Who is an N R I ?

Under the Foreign Exchange Management Act, 1999, Non-resident Indians are:

1. Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an uncertain period of stay abroad; OR,

2. Government servants who are posted abroad on duty with the Indian Mission and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR,

3. Government servants deputed abroad on assignments with foreign government or regional/international agencies like the World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP); OR, 4. Official of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

What kind of Bank Accounts can be Operated by N R I's?

A. Non Resident (Ordinary) Account

Who can open and how? .

An existing bank account of an Indian national going abroad and becoming a non-resident Indian is automatically designated as non-resident (ordinary) account (NRO). An NRI can also open such ordinary accounts even by making remittances from abroad or by transfer from an existing non-resident account in India in his own name. Such accounts can be opened by overseas corporate bodies (OCBs). NRO accounts can be opened while an NRI is on a visit to India or simply by making remittances from abroad. NRO account can be in the sole name of an NRI or in joint names of more than one NRI or in joint names with any of the close relatives in India. In other types of joint accounts, prior permission of Reserve Bank of India (RBI) is required.

What types of account can be opened?

NRO account can be opened in the categories of current, savings, and recurring and term deposit accounts.

What type of transactions are permitted?

All types of transactions of deposits and withdrawals to and from NRO account are normally permitted. However, the RBI has prescribed certain transactions requires to be reported to RBI in prescribed forms.

Can the funds be repatriated ?

The funds can be freely withdrawn for the local disbursements without RBI approval. Interest is now repatriable.

Is interest earned exempt from tax?

Interest on NRE account is not exempt from Income tax and balances to the credit of NRE account are not exempt from wealth tax.

B) Non-resident external account (NRE)

Who can open and how?

NRI as well as OCBs are permitted to open NRE accounts. NRE accounts can be opened by depositing foreign currency along with the account opening application form. The account opening form may be signed by NRI abroad and the signature of NRIs may be verified by a bank abroad or by Indian Embassy or by notary public official abroad. NRE account can be opened during the visit to India by tendering foreign currency travellers cheques or foreign currency notes.

What types of account can be opened?

All types of account that is current, savings, recurring and term deposit can be opened under NRE accounts scheme. NRE accounts can be opened in single or joint name. However, in case or account opened in joint name, all the joint holders should be resident of external group of countries.

Can funds be repatriated ?

As per the Liberalized Exchange Rate Management System (LERMS) all the remittances of foreign exchange to NRE accounts are converted into Indian rupee at the market rate of exchange and credits are given in terms of Indian rupees. Similarly, at the time of repatriation, the amount to be repatriated is converted into the designated foreign currency at the prevailing market rate of exchange. NRE Account offers all the facilities of the NRO account plus complete repatriation without informing the reserve bank.

Is interest earned exempt from tax?

Interest on NRE account is exempt from Income tax and balances to the credit of NRE account are exempt from wealth tax.

C) Foreign Currency Non Resident Account (FCNR)

Who can open and how?

All non resident Indians, resident in external group of countries and OCBs are eligible to open FCNR accounts. FCNR accounts are permitted only in four currencies :

a. Pound Sterling (GBP)

b. US Dollar (USD)

c. Euro

d. Japanese Yen (JPY)

The rate of interest on the above account vary for each type of designated currency.

What types of account can be opened?

FCNR account is permitted in the form of fixed deposits for a maximum period of three years. Current and savings accounts are not available under this scheme.

Is interest earned exempt from tax?

Interest earned on FCNR account is exempt from income tax and the balance in the account is exempted from wealth tax.

What are the options available to depositor at maturity?

There are three options available to a depositor at maturity of FCNR account :
a. To ask for the repayment in designated foreign currency.
b. To ask for the repayment in Indian rupees or in any foreign currency other than designated foreign currency.
c. To ask for the conversion of FCNR account into NRE fixed deposit.

How does it differ from NRE account?

The FCNR accounts, primarily differ from NRE account on the point of fact that the balance in FCNR account is denominated in designated foreign currency in which the account is opened and thus unlike NRE accounts, there is no loss either on account of difference between buying and selling rates or on account of fluctuation in exchange rates. The deposits in FCNR accounts can be withdrawn prior to maturity date.

What is the position regarding acquisition of immovable property by NRI?

Consequent to the liberalization in exchange control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India have been announced. The current position in therefore as under :

1. Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes.

2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO account or NRE account or FCNR account.

3. RBI has given general permission to non resident Indians holding foreign passport (i.e. foreign citizens of Indian origin) to acquire, hold, transfer or dispose off by way of sale or inheritance immovable properties situated in India provided:
   a. The property is for the purchaser's bonafide residential purpose.
   b. The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE account or FCNR

4. Foreign citizens of Indian origin are required to declare the properties to RBI within a period of 90 days from the date of purchase in form IPI 7. The following documents must be submitted along with the declaration.
   a. A certified copy of the purchase deed or a certificate from the Cooperative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name.
   b. Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from declarant's NRE account or FCNR account or FCNR Special Deposit Account and payment of consideration for the property out of those funds.

5. Where a foreign citizen of Indian origin wishes to acquire a property out of funds held in NRO account then the permission from RBI will be required which can be applied for in form IPI 1.

6. Where a foreign citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in form IPI 1.

7. Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.

8. A person resident outside India who has established in India a branch or place of business (but not a mere liaison office) in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for incidental to carrying on such activity.

Do non-resident Indian citizens require permission of The Reserve Bank to acquire residential/commercial property in India?

No. All Indian citizens are entitled to buy property in India, irrespective of their residential status.

Do foreign citizens of Indian origin require permission of the Reserve Bank to purchase immovable property in India for their residential use?

Yes. However, the RBI has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain separate permission of The Reserve Bank.

Who is a foreign citizen of Indian Origin?

A foreign citizen is deemed to be of Indian Origin if : i) he held an Indian Passport at any time or ii) he or his father or paternal grand father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal)

What formalities have to be completed by foreign citizens of Indian origin to purchase residential immovable property in India under the general permission?

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the documentary evidence for the transaction and bank certificate for the money paid.

Can such property be sold without the permission of Reserve Bank?

Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

Can sale proceeds of such property (if and when sold) be remitted out of India?

For residential properties purchased on or after 26 May 1993, the Reserve Bank considers applications for repatriation of sale proceeds. Approval is usually granted for up to the consideration amount remitted in foreign exchange in acquiring the property for a maximum of two such properties. The balance amount of sale proceeds, if any, or sale proceeds for properties purchased prior to 26 May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?

Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of the consideration amount, whichever is later.

What is the procedure for seeking such repatriation?
Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of The Reserve Bank at Mumbai within 90 days of the sale of the property.

Can foreign citizens of Indian origin acquire or dispose residential property by way of gift?

The Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin, whether resident in India or not, provided gift tax has been paid.

Can immoveable property held in India be transferred by way of gift to in India?

General permission has been granted by Reserve Bank to non-resident persons (foreign citizen) of Indian Origin to transfer, by way of gift, immoveable property held by them in India to relatives and charitable trusts / organisations subject to the condition that the provisions of all other laws, as applicable are complied with

Can foreign citizens of Indian origin acquire commercial properties in India?

Properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India. A declaration has to be submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.

Can they dispose of such properties?

Yes.

Can sale proceeds of such property be remitted out of India?

Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26 May 1993 can be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, which ever is later. Applications for the purpose are required to be made to the Central Office of Reserve Bank within 90 days of the sale of property in form IPI 8.

Can the properties (residential/commercial) be given on rent if not required for immediate use?

The Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.

Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?

The Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC and authorised dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation, subject to certain conditions. Criteria regarding the purpose of the loan, margin money and the quantum of loan will be at par with those applicable to resident Indians. Repayment of the loan should be made within a period not exceeding 15 years, out of inward remittance through banking channels or out of funds held in the investors' NRE/FCNR/NRO accounts.

Can Indian companies grant loans to their NRI staff?

The Reserve Bank permits Indian firms to grant housing loans to their employees deputed abroad and holding Indian passport subject to certain conditions.

Can an authorised dealer grant a housing loan to non-residents of Indian nationality where the NRI is the principal borrower with his resident close relative as a co-obligant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?

Yes. However in such cases the payment of margin money and repayment of loan instalments should be made by the NRI borrower.

What should be the method of payment for purchasing residential immovable property in India by foreign nationals of Indian origin under the general permission?

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India
Do non-resident Indian nationals require permission of Reserve Bank to acquire residential / commercial property in India?
No permission is required by non-resident Indian nationals to acquire immovable Property in India.

Are foreign nationals of Indian origin allowed to purchase immovable property in India?
Yes, foreign nationals of Indian origin, whether resident in India or abroad, have been granted general permission to purchase immovable property in India

In what way the Non-resident Indian can finance the flat?

The purchase of the flats can be financed from the fresh remittance through the normal banking channels or from payment from original non-resident account or from Non-resident (External) Accounts. Non-resident Indians who are citizens of India (India Passport holders) are eligible for housing finance for the acquisition of an immovable property or construction of a new house, or a flat for their occupation or for that of their family in India. But the HDFC also considers granting of loans to non-resident Indians even if they are abroad, provided a family member of his or her in India is made a co-borrower and a power of attorney is given to his representative in India

Non-resident Indians are staying abroad can the property be purchased through the agent or through the Power of Attorney?

The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.

Can such residential property be given on rent if not required for immediate residential use?

YES

Can the rental income from such property be remitted outside India?

No. Such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Non-resident Indians are staying abroad can the property be purchased through the agent or through the Power of Attorney?
The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.

Are there any formalities to be completed by foreign nationals of Indian origin for purchasing residential immovable property in India?

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Bombay within a period of 90 days from the date of purchase of immovable property.