside India as under:-
· For transfer of shares/convertible debentures held
by a person resident outside India other than NRI/OCB to any
person resident outside India provided that the transferee
should have obtained permission of Central Government if he
had any previous venture or tie-up in India through investment
in any manner or a technical collaboration or trade mark agreement
in the same field or allied field in which the Indian company
whose shares are being transferred is engaged;
· NRIs/OCBs are permitted to transfer shares or convertible
debentures of Indian company to another NRI/OCB;
· A person resident outside India is permitted to transfer
shares/debentures of an Indian company to a resident by way
Under the terms of a notification issued by the Reserve Bank
of India on November 29, 2001, OCBs, who earlier enjoyed the
facility of Portfolio Investments, will henceforth not be
allowed to do so. However, OCBs that have already made investments
under the Portfolio Investment Scheme, may continue to hold
such shares/convertible debentures till such time these are
sold on the stock exchange. It was, however, clarified that
OCBs will continue to enjoy the facilities of opening and
maintaining non-resident accounts as hitherto. OCBs would
also continue to be eligible for making direct investment
(FDI), under Foreign Exchange Management (Transfer or Issue
of Security by a Person Resident outside India) Regulations,
2000 issued vide Reserve Bank Notification No. FEMA 20/2000-RB
dated May 3, 2000, as amended from time to time.
Eligibility and conditions:
· Non-resident Indians (NRIs) and Overseas Corporate
Bodies (OCBs) are permitted to open and maintain these accounts
with authorised dealers and with banks (including co-operative
banks) authorised by the Reserve Bank of India (RBI) to maintain
· The account should be opened by the non-resident
account holder himself and not by the holder of the power
of attorney in India. (opening NRE accounts in the names of
individuals/entities of Bangladesh/Pakistan nationality/ownership
requires approval of RBI).
Types of Accounts
Accounts can be in the form of savings, current, recurring
or fixed deposit accounts.
Proceeds of remittances to India in any permitted currency.
· Proceeds of personal cheques drawn by the account
holder on his foreign currency account and of travellers cheques,
bank drafts payable in any permitted currency including instruments
expressed in Indian rupees for which reimbursement will be
received in foreign currency, deposited by the account holder
in person during his temporary visit to India, provided the
authorised dealer/bank is satisfied that the account holder
is still resident outside India, the travellers cheques/drafts
are standing/endorsed in the name of the account holder and
in the case of travellers cheques, they were issued outside
· Proceeds of foreign currency/bank notes tendered
by account holder during his temporary visit to India, provided
(i) the amount was declared on a Currency Declaration Form
(CDF), where applicable, and (ii) the notes are tendered to
the authorised dealer in person by the account holder himself
and the authorised dealer is satisfied that account holder
is a person resident outside India.
· Transfers from other NRE/FCNR accounts.
· Interest accruing on the funds held in the account.
· Interest on Government securities and dividend on
units of mutual funds, provided the securities/units were
purchased by debit to the account holder's NRE/FCNR account
or out of inward remittance through normal banking channels.
· Maturity proceeds of Government securities including
National Plan/Savings Certificate as well as proceeds of Government
securities and units of mutual funds sold on a recognised
stock exchange in India and sale proceeds of units received
from mutual funds, provided the securities/units were originally
purchased by debit to the account holder's NRE/FCNR account
or out of remittances received from outside India in free
· Refund of share/debenture subscriptions to new issues
of Indian companies or portion thereof, if the amount of subscription
was paid from the same account or from other NRE/FCNR account
of the account holder or by remittance from outside India
through normal banking channels.
· Refund of application/earnest money made by the house
building agencies on account of non-allotment of flat/plot,
together with interest, if any (net of income-tax payable
thereon), provided the original payment was made out of NRE/FCNR
account of the account holder or remittance from outside India
through normal banking channels and the authorised dealer
is satisfied about the genuineness of the transaction.
· Any other credit if covered under general or special
permission granted by Reserve Bank.
· Local disbursements
· Remittances outside India
· Transfer to NRE/FCNR accounts of the account holder
or any other person eligible to maintain such account.
· Investment in shares/securities/commercial paper
of an Indian company or for purchase of immovable property
in India within prescribed regulations.
· Any other transaction if covered under general or
special permission granted by the Reserve Bank.
As per directions/instructions issued by the Reserve Bank.
Loans against Security of Funds held in the account
a) To the Account holder
· For personal purposes or for carrying on business
activities (except agricultural/plantation activities/investment
in real estate).
· For making direct investment in India on non-repatriation
· For acquisition of flat/house in India for his own
b) To third parties
· The loan should be utilised for personal purposes
or for carrying on business activities (other than agricultural/plantation
activities/real estate business). The loan should not be utilised
c) Loans outside India
· Aurthorised dealers may allow their branches/correspondents
outside India to grant fund based and/or non-fund based, facilities
to non-resident depositors or to third parties at the request
of depositors for bona fide purpose against the security of
fund held in the NRE accounts and also agree to remittance
of funds from India if necessary, for liquidation of outstanding.
NRE Accounts should be redesignated as resident account or
the funds held in these accounts may be transferred to the
Resident Foreign Currency (RFC) Accounts (if the account holder
is eligible for maintaining RFC Account) at the option of
the account holder immediately upon the return of the account
holder to India (except where the account holder is on a short
visit to India).
Can be allowed by the authorised dealer/bank in the case of
deceased account holder.
a) Joint Accounts in the names of two or more non-resident
individuals may be opened provided all the account holders
are persons of Indian nationality or origin. When one of the
joint holder become resident, the authorised dealer may either
delete his name or allow the account to continue as NRE account
or redesignate the account as resident account at the option
of the account holders. Opening of these accounts by a non-resident
jointly with a resident is not permissible.
b) An Account may be opened in the name of eligible NRI during
his temporary visit to India.
c) Operation by Power of Attorney - allowed for withdrawals
for local payments and to facilitate investments in India.
Power of Attorney holder is not allowed to repatriate funds
held in the account under any circumstances or make payment
by way of gift to a resident on behalf of the account holder
or transfer funds from the account to another NRE account.
d) Special Series of Cheques
e) Temporary Overdrawing permitted from NRE Savings Bank account
up to Rs.50,000 for a period not exceeding two weeks.
f) Remittances abroad by Resident nominee application for
meeting the liabilities if any of the deceased account holder
or similar other purposes, should be forwarded to Reserve
Bank of India for consideration.
g) Interest income exempted from income tax, balances held
are also exempt from wealth tax.
h) Transactions to be reported to the Reserve Bank.
· NRIs and OCBs are eligible (approval of Reserve Bank
is required in the case of those from Bangladesh and Pakistan).
· Accounts may be opened with funds remitted from outside,
existing NRE/FCNR accounts, etc.
· Remittances should be in the designated currency.
· Conversion to currency other than the designated
currency also permitted at the risk and cost of the remitter.
· Designated currencies: Pound Sterling, US Dollar,
Deutsche Mark, Japanese Yen and Euro.
Types of Account
Term Deposits of maturity as below are available -
· One year or above but less than two years,
· Two years and above but less than three years, and
· Three years.
Rate of Interest
In accordance with the directions issued by the Reserve Bank
Same as in the case of NRE accounts.
Rate for Conversion of rupees into designated
currencies and vice versa
As per rate on the date of conversion.
Inland Movement of Funds
Permitted/allowed at no extra cost to the remitter.
Payment of Interest
· On half yearly or yearly basis as desired by the
· Interest may be credited to a new FCNR (B) account
or an existing/new NRE/NRO/NRNR/NRSR account in the name of
the account holder at his option.
Loans/Overdrafts against Security of funds held in the account
Same as in the case of NRE Account.
Change of Resident Status of the account holder
When an account holder becomes a person resident in India,
deposits may be allowed to continue till maturity at the contracted
rate of interest if desired by the account holder. However,
except for the provisions relating to rate of interest and
reserve requirements as applicable to FCNR (B) deposits, for
all other purposes, such accounts shall be treated as resident
deposits from the date of return of the account holder to
India. On maturity the account deposits should be converted
into Rupee Deposit Account or RFC at the option of the account
Joint account, repatriation of balances, etc.
As in the case of NRE accounts.
a) Reserve Bank will not provide foreign exchange guarantee.
b) Lending of resources mobilised by authorised dealers under
these accounts are not subject to any interest rate stipulations.
c) The premature withdrawal of deposits for opening NRNR account
with a different authorised dealer will attract penalty.
· Any person resident outside India can open NRO Account.
(Opening accounts by those from Bangladesh, Pakistan) requires
approval of Reserve Bank of India).
· The account holder should furnish an undertaking
to the authorised dealer/bank at the time of opening of the
account that in cases of debits to the account or investment
in India and credits representing sale proceeds of investments/disinvestments
he will ensure that such investments/disinvestments will be
in accordance with the regulations made by Reserve Bank of
· Post offices in India may maintain savings bank accounts
in the names of persons resident outside India.
Types of Accounts
Savings, Current, Recurring or Fixed Deposit Accounts.
· Proceeds of remittances received in any permitted
currency from outside India through normal banking channels
or any permitted currency tendered by the account holder during
his temporary visit to India or transfers from rupee accounts
of non-resident banks.
· Legitimate dues in India of the account holder.
· All local payments in rupees including payments for
· Remittances outside India of current income in India
of the account holder net of taxes.
Remittances of funds held in NRO accounts
· Permitted in the case of foreign tourist visiting
· Funds received by way of remittances from outside
India in foreign exchange, which have not lost their identity,
as remittable funds will be considered by Reserve Bank for
remittance outside India.
Permitted to Account Holders
· For personal purposes or for carrying on business
activities except for re-lending, agricultural/plantation
activity or for investment in real estate business.
· Overdrafts subject to commercial judgement.
Joint Account with Residents
Change of Resident Status of Account
· From Resident to Non-resident - When a person resident
in India leaves India for a country (other than Nepal and
Bhutan) for taking up employment or for carrying on business
or vocation outside India or for any other purpose indicating
his intention to stay outside India for an uncertain period,
his existing account should be designated as NRO account.
· From Non-Resident to Resident - On return of the
account holder to India for taking up employment or for carrying
on business or vocation or for any other purpose indicating
his intention to stay in India for an uncertain period the
NRO account may be re-designated as resident rupee account.
Payment of funds to Non-Resident Nominee
The amount due/payable to non-resident nominee from the account
of a deceased account holder shall be credited to NRO account
of the nominee with an authorised dealer/authorised bank in
Transactions to be reported to Reserve Bank of India.
Any person resident outside India (except individuals/entities
of Bangladesh/Pakistan nationality/ownership) may open NRNR
accounts with an authorised dealer. Account should be opened
in Indian rupees out of funds remitted from outside India
through normal banking channel in freely convertible currency.
NRIs/OCBs can open such accounts from their existing NRE/FCNR
Period of Deposit
Six months to 3 years.
Rate of Interest
Banks are free to determine the rate of interest.
Only interest accrued is repatriable.
Principal amount of deposit together with interest accrued
thereon may be renewed for a further period ranging from six
months to three years. If the interest accrued on an existing
deposit is invested under the scheme, the amount of interest
so invested will not be eligible for repatriation. The account
can also be shifted from one authorised dealer to another.
Individual deposit holder can gift to any resident/non-resident/charitable
trust in India.
Joint Accounts with Residents
Permitted against the security of these deposits to account
holders/third parties for personal purposes or for carrying
on business activities (except agricultural/plantation activities/real
estate business/relending) subject to commercial judgement
of the authorised dealer.
Nomination in favour of either a resident or non-resident
permitted. Registration of nomination of non-resident will
be subject to the condition that the amount standing to the
credit will be non-repatriable.
Transactions to be reported to the Reserve Bank.
NRIs (other than nationals of Bangladesh/Pakistan) are eligible.
· The principal as well as interest is non-repatriable.
· Accounts carry same facilities and restrictions as
are applicable to domestic accounts of residents; investment
in shares/securities or immovable property will be governed
by regulations applicable to such investments by non-residents.
For opening of these accounts an application in form NRSR
has to be made to the authorised dealer.
Types of Accounts
Current, Savings, Recurring or Fixed Deposit.
May be held with residents.
Rate of interest
As applicable to resident accounts.
Change of Resident Status of the Account Holder
Account Holder has the option of designating his existing
domestic account as NRO account or NRSR account.
Available in favour of resident or non-resident. Non-resident
nominee will not be entitled to any remittance facility.
Permitted subject to the commercial judgement of the authorised
· Operation of this account may be allowed freely as
in the case of domestic account maintained by the resident
· The account holders are also permitted to transfer
funds from NRO/NRE/FCNR accounts to NRSR Accounts but not
For the purpose of acquisition of immovable properties in
India, a person of Indian origin means an individual (not
being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Bhutan or Nepal) who
· at any time held an Indian passport; or
· who or either of whose father or whose grandfather
was a citizen of India by virtue of the Constitution of India
or the Citizenship Act, 1955 (57 of 1955).
A person resident outside India who is a citizen of India
· acquire any immovable property in India other than
· transfer any immovable property in India to a person
resident in India.;
· transfer any immovable property other than agricultural/plantation
property/farm house to a person resident outside India who
is citizen of India or to a person of Indian origin resident
A person of Indian origin resident outside India may -
· acquire any immovable property other than agricultural
land/farm house/plantation property in India by purchase,
from out of (i) funds received in India by way of inward remittance
from any place outside India or (ii) funds held in any non-resident
account maintained in accordance with the provisions of the
Act and the regulations made by the Reserve Bank under the
· acquire any immovable property in India other than
agricultural land/farm house/plantation property by way of
gift from a person resident in India or from a person resident
outside India who is a citizen of India or from a person of
Indian origin resident outside India;
· acquire any immovable property in India by way of
inheritance from a person resident outside India who had acquired
such property in accordance with the provisions of the foreign
exchange law in force at the time of acquisition by him or
the provisions of these Regulations or from a person resident
· transfer any immovable property in India other than
agricultural land/farm house/plantation property, by way of
sale to a person resident in India;
· 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;
· 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 person
of Indian origin resident outside India.
A person resident outside India, who has established in India
a branch, office or other place of business for carrying on
in India any activity, excluding a liaison office, may -
a) acquire any immovable property in India, which is necessary
for or incidental to carrying on such activity:
· all applicable laws, rules, regulations or directions
for the time being in force are duly complied with; and
· the person files with the Reserve Bank a declaration
in the Form IPI not later than ninety days from the date of
b) transfer by way of mortgage to an authorised dealer as
a security for any borrowing, the immovable property acquired
in pursuance of clause (a).
a) In the case of acquisition of immovable property for carrying
on a permitted activity, the person or his successor shall
not, except with the prior permission of the Reserve Bank,
repatriate outside India the sale proceeds of the immovable
b) In the event of sale of immovable property other than agricultural
land/farm house/plantation property in India by a person resident
outside India who is a citizen of India or a person of Indian
origin, the authorised dealer may allow repatriation of the
sale proceeds outside India, provided the following conditions
are satisfied: -
· the immovable property was acquired by the seller
in accordance with the provisions of the foreign exchange
law in force at the time of acquisition by him or the provisions
of these Regulations;
· the sale takes place after three years from the date
of acquisition of such immovable property or from the date
of payment of final installment of consideration for its acquisition,
whichever is later;
· the amount to be repatriated does not exceed (a)
the amount paid for acquisition of the immovable property
in foreign exchange received through normal banking channels
or out of funds held in Foreign Currency Non-Resident Account
or (b) the foreign currency equivalent, as on the date of
payment of the amount paid where such payment was made from
the funds held is Non-Resident External account for acquisition
of the property; and
· in the case of residential property, the repatriation
of sale proceeds is restricted to not more than two such properties.
No person being a citizen of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal or Bhutan without prior permission
of the Reserve Bank shall acquire or transfer immovable property
in India, other than lease, not exceeding five years.
Non Resident Indian Nationals and Persons of Indian Origin
can bring into India gold up to 10 Kgs on payment of customs
duty @ of Rs.250 per 10 gms. and silver up to 100 Kg. on payment
of customs duty @ Rs. 500 per Kg. as part of their baggage
once in six months. The gold/silver so brought can be sold
to residents against payment in rupees, by means of crossed
cheque in India, which has to be credited to the NRO account
of the importer.
In various housing projects taken up by the Life Insurance
Corporation of India (LIC) for providing residential houses
to its policy holders, 5 per cent is normally reserved for
allotment to Non Resident Indian policy holders.
LIC Housing Finance Ltd. has a separate scheme for grant of
individual housing loan to Non Resident Indians viz Grih Shobha
under which loans are granted up to a maximum of Rs.2.5 million
for construction/purchase/ extension of flat. Life Insurance
Corporation also accepts repayment of outstanding balance
of housing loans from returning Indians in Indian rupees.
Providing Housing Loans in Rupees to
An authorised dealer or a housing finance institution in India
approved by the National Housing Bank may provide housing
loan to NRI/PIO resident outside India for acquisition of
a residential property in India subject to the following conditions:
a) the quantum of loans, margin money and the period of repayment
shall be at par with those applicable to housing finance provided
to a person resident in India;
b) the loan amount shall not be credit to Non-resident External
(NRE)/Foreign Currency Non-Resident (FCNR)/Non-resident Non-repatriable
(NRNR) account of borrower;
c) the loan shall be fully secured by equitable mortgage of
the property proposed to be acquired, and if necessary, also
by lien on the borrower_ s other assets in India;
d) the installment of loan, interest and other charges, if
any, shall be paid by the borrower by remittances from outside
India through normal banking channels or out of funds in his
Non-resident External (NRE)/Foreign Currency Non-resident
(FCNR)/Non-resident Non-repatriable(NRNR)/Non-resident Ordinary
(NRO)/Non-resident Special Rupee (NRSR) account in India,
or out of rental income derived from renting out the property
acquired by utilisation of the loan;
e) the rate of interest on the loan shall conform to the directives
issued by the Reserve Bank or, as the case may be, by the
National Housing Bank.
The New India Assurance Company Ltd., a subsidiary of the
General Insurance Corporation of India has devised a scheme
for personal accidents and expenses following death (occurring
in foreign countries due to accidents or sickness). This is
a special scheme offered to meet the requirement of Non Resident
Indians. The premium payable is very nominal in comparison
to the risk coverage. The New India Assurance Company Ltd.
has entered into an agreement with the Government of Kerala
for the implementation of the scheme.
The State Bank of Tranvancore along with the United India
Insurance Company Ltd. has introduced "UII Co. Ltd. _
SBT NRI Family Welfare Scheme" for NRE account holders
of the State Bank of Tranvancore. The scheme provides personal
accident covers including expenses following unfortunate death
of the NRI and medical expenses cover for his/her family (including
the NRI). Medical cover is available for expenses incurred
through hospitalisation in India only.
In private medical colleges/dental colleges, 15% of seats
are reserved for admission to children of NRIs/ PIOs. They
are not required to appear for any admission test. There are
about 3000 seats available in such institutions, which means
that the availability of seats for children of NRIs/PIOs in
such institutions will be approximately 450.
In other universities and colleges, students including NRIs
are admitted as per Government of India Policy and they have
to pay fees as applicable to Indian students.
Incorporation of a Company
With a view to facilitating the work of Non Resident Indians
intending to set up new industrial projects in India, the
Reserve Bank of India has granted general permission to: -
· Non Resident Indians or Persons of Indian Origin
to subscribe to the Memorandum and Articles of Association
and take up shares of an Indian company for the purpose of
its incorporation and
· the company to issue shares to Non Resident Indians/Persons
of Indian Origin subject, inter-alia, to the condition that
the total face value of the shares to be taken up by such
persons should not exceed Rs. 10,000 and the company should
hold investment proposal approved by the Reserve Bank of India
or Foreign Investment Promotion Board for taking up its industrial
activity in India or a Letter of Intent/Industrial Licence/acknowledgment
of Industrial Entrepreneurs Memorandum issued by the Secretariat
for Industrial Assistance, Department of Industrial Policy
and Promotion or provisional registration with the State Government
Persons of Indian Origin can visit India on multi entry visa.
The general permission granted by RBI covering sale of shares
acquired under the portfolio investment scheme on repatriation
basis by individual NRIs/PIOs is extended to OCBs also.
On Repatriation Basis
An individual resident in India is permitted to obtain loan
not exceeding US $ 250,000 from his close relatives resident
outside India subject to the conditions that: -
· the loan is free of interest
· the minimum maturity period of the loan is 7 years
· the amount of loan is received by inward remittance
in free foreign exchange through normal banking channels or
from the NRE/FCNR account of the lender
· the loan is utilised for the borrower's personal
purposes or for carrying out is normal business activity other
than agricultural/plantation activity, purchase of immovable
property or shares/debentures/bonds issued by companies in
India or for relending
RBI will give automatic clearance for such loans.
On Non Repatriation Basis
RBI has given general permission for interest free non-repatriable
loans from NRI relatives for personal purposes and for business
On Non-repatriation Basis
A person resident in India, other than a company incorporated
in India may borrow in rupees on non-repatriation basis from
Non Resident Indian or a Person of Indian Origin resident
outside India subject to the following conditions: -
· the amount is received by inward remittance or from
the NRE/FCNR/NRO/NRNR/NRSR account of the lender
· the period of loan shall not exceed three years
· the rate of interest shall not exceed 2% over the
bank rate prevailing on the date of availing loan
· where the loan is from NRSR account, the interest
and repayment shall also be to the NRSR account; in other
cases interest and repayment shall be made to the NRO account
or NRSR account as desired by the lender
· the amount borrowed is non repatriable.
Borrowing in Rupees by Indian companies
A company incorporated in India may borrow in rupees on repatriation
or non-repatriation basis from a Non Resident Indian or a
Person of Indian Origin resident outside India or an Overseas
Corporate Body by way of investment in non-convertible debentures.
Restriction on use of borrowed funds
The borrowed fund shall not be used for chit funds, Nidhi
companies, agricultural or plantation activities or real estate
business or construction of farmhouses or trading in Transferable
Development Rights or for re-lending.
Indian companies can raise deposits from NRIs or OCBs subject
to the following conditions: -
· The issue is in compliance with non-banking companies
(Acceptance of Deposits through Commercial Paper) Directions
1998 issued by the Reserve Bank of India and any other law,
rules, directions or orders applicable.
· Payment is received by inward remittance through
normal banking channels or from funds held in permissible
· The amount invested shall not be eligible for repatriation.
· The Commercial Paper shall not be transferable.
Rupee Loans to NRIs
RBI has granted general permission to Authorised Dealers to
sanction rupee loans to NRIs against the security of shares
held by them either on repatriation or non-repatriation basis,
subject to lending norms.
Remittance of Sale Proceeds of Shares
NRIs are permitted to raise loans abroad against the security
of shares of Indian companies held by them on repatriation
basis. However, in case the shares are sold and the amount
of sale proceeds is required to be remitted abroad for repaying
the loan, prior permission of RBI is required. The aforementioned
condition has been waived off and Authorised Dealers are permitted
to remit the sale proceeds to the overseas bank that has extended
the loan to the NRIs, net of applicable taxes, if any.
Rupee Loans against Immovable Property held in India
NRIs are permitted to raise rupee loans on non-repatriable
basis in India against the collateral of their immovable property
irrespective of the fact whether the property is purchased
by remittances from abroad or acquired otherwise.
· Continuance of rupee loan/overdraft to resident who
becomes Non Resident.
· Continuance of rupee loan in the event of change
in residential status of the lender.
· Overdraft in rupee account maintained with authorised
dealer in India by a bank outside India.
RBI has granted permission to certain housing finance companies
to extend rupee loans to NRIs for acquisition of houses in
India. These loans are required to be repaid by NRIs by sending
remittances from abroad. This facility has been extended to
ADs who may be willing to extend rupee loans to NRIs for acquisition
of residential houses in India subject to the same terms and
conditions as applicable to loans granted to NRIs by housing
Indian companies who desire to grant housing loans in India
to their NRI staff who have been deputed abroad have been
granted general permission to extend such loans under the
staff housing loan scheme of the concerned company provided
the loans are repaid out of remittances in foreign exchange
from abroad by the employee during his period of deputation
The ceiling on total loan to be advanced and the percentage
of the project cost which can be funded, and the purposes
for which loans may be given are brought at par with the ceiling
and percentage etc. for residents.
RBI has granted general permission to Indian companies for
payment of interest on delayed refunds of share subscriptions
if such payment of interest is as per SEBI guidelines.
The tax liability of a person under the Income Tax Act depends
on the residential status in the financial year (1st April
to 31st March) in which the income accrues or arises to him
or is received by him.
For income tax purposes the residential status of an individual
generally depends on his/her physical presence or stays in
India and not on his nationality or domicile.
An individual is said to be a 'resident' in India in any financial
year if he has been in India during that year:
· for a period of 182 days or more; or
· for a period of periods of 60 days or more and has
also been in India within the preceding four years for a period
or periods of 365 days or more;
However, the period of 60 days is increased to 182 days in
the case of:
· a citizen of India or person of Indian origin who
has been outside India and comes on a visit;
· when a citizen of India leaves India for purpose
of employment outside India or as a member of a crew of an
An individual is said to be 'not ordinarily resident' in any
financial year, if:
· he has not been resident in India in nine out of
ten financial years preceding that financial year; or
· has not during the seven financial years preceding
that year, been in India for a period of periods of 730 days
An individual would be "not ordinarily resident"
if he fulfils either of the above conditions.
A Hindu Undivided Family is said to be 'not ordinarily resident'
in India if its manager is 'not ordinarily resident' in India.
For calculating the length of the manager's stay in India,
periods of stay in India of successive managers of a Hindu
Undivided Family have to be added up.
The status of 'resident but not ordinarily resident' is available
only to individuals and Hindu Undivided Families.
A person who is not resident in India is a 'non-resident'.
Based on the residential status of a taxpayer and the place
where the income is earned, the income that is included in
the total income is as under: -
Resident All incomes whether earned in India or outside India
Not Ordinarily Resident All incomes:
· earned in India, and
· all incomes earned outside India if the same is derived
from a business, which is controlled in India, or from a profession,
which is set up in India.
Non Resident All incomes earned in India
Since a resident is liable to pay tax in India on his 'total
world income', it is possible that he may have to pay tax
on his foreign income in that country also. To avoid such
a situation the Government of India has entered into agreements
for avoidance of 'double taxation' with different countries.
With a view to attract investment by Non Resident Indians
(NRIs), certain reliefs, exemptions and incentives have been
For Income Tax purposes, a Non Resident Indian has been defined
as an individual being a citizen of India or a person of Indian
origin who is not a resident. A person is considered to be
of Indian Origin if he or either of his parents or his grand
parents was born in undivided India.
Income from foreign exchange assets (any specified asset which
the assessee has acquired or purchased or subscribed to in
convertible foreign exchange) comprising of shares/debentures/deposits
with Indian companies. Central Government securities or any
other notified assets subscribed to or purchased in convertible
foreign exchange could be charged at a flat rate of 20%.
No deduction, basic exemptions etc. will be available under
the 20% scheme.
Long term capital gains on specified foreign exchange assets
such as Units/Bonds/shares and listed securities as specified
by the Government held by NRIs are taxable @ 10%.
Minimum holding period for allowing this rate is one year
for shares and other securities listed in stock exchanges
in India and units of specified mutual funds. For other assets
the minimum holding period is 36 months.
If the proceeds are reinvested within six months of such transfer
in any specified securities and new assets are retained for
3 years, the proceeds are exempted from payment of Income
Incomes from units of UTI are totally exempted from payment
of Income Tax.
Income from following investments made by NRIs out of convertible
foreign exchange is totally exempt from income tax.
· NRE and FCNR (B) Accounts;
· Units of UTI;
· Specified Securities, Bonds, Savings Certificates.
The above exemptions will cease immediately on NRI becoming
Where the NRI has income from only foreign exchange assets
or income by way of long term capital gains from foreign exchange
assets or both, and tax deductible at source from such income
has been deducted he is not required to file return of income
as otherwise required under the Income Tax Act.
The special provisions in relation to investment income from
foreign exchange assets (other than shares of an Indian company)
will continue, even after the NRI becomes resident till transfer
or conversions of such assets into money, if the NRI so wishes.
NRIs/OCBs desirous of obtaining advance ruling may make an
application stating the question on which the ruling is sought.
The question, which could be of law or fact, should relate
to a transaction undertaken or proposed to be undertaken by
Non Resident Indians including Persons of Indian Origin have
been exempted from declaring their assets abroad and/or obtaining
permission from the Reserve Bank of India to hold the same
at the time of their return to India provided such persons
have a minimum continuous stay of one year abroad and have
acquired such assets lawfully.
The above said general exemption applies to all incomes i.e.
interest, dividend earned on foreign exchange assets, bank
deposits, investment in foreign shares or securities or immovable
properties situated out side India or investment in business
out side India. The exemption is also applicable for acquiring
foreign currency continuously through such assets. Fresh credit
to such assets should be out of foreign currency acquired
for which exemption is also available. There is no restriction
for the utilisation of such balances held abroad for any bona
fide payments, including making further investment in shares,
securities or immovable properties abroad provided the cost
of such investment and or subsequent payment required is met
exclusively out of such balances eligible for such exemption.
Persons of Indian Nationality/Origin, resident outside India
for not less than one year, on becoming residents are free
to open and maintain such accounts with authorised dealers.
RFC accounts may be in the form of savings (without cheque
facility), current or term deposits.
The funds may be allowed to be freely utilised by the account
holder, for any bona-fide remittances outside India through
normal banking channels and for withdrawals in Indian rupees.
On becoming non-resident, the funds can be transferred abroad
or credited to fresh NRE/FCNR accounts.
Where the stay abroad is less than one year, an application
in form RFC has to be made to the authorised dealer and referred
to the Reserve Bank of India for specific approvals.
The Indian Investment Centre is a service organisation of
the Government of India set up four decades ago for the promotion
of foreign private investment in India. It advises overseas
investors on setting up industrial projects in India by providing
information regarding investment opportunities in India, the
Government_ s industrial policy (including that relating to
foreign investment and technology transfer), licensing procedures,
taxation laws and facilities and incentives available. It
also helps them in finding partners in India.
It is the nodal agency for investment in India by NRIs and
OCBs in which NRI holding is not less than 60 per cent and
provides them with hand holding services.
It is a service agency providing assistance in the establishment
of joint ventures and technical collaborations in India and
abroad and third country ventures between Indian and foreign
It provides guidance and information to Indian entrepreneurs
and assists them in locating suitable foreign firms for collaboration.
It assists Indian and foreign entrepreneurs in meeting the
procedural requirements of project approvals and in overcoming
bottlenecks, if any, in the process of implementation of the
It has a well-maintained reference library covering a wide
range of subjects like industry, management, taxation, etc.
A cross-section of journals, periodicals and magazines is
available for ready reference.
It brings out publications, which provide authentic information
on various aspects of Government policies, procedures and
regulations as also facilities, incentives and opportunities
available to entrepreneurs in various industrial fields, both
in India and abroad. Some of the important publications are
in the fields of industrial policy, facilities and incentives
for Non Resident Indians and technological development.
It provides factual information on current economic developments
in India through its Monthly News Letter, which is an authentic
source of information about industrial licences and letters
of intent, issued, and foreign collaborations approved, by
the Government of India/Reserve Bank of India.
It circulates authentic texts of various Press Notes issued
by the Department of Industrial Policy and Promotion under
Readers Subscription Service.
In order to promote investment and technology transfer from
abroad the Indian Investment Centre has signed Memoranda of
Understanding with various organisations.
Indian Investment Centre has launched its website on Internet
containing latest information relating to NRI/Foreign Investment,
Industrial Policies and Procedures, Facilities and Incentives
given by Central/State Governments including Questions Asked
Frequently by NRIs. The address of the website is
Answers to some Frequently Asked Questions by NRIs are also
available at the IIC website, at the address http://iic.nic.in/vsiic/iic5_a.htm.
For additional updates and information, you can also visit
the website of the Reserve Bank of India at www.rbi.org.in