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Frequently Asked Questions

Who is a Non–Resident Indian (NRI)?

a. An NRI–

is a citizen of India or a foreign citizen of Indian origin

who has gone abroad/is residing abroad

for the purpose of employment/business/vocation/any other motive

that shows his intention to stay outside India for an indefinite period

b. As per FEMA, for a person to retain the status of NRI, his stay when he arrives in India should be for a period of 182 days or less during a year

c. But if a person of Indian origin has gone out of India for settlement, he is to be treated as an NRI irrespective of number of days he has stayed in India He will continue to be an NRI during his visit/stay in India until the time he takes up an employment or carries on any business or vocation or any other reason that indicates his intention to stay in India for an indefinite period.

Who is a Person of Indian Origin (PIO)?

a. A PIO–

is a person, being a citizen of any country other than Pakistan and Bangladesh who at any time held an Indian Passport or

was a citizen of India or either of his parents or any of his grandparents were a citizen of India or

is a person who is a spouse of Indian citizen or any of the persons mentioned in point (ii) above

b. But when it comes to rules regarding acquisition and transfer of immovable property in India, then individuals not only being citizens of Pakistan and Bangladesh but also from Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are excluded.
For such transactions, only the person’s father or grand father is included unlike parents or grand parents and spouse.

What is an Overseas Corporate Body (OCB)?

An OCB is a company, partnership firm, society or any corporate body wherein 60% or more ownership lies with the NRIs and includes overseas Trust wherein 60% or more financial interest is irrevocably held by NRIs directly or indirectly, which was in existence as on September 16, 2003.

What is INSTA ONLINE ACCOUNT?

It’s a unique product offered by IDBI Bank for NRIs to open an online NRI account instantly

What are the features of INSTA ONLINE ACCOUNT?

Insta Online Account offered by IDBI Bank is very user-friendly for NRIs. The account has various unique features such as –

Immediate receipt of account number

Hassle-free, convenient and inexpensive

No requirement of documents initially

Facility to initiate credit into the account immediately

Access to a wide range of exclusive NRI products & services

What are the documents required for opening an NRE account?

For NRIs
For accounts opened in person:

Indian passport with valid visa and overseas resident address or work permit
Separate proof of Non Resident status
Date of exit from India, and date of last entry into India (to establish you have been out for at least 6 months) stamped on passport
Completed NRE account opening form
Photograph of individual account holder

For persons employed with foreign shipping company

Initial work contract
Last wage slip

For contract employees

Last work contract
Letter from local agent confirming next date of joining the foreign vessel (not more than six months from date of last return to India)
Principal's overseas address or current work contract

In case of documents sent by mail

All the relevant above mentioned documents/signatures to be attested by any one of the following:

Indian embassy
Overseas notary
Local bank

For PIOs -

Indian Passport

Foreign Passport with place of birth in India - School/College/University leaving certificate or mark sheet
The above may have to be supported by any one of the following: ·Certification from the Indian Embassy that the applicant is of Indian origin ·Ration Card, Voter ID or PAN Card ·In the case of spouse, Marriage Certificate with supporting evidence of the maiden name

Foreign Passport with place of birth outside India or not showing a place of birth
This will have to be supported by any one of the following:

a. Birth Certificate of parents/grandparents substantiating evidence of the relationship

b. School/College/University leaving certificate or mark sheets of the account holder/parents or grandparents with supporting evidence of the relationship

c. Passport of either parents or grandparents, which indicate that they were Indian citizens with supporting evidence of the relationship

d. Certification from the Indian Embassy that the applicant or either of his parents or grandparents are of Indian origin with supporting evidence of the relationship

e. Ration Card, Voter ID or PAN card of either self or parents/grandparents with supporting evidence of the relationship

f. Old Indian Passport

g. PIO Card

h. Marriage certificate with supporting evidence of the maiden Indian name substantiated by any of the above documents.

Note:- All the above relevant documents have to be submitted along with duly filled-in and signed Account Opening form, Customer Profile Form and Schedule of Charges Form to the branch where the account is proposed to be opened.

What is the procedure for remitting funds to India?

IDBI Bank offers six different options under its IndiaRemit facility for remitting funds to India.

1.	Online transfer from USA
	A simple mode of transferring funds for those based in US. Four easy steps for a convenient, economical and secure transfer are: Visit our website www.idbibank.com. Click on IndiaRemit Register once by providing details to initiate the Automated Clearing House (ACH) Transfer through the local banker to credit in IDBI account. NRIs can send funds to the IDBI Bank accounts of any of their family members as well. For recipients having accounts with other banks in India, IDBI will courier a Rupee draft directly to the credit of their account.
2.	Foreign Currency Cheque/Draft
	¡ If the customer is a non-US based NRI and wish to send remittance using a cheque or a draft, either in foreign currency or INR, then he has to dispatch the cheque/draft to his branch where he has his account
3.	Foreign Currency & Travelers’ Cheques
	While on a visit to India, NRIs can encash their Foreign Currency & Travelers Cheques through us & deposit the proceeds to their account with us
4.	Wire Transfer/SWIFT Facility
	NRIs can remit money directly through our correspondent banks abroad (list given below)
5.	Online transfer from Gulf and Far East via Exchange Houses
	NRIs based in Gulf and Far East region can now make a Speed Remittance from any of the Exchange Houses listed below, directly for credit to their IDBI Bank account. The funds would be credited to their account within 1 working day.
6.	Instant Money Transfer Service
	This service enables non-residents to send personal remittances towards family maintenance to beneficiaries in India. The various benefits include - quick remittance (within 10 minutes), convenient, reliable and simple procedure - only need to fill in a form, no requirement to have a bank account. Bank has tie-ups with the following reputed companies for money transfer services: Coinstar Money Transfer Moneygram Money Transfer 'Xpress Money' Service offered by UAE Exchange & Financial Services Ltd

LIST OF OUR CORRESPONDENT BANKS

Currency	Correspondent Bank	Location	Swift Code	Account No
USD	Deutsche Bank & Trust Company, Americas	New York	BKTRUS33	04-169-786
EUR	Dresdner Bank	Frankfurt	DRESDEFF	499 8 063 52711
EUR	Deutsche Bank	Frankfurt	DEUTDEFF	(100)953413200
GBP	Standard Chartered Bank	London	SCBLGB2LXX	01708762401
CHF	Union Bank of Switzerland	Zurich	UBSWCHZH80A	230-94752.05Y
JPY	Citi Bank	Tokyo	CITIJPJT	0/221843/401
DKK	Danske Bank	Copenhagen	DABADKKK	3996070794
AUD	HSBC Bank Australia Ltd.	Sydney	HKBAAUZSSYD	011-795-861-041
SGD	Deutsche Bank	Singapore	DEUTSGSGXXX	2773679-00-0
CAD	HSBC Ltd	Toronto	HKBCCATTXXX	930135601060

LIST OF EXCHANGE HOUSE

Name of the Exchange House Country Mode of Transfer

Orient Exchange Co. LLC Dubai, UAE Speed Remittance

Al Ahalia Money Exchange Bureau Abu Dhabi, UAE Speed Remittance

National Exchange Co. Doha, Qatar Speed Remittance

Al Amoudi Exchange Saudi Arabia Speed Remittance

National Finance & Exchange Co. Manama, Bahrain Speed Remittance

Musandam Muscat, Oman Speed Remittance

Lotus Forex, Kowloon remittance Hong Kong Speed Remittance

UAE Exchange Abu Dhabi Speed Remittance

Instructions to be given by NRIs to their banker:
(Specimen Format)
Please remit (currency + amount) USD 1000 to IDBI Ltd, Account No.3615-1898 with Citibank N.A,New York (correspondent bank name and location) (Swift Code CITIUSS33) for further credit to my Account No 1234123412341234 with IDBI Ltd.(Swift code IBKLINBB) (branch and city), India.

Additional information to be given for fixed deposits:
Proceeds to be placed as a fixed deposit (NRE/NRO/FCNR-B) for a period of 36 months, with IDBI Ltd, (branch and city). My Customer ID is 123456.

What are the avenues for NRIs to invest in Immovable Properties in India?

NRIs, irrespective of their citizenship can freely acquire and transfer residential/commercial properties in India (barring agricultural land and plantation), with repatriation of foreign exchange equivalent of cost of acquisition (maximum two in case of residential houses) and no restrictions as regards holding period.
They can –

(a)	acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of – funds received in India by way of inward remittance from any place outside India, or 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 Act
(b)	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
(c)	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 in India
(d)	transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India;
(e)	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;
(f)	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

Immovable property includes

a.	Residential property (house property, bungalow, flat, apartment and all other kinds of residential properties)
b.	Commercial property (shops, offices, show rooms, etc.)
c.	Industrial property (factory premises, godowns etc.)
d.	Land for construction of any of the above properties

Acquisition can be made by way of

a.	Purchase
b.	Receiving the property as a gift
c.	Inheritance
d.	Share of joint property received upon partition of family / property etc.

Transfer includes

a.	Sale for consideration
b.	Exchange of property
c.	Gift of property
d.	Relinquishment of right in a joint property etc.
e.	Apart from the above, it also includes purchase, mortgage, pledge, loan or any other form of transfer of right, title, possession or lien

What is the mode of payment for purchase of immovable properties by NRIs?

The payment for purchase of immovable properties (including stamp duty, registration fees etc.) is required to be made from NRIs bank account (NRE, FCNR, NRO or Foreign Exchange Inward Remittance from abroad)

10.

How can an NRI repatriate the sale proceeds of an immovable property?

An NRI is allowed to repatriate the sale proceeds of an immovable property subject to the following conditions:

the acquisition should be in accordance with the existing Foreign Exchange Laws (i.e. FERA, ‘73 or FEMA ‘99)

the purchase price was met out of Foreign Exchange Inward Remittance or NRE/FCNR(B) account, and

Please note:

In case of residential properties, repatriation is restricted to a maximum of two properties

There are no restrictions as regards repatriation of sale proceeds vis-à-vis number of commercial or industrial properties.

The amount of repatriation is restricted to foreign exchange equivalent of the purchase price i.e. profits/gains are not allowed to be repatriated.

11.

What are the taxation rules relating to capital gains for NRIs?

Let us see some definitions before going to the taxation rules:

a. Capital gains
Capital gains are the profits arising upon sale of capital assets such as shares, securities, immovable properties etc.
b. Capital assets
Capital Asset means any kind of property other than personal effects and stock in trade. Immovable/movable properties, jewellery, shares, securities etc. are some of the capital assets.

Short and Long term capital assets
Short term capital asset means an asset held for not more than 36 months preceding the date of transfer. In few of the cases mentioned below, we have to consider 12 months instead of 36 months:
1. shares held in a company,
2. any other security listed in a recognized Stock Exchange in India,
3. units of Unit Trust of India,
4. units of specified mutual funds

Hence, if the above assets are held for more than 12 months, they will be treated as long term capital asset

Long term and short term gains
Long term capital gain means capital gain arising from long term capital asset and short term capital gain means a capital gain arising from transfer of a short term capital asset

NRIs are offered a unique benefit of paying tax on gains computed in foreign exchange earnings i.e. profits after considering the devaluation of rupee as regards profits from shares in or debentures of an Indian company.

Hence, long term capital gain arising from the transfer of an equity share in company or a unit of an equity oriented fund where securities transaction tax has been paid is exempt from tax u/s 10(38) of the I.T Act,1961

12.

What are the Income Tax Concessions available to NRIs?

1.	NRIs are granted a special benefit by way of an option of being taxed at concessional tax rate of 20% as regards investment income and 10% as regards long term capital gains arising from specified assets (i.e. Section 115 C to Section 115 I of the Income Tax Act, 1961)]
2.	An Overseas Corporate Body (OCB) is not eligible for said exemption
3.	3. Further, an NRI is given a choice, and if he so decides, then only provisions of the above Sections are applicable to him. As for the provisions, concerned NRI has to file a declaration together with return of income and then only provisions are applicable. Otherwise, an NRI is to be taxed at par with Residents in said matters
4.	4. If an NRI so chooses and furthermore if he does not have any other income, then, for the income opted under these provisions, he is not required to furnish a return of income. However, it is necessary that tax is deducted at source as regards the specified income.
5.	Investment income from specified assets include – Dividend from shares in an Indian Company. [However the same is exempt u/s 10(23FA) of the I.T. Act,1961] Interest on debentures of an Indian Public Company Interest on deposits with an Indian Public Company Income from Securities of Central Government

Wealth Tax concessions:
There is a common myth amongst NRIs that they are exempt from almost all taxes in India and they are particularly not liable to pay wealth tax as regards their taxable wealth/assets in India. They have to pay Wealth Tax on chargeable assets in India i.e. immovable properties, jewellery and vehicles.

13.

What are the Taxable Assets for NRIs?

Taxable Assets for NRIs are:
[Sec. 2(ea) of Wealth Tax Act, 1957]

1.	Buildings or land apparent there to other than, one house property or plot of Land and one additional plot of Land having area of 500 square meters or less. [Sec.5(1)(vi)of Wealth Tax Act,1957]
2.	Value of personal vehicles i.e. motor cars, boats, air crafts
3.	Jewellery, i.e. ornaments made of gold, silver, platinum, or any other precious metal and bullion including utensils and furniture made of gold, silver precious metal
4.	Cash on hand in excess of Rs. 50,000/-
5.	Urban land: i.e. the land situated – ·within the jurisdiction of Municipality and having population of 10,000 and more or ·in any area within such distance from the local limits of municipality

However this does not include:

a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees;
any house for residential or commercial purposes which forms part of stock-in-trade;
any house which the assessee may occupy for the purposes of any business or profession carried on by him;
any residential property that has been let-out for a minimum period of three hundred days in the previous year;
any property in the nature of commercial establishments or complexes;
Motor cars used by the assessee in the business of running them on hire or as stock in trade.
Yachts, boats and aircrafts used by the assessee for commercial purpose.
Urban Land will not be chargeable to tax. if –

Construction of building is not permissible
Construction of building is made with approval of appropriate authority
Unused land held for industrial purpose for two years
Stock in trade for period of 10 years from the date of its acquisition by him

Important: Import of Gold and Silver
NRIs being granted concessional import duty and permission to import gold & silver often import large quantity of gold/silver. If the market value of such gold/silver exceeds Rs.15 lakhs & the same is held in India as at 31st March, the NRI is liable to pay wealth tax @ 1% on such value together with value of other taxable assets, in excess of Rs.15 lakhs & file wealth tax return.

14.

Can NRI invest in shares and debentures of Indian companies?

Yes, NRIs can invest in the new issue of shares and debentures of Indian companies by subscribing to new issue of equity/preference shares/debentures under different percentage schemes approved by RBI.

As per the percentage scheme the total percentage of issue to NRIs/OCBs should not exceed the specified limit. Different percentages are specified for companies engaged in different areas:

For hospitals & hotels - specified percentage is 40 %
For companies engaged in hire purchase, leasing etc. - the specified percentage is 24%.
For industries engaged in export trading activities, housing & real estate development and Air Taxi operation - the specified percentage is 100%

The amount invested and interest on that amount can be repatriated if the required conditions are fulfilled. Moreover, NRIs can also purchase both old and new shares of sick industrial units for its revival. They can also purchase shares of Public Sector Enterprise (PSE)

15.

Can NRIs invest in the Mutual funds schemes?

Yes, NRIs can invest in domestic mutual funds on repatriation basis. They can also invest in mutual funds floated by public and private sector mutual funds on non-repatriation basis by giving a separate application to RBI. There is no separate approval required for the same.

Likewise, they can also invest in Money Market Mutual Funds floated by commercial banks and other financial institutions. There is no separate approval required for the same.

16.

Can an NRI place deposits with the companies?

Yes, NRIs can place funds in fixed deposits with public limited companies in India. If the permission to accept deposit from non-residents is already being taken by Indian company, it is not necessary for the investor to take separate permission. The investment can be done with full repatriation benefits for a period of three years.

17.

What is the Portfolio Investment Scheme for NRIs available with the Bank?

IDBI Bank provides Portfolio Investment Services through its designated branch at Nariman Point. The trading account is maintained at IDBI CAPS while the Savings Bank and DP Account is maintained at the branch.

The provisions relating to Portfolio investment by NRIs is contained in Schedule 2 and 3 of the Notification No. FEMA 20/2000 RB.

OCBs are not allowed to make fresh investments in India under the Portfolio Investment Scheme vide Notification No. FEMA 46 dated 29th November 2001.

Further, in September 2003, RBI has banned OCBs from investing in any manner in India. In fact, the category of OCB has been abolished. However, they can continue to hold and sell shares purchased before 29th November 2001.

Portfolio investment is covered by general permission subject to following condition/provisions.

(i)	Investment is permitted on repatriation as well as non-repatriation basis
(ii)	Purchases, sale of shares (Preference and Equity) and/or convertible debentures are covered On non-repatriation basis NRIs can purchase shares/ convertible debentures issued by an Indian company on non-repatriation basis without any limit. Amount of consideration for such purchase shall be paid by inward remittance through normal banking channels from abroad or out of funds held in NRE / FCNR / NRO account maintained with the AD bank. NRI can also, without any limit, purchase on non-repatriation basis dated Government securities, treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds. Government of India has notified that NRIs are not permitted to make Investments in Small Savings Schemes including PPF. In case of investment on non-repatriation basis, the sale proceeds shall be credited to NRO account. The amount invested under the scheme and the capital appreciation thereon will not be allowed to be repatriated abroad. On repatriation basis: A Non-resident Indian can purchase on repatriation basis, without limit, Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; bonds issued by a public sector undertaking (PSU) in India and 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 bids.
(iii)	Purchase/sale is done through registered broker of a registered broker of a recognized stock exchange
(iv)	One bank branch must be designated by NRIs and all purchase/sale must be routed through that designated bank branch only
(v)	All transactions of sales and purchase must be delivery based. Speculative transactions are not allowed
(vi)	Mode of investment may be in any of the following ways: For investment on Repatriation basis inward remittances through normal banking channels out of FCNR/NRE account For investment on non-repatriation basis - Besides the above two, investment can be made out of NRO account
(vii)	Ceiling on Investment Per investor (Each NRI) 5% of the paid-up value of shares of an Indian Company on both repatriation and non-repatriation basis 5% of the value of each issue of convertible debenture of an Indian Company on both repatriation and non-repatriation basis Per investee Company (Total holding by all NRIs put together on both repatriable as well as non-repatriable basis) 10% of paid-up value of shares of an Indian Company 10% of paid-up value each series of convertible debenture This ceiling of 10% could be increased to 24%, if the General Body of concerned Indian Company passes a special resolution to that effect It is interesting to note that FIIs are allowed to increase their investments under portfolio investments scheme up to the sectoral cap, whereas NRIs are allowed to increase the limit only up to 24%
(viii)	Repatriation of Sale/Maturity Proceeds Sales proceeds of Investment held on repatriation basis can be credited to NRE/FCNR/NRO account after payment of applicable taxes If investment is on non-repatriation basis, credit of sale/maturity proceeds is permitted in NRO account
(ix)	Existing OCBs (i.e. prior to Sep 16, 2003) must intimate the designated bank branch immediately on the holding/interest of NRIs in the OCB becoming less than 60%
(x)	NRIs are allowed to enter into forward contracts to hedge their investment made in India
(xi)	NRI is also permitted to invest in exchange traded derivatives contracts approved by SEBI from time to time out of his Rupee funds held in India on Non-Repatriable basis subject to the limits described by SEBI

18.

What are the regulations with regard to NRI investments in Tier I and Tier II instruments issued by banks in India

NRIs have been permitted to subscribe to the Perpetual Debt instruments (eligible for inclusion as Tier I capital) and Debt Capital instruments (eligible for inclusion as upper Tier II capital), issued by banks in India, subject to the following conditions

Investments by all NRIs in Perpetual Debt instruments (Tier I) should not exceed an aggregate ceiling of 24 per cent of each issue and investments by a single NRI should not exceed 5 percent of the issue

Investment by NRIs in Debt Capital instruments (Tier II) shall be in accordance with the extant policy for investment by NRIs in other debt instruments

The issuing banks are required to ensure compliance with the conditions stipulated above at the time of issue. They are also required to comply with the guidelines notified by the Department of Banking Operations and Development (DBOD), Reserve Bank of India, from time to time

The issue-wise details of amount raised as Perpetual Debt Instruments qualifying for Tier I capital by the bank from NRIs are required to be reported in the prescribed format within 30 days of the issue to the Reserve Bank

The details of the secondary market sales/purchases by NRIs in these instruments on the floor of the stock exchange are to be reported by the custodians and designated banks respectively, to the Reserve Bank of India through the soft copy of the LEC Returns.

19.

Some of the practical queries:

(i)	Can NRIs take their securities outside India? There is no express prohibition in FEMA. As such “demat” being in vogue, physical transfer of security assumes little or no significance. Under FERA, general permission was granted for taking securities outside India.
(ii)	Can NRIs invest under portfolio investment scheme out of funds borrowed in India? No, NRIs cannot invest out of borrowed funds in India
(iii)	Can power of attorney holder manage portfolio on behalf of NRIs? Yes. A power of attorney holder can manage portfolio on behalf of NRIs. However, he cannot effect remittance outside India. With internet trading, life of NRIs has become easy for portfolio investments.
(iv)	Can NRIs avail of loan against such securities? Yes. NRIs can borrow against shares or other securities. However, the loan should be utilized for meeting the borrower’s personal requirements or for his own business purposes.
(v)	Is any approval required from anyone to begin Portfolio Investment? NRIs do not need any approval to undertake Portfolio Investment. They have to comply with the guidelines. FIIs need approval of SEBI and RBI. An application has to be filed with SEBI as the relevant rules. The application is forwarded to RBI. Both approvals are available simultaneously. One does not have to approach SEBI and RBI independently. In fact for FIIs, SEBI is the monitoring authority. Detailed rules are laid down under the SEBI law.
(vi)	How can NRI begin portfolio Investment? NRIs should comply with the following conditions: The NRI designates a bank branch for routing all his purchase and sale transactions through that Bank branch only Purchase and sale is carried out through a registered broker on a recognized stock exchange All transactions of purchase and sale must be delivery based. Speculative transactions are not allowed
(vii)	Can income earned on Portfolio Investment be remitted abroad? Income such as interest and dividend earned by NRI from portfolio investments acquired whether on repatriation basis or on Non-repatriation basis, can be remitted abroad provided applicable taxes have been deducted/paid However capital gains can be repatriated only if investment is on repatriable basis.
(viii)	Are NRIs required to file any reports to RBI for acquiring or selling shares/debebtures? The NRI investor is not required to file any Return or Report with the RBI with regard to acquisition or sale of shares and/or debentures in an Indian Company. Only the link office of the designated bank branch is required to furnish a report on daily basis on Portfolio Investment Scheme Transactions to RBI.

20.

What investments can an NRI make on Non-Repatriation basis?

Schedule – IV of notification No. 20/2000-RB deals with provisions relating to such type of investments. Briefly the provisions are as follows:-

General Prohibition
Investments in shares or convertible debentures of an Indian Company engaged in following type of activities are not permitted.

Chit Fund or Nidhi Company
Agricultural or Plantation activities
Real Estate Business
Construction of farm houses or
Dealing in Transfer of Development Rights (TDRs)

General Permission
Subject to above, NRIs are free to invest without any limit on non-repatriation basis in shares or convertible debentures of an Indian Company. However, only direct investment in the form of public issue, private placement or right issue is covered here. It follows that secondary investment, on private arrangement basis, would require prior RBI approval.

NRI can also, without any limit, purchase on non-repatriation basis dated Government Securities, treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds.

However, NRIs are not permitted to make Investments in Small Savings Schemes including PPF.

21.

What are the guidelines for transfer of existing shares from NRIs to residents and residents to NRIs?

The term ‘transfer’ is defined under FEMA as including "sale, purchase, acquisition, mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien". {Section 2 (ze) of FEMA, 1999}.

NRIs to residents:
The FEMA Regulations give specific permission covering the following forms of transfer i.e. transfer by way of sale and gift. These permissions are discussed below:
a. Transfer by way of sale:
A non-resident Indian (NRI) or an erstwhile Overseas Corporate Body may transfer by way of sale, the shares/convertible debentures held by him to another NRI only.
b. Transfer by way of Gift:
A non-resident Indian (NRI) may transfer by way of gift, the shares/convertible debentures held by him to another NRI only.

Residents to Non-Residents:

Transfer by way of sale - General Permission under Regulation 10 of Notification No. FEMA 20/2000-RB dated May 3, 2000.
A person resident in India may transfer to a person resident outside India any share/convertible debenture of an Indian Company whose activities fall under the Automatic Route for FDI subject to the Sectoral Limits, by way of sale subject to complying with pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by the Reserve Bank of India, from time to time.

This general permission is not available where:
Indian Company whose shares or convertible debentures are proposed to be transferred is in financial service sector (financial services sector means service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) and other companies regulated by any other financial regulator, as the case may be)
The transfer falls within the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
Transfer by way of gift:
A person resident in India can transfer by way of gift shares to a person resident outside India in the following ways:
A person resident in India who proposes to transfer to a person resident outside India [other than erstwhile OCBs] any security, by way of gift, shall make an application to the Central Office of the Foreign Exchange Department, Reserve Bank of India furnishing the following information, namely:

Name and address of the transferor and the proposed transferee
Relationship between the transferor and the proposed transferee
Reasons for making the gift. The gifts are permissible up to a limit of:

5% of the paid up capital of the company per donee, and
Amount does not exceed USD 25,000 per calendar year for each donor. The valuation of these shares shall be in accordance with pricing guidelines prescribed

In case the transfer does not fit into any of the above, either the transferor (resident) or the transferee (non-resident) can make an application for the Reserve Bank's permission for the transfer with the copies of the Reserve Bank of India's approvals evidencing the shares held by them on repatriation / non-repatriation basis.

22.

Can an NRI set up a partnership/proprietorship concern in India?

A non-resident Indian or a person of Indian origin resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided–

Amount is invested by inward remittance or out of NRE / FCNR / NRO account maintained with AD bank
The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income there from) or print media sector
Amount invested shall not be eligible for repatriation outside India

Investments with repatriation benefits

NRIs / PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/ partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India

23.

What is Exchange Earners’ Foreign Currency Account?

EEFC is an account maintained in foreign currency with an Authorized Dealer, i.e. a bank dealing in foreign exchange.

24.

Can the account be in term deposit form?

No, the account is a non-interest bearing current account.

25.

Who can open an EEFC account?

A person resident in India may open the account.

26.

Can one credit the entire foreign exchange earnings in this account?

Yes, one can credit 100 percent of his foreign exchange earnings into this account subject to permissible credits and debits.

27.

What are the permissible credits into this account?

i.	Inward remittance through normal banking channel, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder
ii.	Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area.
iii.	Payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ)
iv.	Payment received by an exporter from an account maintained with an authorized dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of Reserve Bank guidelines)
v.	Advance remittance received by an exporter towards export of goods or services
vi.	Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorized dealer in India
vii.	Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.
viii.	Interest earned, if any, on the funds held in the account
ix.	Re-credit of unutilized foreign currency earlier withdrawn from the account
x	Amount representing repayment by the account holder's importer customer, of loan/advances granted, by the exporter holding such account.

28.

Can foreign exchange earnings received through an international credit card be credited to the EEFC account?

Yes, foreign exchange earnings received through an international credit card for which reimbursement are provided in foreign exchange may be regarded as a remittance through normal banking channels and can be credited to the EEFC account.

29.

What are the permissible debits into this account?

Payment outside India towards a permissible current account transaction [in accordance to the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000] and permissible capital account transaction [in accordance to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000].
Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park and payment of customs duty in accordance with the provisions of the Foreign Trade Policy of Central Government for the time being in force.
Trade related loans/advances, by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.
Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure.

30.

Is there any restriction on withdrawal in rupees of funds held in an EEFC account?

No, there is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount withdrawn in rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.

A QUICK GLANCE ON THE ACCOUNTS AN NRI CAN OPEN

	NON RESIDENT EXTERNAL RUPEE ACCOUNT	FOREIGN CURRENCY NON-RESIDENT (BANK) SCHEME	NON RESIDENT ORDINARY ACCOUNT	RESIDENT FOREIGN CURRENCY ACCOUNT
PURPOSE OF ACCOUNT	To maintain overseas savings remitted to India in INR	To maintain overseas savings in foreign currency	To maintain Indian earnings like rent, Indian salary, dividend and also local expenses	To maintain savings in foreign currency by NRIs returning to India
ELIGIBILITY	NRI, PIO Account holder is required to open the account personally. Power of attorney can not open the account		NRI, PIO	Ex-NRIs/Residents
TYPE OF ACCOUNTS	SB, CA, RD or FD	FD only	SB, CA, FD or RD	SB, CA, FD
CURRENCY	Rupee	USD, GBP, EUR, AUD, CAD	Rupee	USD, GBP, EUR & JPY
MINIMUM BALANCE REQUIREMENTS	SB – 5,000 CA – 10,000 FD – 10,000	USD 1000	SB – 5,000 CA – 10,000 FD – 10,000	USD – 1000
PERIOD	12 Months to 120 months(but 36 months with us)	12-24 months; 24-36 months & 36 months	15 days to 10 years for FD	1 year to 3 years for FD
REPATRIATION	Principal and Interest - both fully Repatriable		While the principal of NRO deposits is non-repatriable, current income and interest earning up to US $ 1 million per calendar year is repatriable out of the NRO balances/sale proceeds of assets held in India Interest income from NRO accounts is not exempt from income tax, as is the case with domestic deposits. Interest is freely repatriable after TDS of 30% + applicable surcharge	Fully repatriable
INTEREST	Compounded quarterly	Initial interest is paid after one year and subsequently after every six months	Quarterly compounded
LOANS	Available to account holder/third party resident as per RBI circular No RBI / 2006-2007 / 244 A.P. (DIR Series ) Circular No 29 dated January 31, 200 To account holder for business, investment in shares & securities, purchase of house property for own residential purpose and any other personal purpose To third party for personal or business purpose Overseas loan given for fund based/ non fund based facility for any bonafide purpose		Available against Fixed Deposits subject to an upper limit of Rs 20 lakhs as per RBI guidelines	Available
AUTHORITY TOATTORNEY	Can operate an account but cannot open it, make gift, transfer funds to another NRE Account nor remit abroad. However w.e.f 15-3-2005 he can withdraw for local payments or remittance to the account holder himself through normal banking channels	May operate the account but cannot open it or gift or prematurely withdraw, cannot transfer funds to another FCNR (B) Account or remit abroad. However he can transfer funds to another NRE/FCNR a/c. of the accountholder or remit funds to accountholder if empowered	Operations are restricted to: all local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes. The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder nor to make payment by way of gift to a resident on behalf of the non-resident account holder or transfer funds from the account to another NRO account.
NOMINATION	Permissible
RENEWAL / TRANSFER	Can be renewed and easily transferred to account holder's another NRE/FCNR(B) account Transfer to another NRIS NRE/FCNR(B) account permitted Transfer abroad by way of remittance – Allowed The account can also be shifted from one authorized dealer to another		Auto renewal allowed as per the instructions given	Money can be remitted abroad for bonafide purposes either for self or dependants If you decide to go abroad again funds can be transferred to NRE/FCNR account(s)
PREMATURE WITHDRAWAL	Permissible - however, no interest payable for period of less than 6 months; Above 6 months - subject to penalty as per Bank rules	Permissible - however no interest payable for period of less than 12 months, Above 12 months - subject to penalty as per Bank rules	Permissible - however no interest payable for period of less than 15 days, Above 15 days - subject to penalty as per Bank rules	Permissible – but subject to penalty as per Bank rules
TAXABILITY	Interest exempt from Income Tax Balance not subject to Wealth Tax No Gift Tax provisions in India. Hence no gift tax liability on gifts from NRE account. However w.e.f 1-9-2004 u/s 56 of the I.T Act amount received in excess of Rs. 25,000/- by way of gifts to be included in individual's income and chargeable to income tax. Gift from specify relatives are exempt		TDS @ 30% + applicable surcharge (If interest income above Rs. 8.5 lakhs, surcharge is 10% of IT)	Exemption can be claimed on interest earned basis declaration of RNOR (Resident but Not Ordinarily Resident) status, if eligible, at the start of the financial year.
RETURNING NRIs	NRE account is to be redesignated as Resident Account/Funds be transferred to RFC Account upon return	Maintained as FCNR(B) [till maturity] and thereafter transferable to: RFC Account or to be designated as Resident Rupee Account	Accounts to be re-designated as resident rupee accounts If on a temporary visit to India, then account should continue to be treated as non-resident	Not Applicable as the account is opened by returning NRIs
PERMITTED CREDITS	Proceeds of remittances to India in any permitted foreign currency		Any foreign currency which is freely convertible tendered by the account-holder during his temporary visit to India. Foreign currency exceeding USD 5000/- or its equivalent in form of cash should be supported by Currency Declaration Form. Rupee funds should be supported by Encashment Certificate, if they represent funds brought from outside India	Account can be credited by– bringing entire amount of foreign exchange to India at the time of return to India balances standing to the credit of NRE and FCNR accounts at the time of return income from overseas assets or sales proceeds from overseas assets entire amount of pension received from abroad
	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(B) account of the account holder or remittance from outside India through normal banking channels and the authorized dealer is satisfied about the genuineness of the transaction
	Transfers from other NRE / FCNR (B) accounts		Transfers from rupee accounts of non-resident banks
	Interest accruing on the funds held in the account		Proceeds of remittances from outside India through normal banking channels received in foreign currency which is freely convertible
	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 (B) account or out of inward remittance through normal banking channels		Legitimate dues in India of the account holder. This includes current income like rent, dividend, pension, interest etc. as also sale proceeds of assets including immovable property acquired out of rupee / foreign currency funds or by way of legacy / inheritance	Income received from overseas assets in the form of dividends etc. or sale proceeds of such assets repatriated to India can be credited to RFC accounts
	Proceeds of personal cheques drawn by the account holder on his foreign currency account and/or travelers 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 authorized dealer/bank is satisfied that the account holder is still resident outside India, the travelers' cheques/drafts are standing/endorsed in the name of the account holder and in the case of travelers' cheques, they were issued outside India			Pension received by the account holder from abroad can be credited to his RFC account FE (Foreign Exchange) balances repatriated from abroad. Incomes or sale proceeds from FE assets held abroad. Sale proceeds of FE Assets held in India sold. Pension, superannuation or other monetary benefits from ex-employer outside India. Transfer from NRE and FCNR balances Proceeds of foreign currency notes and foreign travelers' cheques brought in by the account holder. Transfers from other RFC accounts of the account holder. Interest earned on RFC accounts. Recredit of unspent FE surrendered by the account holder on his return to India, provided that unspent exchange had in fact been released for travel, etc., and it is surrendered within the stipulated period Gifts or inheritance received from abroad
	Proceeds of foreign currency/bank notes tendered by account holder during his temporary visit to India, provided: the amount was declared on a Currency Declaration Form(CDF), where applicable, and the notes are tendered to the authorized dealer in person by the account holder himself and the authorized dealer is satisfied that account holder is a person resident outside India
	Maturity proceeds of Government securities including National Plan / Savings Certificates as well as proceeds of Government securities and units of mutual funds sold on a recognized 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 (B) account or out of remittances received from outside India in free foreign exchange
	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 (B) account of the account holder or by remittance from outside India through normal banking channels
	Any other credit if covered under general or special permission granted by Reserve Bank
PERMITTED DEBITS	Any other transaction if covered under general or special permission granted by the Reserve Bank		Remittance outside India of current income like rent, dividend, pension, interest etc. in India of the account holder	Funds in RFC accounts can be withdrawn freely for local payments in rupees Remittance abroad for any bonafide purpose of the account holder or for his dependents. This may include Purchase of a foreign security. Transfers to other RFC accounts of the account holder. All local disbursements and bank charges
	Investment in shares / securities / commercial paper of an Indian company or for purchase of immovable property in India provided such investment / purchase is covered by the regulations made, or the general / special permission granted, by the Reserve Bank		Remittance of an amount of balances in NRO account of NRI/PIO up to USD One million, per calendar year, for all bonafide purposes to the satisfaction of the authorized dealer
	Transfer to NRE/FCNR(B) accounts of the account holder or any other person eligible to maintain such account		All local payments in rupees including payments for investments in India subject to compliance with the relevant regulations made by the Reserve Bank
	Remittances outside India
	Local disbursements
DECLARATION OF AMOUNT	In Currency Declaration Form (CDF) where applicable
OTHER FACILITIES	Cheque book facility with SB A/c International ATM cum Debit Card Safe Custody of FD receipt with the Bank Locker facility at identified branches Online account statement

Note: The above information is based on references from websites of Ministry of Overseas Indian Affairs, Reserve Bank of India, Foreign Exchange Management Act. Customers desirous of having further information may refer to these websites

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