Many Indians move abroad to foreign nations for various purposes such as education, employment, etc. and also settle there. When a person moves abroad, his residential status may change from Resident to Non-Resident under FEMA depending upon the number of days he resides outside India as well as intention of such person to stay outside India for uncertain period. When the residential status changes, along with the provisions of Income Tax Act, 1961, he also has to adhere to the provisions of FEMA which regulates various types of investments in India by the NRIs. The terms Persons resident outside India, NRI and PIOs are defined specifically under the FEMA regulations. This article is primarily focused on Indians who have left the country to reside abroad.
Yes. Such a person has to close his regular saving account and open Non-Resident Ordinary Rupee Account (NRO) / Non-Resident External Rupee Account (NRE).
RBI has introduced the USD one million dollar scheme under which proceeds of non-repatriable investment can be remitted outside India per financial year.
Note: The scheme is governed under certain terms and conditions and also are subject to reporting compliance.
Yes. NRIs can purchase shares, mutual funds, Exchange Traded Funds on Indian stock exchange under the Portfolio Investment Scheme (PIS) subject to reporting compliance. The DEMAT account should be linked with the NRE Account.
They can also invest in Initial Public Offer (IPO) of to be listed companies under PIS. NRIs can also invest in shares and mutual funds on non-repatriation basis without any reporting compliance.
Yes, an NRI can make direct investment in shares of listed as well as unlisted company subject to certain conditions and reporting obligations. The investment can either be on repatriation basis or non-repatriation basis. Please seek advice before making investments to comply with regulations.
Note: The term ‘relative’ is very narrowly defined under section 2(77) of Companies Act, 2013. ‘Relative’ includes Father (Including Step-Father), Mother (Including Step-Mother), Sons (Including Step-Son), Son’s Wife, Daughters, Daughter’s Husband, Brothers (Including StepBrother), Sisters (Including Step-Sister) and members of HUF
Note: For the purpose of Gifts, definition of the term relative under Companies Act, 2013 as mentioned above in Q.7 is to be applied. Also, one has to keep in mind the gift tax laws of the foreign country in which such NRI resides
Yes. Indian person becoming Non Resident can continue paying the premium on the LIC and other existing policies for insurance etc
Yes. NRI can continue loans given to residents given in their capacity as residents. Any new loan/new instalment will have to be given as per extant FEMA regulations only and all the applicable terms and conditions pertaining to end use, maturity period, rate of interest etc. are to be followed.
Yes, an NRI can purchase immovable property in India other than a plantation, farmhouse and agricultural property. He can also acquire property in India by way of gift from Residents or from another NRI who are relatives as per Companies Act, 2013 (mentioned in Q. 7).
Yes. Under FEMA, any person who was once a Non-Resident, can continue to hold his foreign bank accounts, investments and properties abroad even after he becomes a person resident in India.
Any person contravening FEMA provisions may be liable to a penalty as under:
The information contained in this write up is to provide a general guidance to the intended user. The information is based on our interpretation of various prevailing laws, rules, regulations, pronouncements as on date mentioned below. The information should not be used as a substitute for specific consultations. The information has been provided in simplified manner for general reference of the public which can lead to interpretation not intended under law. Hence, we recommend that professional advice is sought before taking any action on specific issues before entering into any investment or financial obligation based on this Content.
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