1. Introduction Welcome to this effort of Karnataka Bank Ltd - one of the India's oldest private sector Bank to empower you with information with respect to facilities for Non-residents and the regulatory framework operative in India. Our experience so far has been that the Non Resident Indians like to get information on several matters relating to various current account and capital transactions as well as other incidental issues. This questionnaire attempts to answer to all such questions in simple language. While preparing replies to questions,special care has been taken to ensure that the replies are drafted in simple words and reference to technical details are avoided. -- Foreign Exchange Mangement Act 1999   What is FEMA 1999? The Foreign Exchange Management Act, 1999 (FEMA), has come into force with effect from June 1, 2000 (in place of FERA 1973). This act provides legal framework for administration of exchange control in India.  What is the extent and application of Foreign Exchange ManagementAct (FEMA)? FEMA extends to the whole of India. It applies to all branches,offices and agencies outside India, owned or controlled by a person,resident in India. It also applies to any contravention, there under,committed in or, outside India, by any person to whom the Act applies.   What are the capital account transactions? The capital account transaction means a transaction, which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA 1999.  What are the current account transactions? A transaction other than a capital account transaction is a current account transaction. To be precise, payments in connection with foreign trade, services and other miscellaneous remittances are current account transactions, which are guided by FEMA (current account transactions) rules 2000.   Who is an Authorized Dealer in foreign exchange? Authorized dealers in foreign exchange are those banks/ entities in India permitted by Reserve Bank under section 10 of the Foreign Exchange Management Act, 1999, which alone are entitled to engage in foreign exchange transactions with each other, with non-residents and with resident non banking clients for certain approved purposes.   What are permitted currencies? The expression permitted currency indicate a foreign currency which is freely convertible i.e. a currency which is permitted by the rules and regulations of the country concerned to be converted into major reserve currencies like US Dollars, Pound Sterling, Euro etc and for which a fairly active market exist for dealings against the major currencies. -- Residents   Where are the terms a `person resident in India' and a `person resident outside India' defined? Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines `person resident in India' and a `person resident outside India' respectively.  Who can determine whether a person is resident in India or not? Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.   Who is a person resident in India? Under FEMA 1999, a person resident in India is defined as a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment,carrying on business or vocation in India or for any other purpose,that would indicate his intention to stay in India for an uncertain period. In other words, to be treated as `a person resident in India'under FEMA 1999, a person has not only to satisfy the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but has also to comply with the condition of the purpose/ intention of stay. -- Non-resident  Who is a Non Resident Indian (NRI)? Non-Resident Indian nationals generally fall under the following broad categories: a) Indian citizens who stay abroad for employment or for carrying on any business or vocation or for any other purpose, in circumstances indicating an indefinite period of stay outside India. b) Indian citizens working abroad on assignments with foreign governments, Government agencies or international/ multination agencies like United Nations Organisation (UNO), International Monetary fund (IMF), World Bank etc. c) Officials of central and State Governments and Public sector undertakings deputed abroad on assignments with foreign governments/agencies/ organisations or posted to their own offices (including Indian Diplomatic Missions) abroad. d) Student who has gone abroad for studies. -- Person of Indian Origin  Who is a Person of Indian Origin (PIO)? For the purposes of availing of the facilities of opening and maintenance of bank accounts and investment in shares/ securities in India, a foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be person of Indian origin, if, a)   he/ she at any time held an Indian passport;            OR b)   he/ she or either of his/ her parents or any of his/ her grandparents were a citizen of India by virtue of the Constitution of India or the Indian Citizenship Act, 1955 (57 of 1955).            OR c)   the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b). Note:    1. Spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in share/ securities in India are made by such persons only jointly with their NRI spouses.    2. For investments in immovable properties A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal), is deemed to be of Indian origin if, (i) He/She held an Indian passport at any time, or (ii) He/She or His/Her father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act 1955, (57 of 1955). -- Overseas Corporate Bodies (OCB)   What is an 'Overseas Corporate Body' [OCB]? 'Overseas Corporate Body' means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-Resident Indians directly or indirectly but irrevocably. Such ownership interest should be actually held by them and not in the capacity as nominees. OCBs were debarred from Portfolio Investment Scheme w.e.f November 29, 2001. OCBs have been banned as a class of investor w.e.f September 16, 2003. However, they have been permitted to continue to hold the securities acquired by them prior to these dates. Accordingly OCBs may open a demat account; however it can be only for the purpose of dematerializing the existing holdings. 2. Facilities available to Non-Resident Indians   What are the facilities available to NRIs? The facilities available to NRIs for making investment in India are as follows: * Bank accounts and deposits. * Other Investments on repatriation basis. - Government dated securities/treasury bills. - Units of domestic mutual funds. - Bonds issued by a public sector undertaking (PSU) in India. - Non-convertible debentures of a company incorporated in India. - 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. - Shares and convertible debentures of Indian companies under FDI scheme (including automatic route & Foreign Investment Promotion Board(FIPB). - Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme. - Perpetual debt instruments and debt capital instruments issued by banks in India. * Other Investments on non-repatriation basis. - Government dated securities (other than bearer securities)/treasury bills. - Units of domestic mutual funds. - Units of Money Market Mutual Funds in India. - Non-convertible debentures of a company incorporated in India. - The capital of a firm or proprietary concern in India, not engaged in any agricultural or plantation activity or real estate business. - Deposits with a company registered under the Companies Act, 1956 including NBFC registered with RBI, or a body corporate created under an Act of Parliament or State Legislature, a proprietorship concern or a firm out of rupee funds which do not represent inward remittances or transfer from NRE/ FCNR (B) Accounts into the NRO Account. - Commercial Paper issued by an Indian company. - Shares and convertible debentures of Indian company other than under Portfolio Investment Scheme. * Investment in immovable Property. - May acquire immovable property in India other than agricultural land/ plantation property or a farmhouse out of repatriable and non-repatriable funds.  What are the facilities available to returning NRIs/PIO? Returning NRIs/PIO;    -- May continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India.    -- May open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR (B) accounts. Proceeds of assets held outside India at the time of return, can be credited to RFC account. The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India. -- Bank Accounts  Can accounts be maintained by NRIs with any bank in India? Banks holding authorised dealers' licences (i.e. banks authorised to deal in foreign exchange) or banks specifically authorised in this behalf by the Reserve Bank can only maintain accounts in the names of NRIs. Certain co-operative / commercial banks (referred to as authorised banks) have been specifically permitted to maintain accounts of NRIs expressed in rupees even though they are not authorised dealers.   Can a person employed in Bhutan or Nepal open NRE/FCNR accounts or Fixed Deposits in foreign currency? No. Persons resident in Bhutan and Nepal cannot normally open NRE accounts/FCNR deposits except where the funds to these accounts are remitted in free foreign exchange. Interest earned on these accounts can be remitted only in Indian Rupees to NRIs/ PIOs in Nepal & Bhutan.  Can NRI account be opened in the name of crewmembers of shipping companies? Yes. NRI accounts can be opened in the name of crewmembers of shipping companies if their posting is not based in India and they derive their income from abroad in foreign currency.  Can NRI maintain multiple accounts with different banks in India, simultaneously? Yes, there is no prohibition to open and maintain multiple accounts.  Can accounts be opened from abroad or should the NRIs come in person to open the accounts? NRI can open accounts from abroad by sending duly filled and signed account opening form attested by the Indian Consulate, along with attested copies of passport and passport size photograph.  Can NRI open a savings bank account with Zero balance? Yes, an individual taking up an employment, business, vocation etc. can complete the account opening formalities prior to going abroad with zero balance. Subsequently, he/she must remit funds to make the account operative within a reasonable time, where after only chequebook will be issued.  How and where does one open NRI account? NRI accounts (NRE/FCNR/NRO) are accounts held by Bank in India.In order to open an account, the Account Opening Form duly filled in must be sent to a branch of your choice in India. To know a branch located in your city in India, please go to "branch locator" on the top left hand corner of the home page of the bank's website www.karnatakabankltd.com    Please note the following:     -- Attach 2 photographs (one signed and affixed on the form).     -- Enclose copy of passport attested by an authorized officer of the Indian Embassy / Consulate or a Notary Public. Indian citizens need to enclose copy of the current Visa page or green card.     -- It is advisable to ask the branch in India to open a `zero balance'account and on receipt of account number, fund the account by remittance through approved channel  Can the account be accessed through Internet? Yes. For more details on Internet banking please  Click Here -- Rupee Accounts    Ordinary Non-Resident Accounts (NRO)  What are the types of NRO account available to NRI's? Non Residents can hold:    -- NRO Savings Bank account.    -- NRO Current Account.    -- NRO Term Deposits.    -- NRO Cumulative term deposits.  Can NRO account be jointly held with Resident Indian? Yes. Account can be jointly held by NRI with Resident Indians.  Is there any restriction to number of joint holders? No.  Can money transferred from NRE account to NRO account be transferred back to NRE account? No. However, funds derived by remittances from abroad and which cannot be said to have lost their identity as remittable funds, can be transferred back to NRE account of the NRI.  Is interest on NRO accounts repatriable? Yes, interest earned on NRO accounts can be repatriated subject to payment of tax.  What are the conditions regarding repatriation of balances in NRO accounts? Repatriation of current income is allowed up to US dollars 1 million per calendar year for any purpose from the balances in NRO accounts subject to payment of applicable taxes. The limit of US dollars 1 million includes sale proceeds of immovable properties held by NRIs/ PIOs.  What is the rate of interest applicable on these deposits? The interest rates are as applicable as for domestic savings bank account and are subject to change from time to time. For more details please  Click Here. The interest income earned on NRO accounts attracts income tax.  What are the permissible credits? The following credits are permitted: a) Proceeds of remittances in any permitted currency from abroad through normal banking channel. b) Any permitted currency tendered by the account holder during his/her temporary visit to India. Foreign currency exceeding USD5000 or its equivalent in form of cash should be supported by Currency Declaration Form. c) Remittances by way of transfer from rupee accounts of Non-Resident bank accounts. d) Legitimate dues like rent, dividend, pension, and interest as also proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance.   What are the permissible Debits? The following Debits are permitted: a) All local payments in rupees, including payments for investments subject to the compliance with the relevant regulations made by the Reserve Bank. b) Remittance outside India of current income like rent, dividend,pension, interest in India of the account holder net of applicable taxes.     Non-Resident (External) Accounts(NRE)  What are the types of NRE account available? Non Resident Indians can hold:    -- NRE Savings Bank account.    -- NRE Current Account.    -- NRE Term Deposits.    -- NRE Cumulative term deposits.  Can NRE account be held jointly with the residents? No. NRE accounts can only be maintained jointly with other NRIs only.  Should all the NRIs desirous of opening joint accounts be residing in the same country? No, NRIs residing in different countries may open joint accounts.  What are the permitted credits to NRE accounts? The following credits are permitted: a) Proceeds of remittances to India in any permitted currency. b) Proceeds of personal cheques drawn by the account holder on his foreign currency accounts, travelers cheques, bank drafts deposited by the account holder in person during his temporary visit to India. The travelers cheques (issued outside India)/ bank drafts should be standing/endorsed in the name of the account holder. c) Proceeds of foreign currency/ bank notes tendered by the account holder during his temporary visit to India and should be supported by Currency Declaration Form wherever applicable. d) Transfers from other NRE/ FCNR accounts. e) Interest accruing on the funds held in the account. f) 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. g) Maturity proceeds of Government securities provided they were originally purchased by debit to the account holders NRE/FCNR account or out of remittances received from outside India in free foreign exchange. h) 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. i) Refund of application/earnest money/purchase consideration made by the house building agencies/seller on account of non-allotment of flat/plot/cancellation of bookings/deals for purchase of residential/commercial property, together with interest if any (net of income tax payable thereon), provided the original payment was made out NRE/FCNR account of the account holder or remittance from outside India through normal banking channels.   What are the permitted debits to NRE accounts? The following debits are permitted: a) Local disbursements. b) Remittances outside India. c) Transfer to NRE/FCNR account of the account holder or any other person eligible to maintain such account. d) Investment in shares/securities/commercial paper of an Indian company or for purchase of immovable property in India provided such investment /purchase deals covered by the regulations made, or the general/special permission granted by the Reserve Bank.  Can funds in NRE accounts be repatriated outside India? Yes. Funds held in NRE accounts can be repatriated abroad freely.  What is the minimum and maximum period for NRE deposits? The minimum period is one year and the maximum period is five years.  Can NRE term deposits be value dated? Deposits are value dated. The date will be the date on which the funds are received by the Bank in its Nostro account.  Is premature withdrawal of the NRE term deposit allowed? Yes. However, this is subject to the levy of a penalty and at the discretion of the bank.   If a NRE deposit of 12 months maturity is withdrawn prematurely, would any interest be payable? No. While the premature withdrawal would be allowed, no interest would be payable. For such premature withdrawals the bank may levy penalty as per their discretion.   Can NRI withdraw funds in abroad from his NRE account in India? Yes. NRI can withdraw funds in abroad from his NRE account by using International ATM cum Debit card. For application and more details on International ATM cum Debit card please  Click Here  What is the rate of interest rate applicable on these deposits? The interest rates on these deposits are regulated by Reserve Bank of India. Presently, the interest rates are linked to LIBOR (London Interbank Offered Rate). For the on going interest rates, please  Click Here 3. Foreign Currency Accounts -- Foreign Currency (Non-Resident) Accounts (FCNR)  What is FCNR account? It is a term deposit account in foreign currency. It is also referred as FCNR (B) account.   What are the foreign currencies in which such accounts can be maintained? FCNR Accounts can be maintained in Pound Sterling, U.S.Dollar,Canadian Dollar, Australian Dollar, Japanese Yen and Euro.  What is the minimum and maximum period for FCNR deposits? The minimum period is one year and the maximum period is five years.  Is premature withdrawal of the FCNR term deposit allowed? Yes. However, this is subject to the levy of a penalty and at the discretion of the bank.  If a FCNR deposit of 12 months maturity is withdrawn prematurely,would any interest be payable? No. While the premature withdrawal would be allowed, no interest would be payable. For such premature withdrawals the bank may levy penalty as per their discretion.   Are funds in FCNR accounts freely repatriable abroad? Yes. Authorized dealers maintaining these accounts would allow repatriation abroad of these funds.  Can proceeds of FCNR be withdrawn in the form of Foreign Currency/Foreign Currency Travellers Cheques? NRI can withdraw up to USD 2000/- in currency notes and balance in TCs or the entire amount in Travellers Cheques/Drafts or Telegraphic Transfers.  Are there any charges while remitting the FCNR proceeds abroad? No.  Can FCNR deposit in one currency be converted to a deposit in another currency? Yes. However, it would be advisable to do so only on maturity of the deposit so that there is no loss of interest.   Can FCNR deposits be value dated? Deposits are value dated. The date will be the date on which the funds are received by the Bank in its Nostro account.  What is the interest payable on these deposits? The interest rates on these deposits are regulated by Reserve Bank of India and at present banks are allowed to quote interest rate linked to LIBOR (London Interbank Offered Rate) as on last working day of the previous month for the respective currencies of corresponding maturities. For the ongoing rates please  Click Here -- Resident Foreign Currency (RFC) Account (For Returning Indians)  What is a Resident Foreign Currency (RFC) Account Scheme? This is a Scheme by Reserve Bank permitting persons of Indian nationality or origin, who have returned to India for permanent settlement (Returning Indians), to open foreign currency accounts with banks in India for holding funds brought by them to India.   What are the types of account that can be opened under the scheme? All types of accounts namely, current, savings (without cheque book facility), and fixed deposits can be opened under the scheme.  What are the documents to be furnished for opening Resident Foreign Currency (RFC) Account? The application for opening Resident Foreign Currency Account shall be accompanied by the following documents: (a) An attested copy of relevant pages of passport giving passport particulars, date of arrival in India and particulars of residence outside India. (b) Documentary evidence to show that funds proposed to be credited to the account are eligible for the purpose.  Can the funds in NRE/FCNR accounts be credited to RFC account? Yes, the returning NRI can credit the balances in NRE, FCNR accounts to RFC accounts.  Can a person who returns to India after a short assignment abroad open a RFC account? Yes.  Can RFC accounts be opened jointly? Yes. Joint accounts in the names of eligible persons (persons of Indian nationality or origin who have been resident outside India for a continuous period of not less than one year) are permitted. However,addition of names of non-eligible persons is not permitted.  In what currencies are RFC accounts denominated? At present RFC accounts can be opened in any permitted currency other than currency of Nepal or Bhutan.  What are the permissible credits to RFC account? The following amounts can be credited to an RFC account: a) Received as pension or any other superannuation or other monetary benefits from his employer outside India;        or b) Realized on conversion of the foreign assets including foreign security or immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India. Or, and repatriated to India;      or c) Received or acquired as gift or inheritance from a person resident outside India and proceeds have been repatriated to India;      or d) Acquired or received before the 8th day of July 1947 or any income arising or accruing thereon which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank;     or e) Held by a person resident in India up to such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person who had acquired the foreign exchange before the 8th day of July 1947 including any income arising there from;      or f) Received as the proceeds of life insurance policy claims/maturity/surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority. g) Transfers from other RFC account of the account holder. h) Balances in any NRE/FCNR account. No penalty would be payable for premature withdrawal of NRE/FCNR deposits in such cases. Note: Rupee balances in eligible NRE accounts will be converted into foreign currency in which RFC account is maintained at ruling TT selling rate, on the date of such conversion.  What are the permissible debits to RFC account? The funds in RFC account are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form outside India.   What are the prohibited debits to RFC account? Funds in RFC account cannot be utilized for remittances prohibited in Rule 3 and schedule I to FEM (Current Account Transactions) Rules, 2000, namely a) Remittance out of lottery winnings. b) Remittance of income from racing/riding, etc or any other hobby. c) Remittance for purchase of lottery tickets, banned/proscribed magazines, football pools, sweepstakes etc. d) Payment of commission on exports made towards equity investments in Joint Ventures/Wholly Owned Subsidiaries of Indian companies. e) Travel to Nepal and/or Bhutan.  Can funds in RFC accounts be remitted abroad? Yes. Funds in RFC accounts can be remitted abroad for any bonafide purpose of the account holder or his dependents including exchange required for travel and other personal purposes and investments.   Can the funds in RFC accounts be used for making local payments? Yes. Funds in RFC account can be withdrawn freely for local payment in rupees.  Whether nomination facility available for RFC account? Yes. Nomination facility is available as in the case of resident Rupee accounts.  Can the balance in RFC account be credited to NRE/FCNR in event of becoming NRI again? Yes. Funds held in RFC account may be freely remitted abroad or credited to NRE/FCNR account in the event of account holder becoming Non-Resident again.  What is the minimum period in case of RFC term deposits? RFC term deposits are accepted for maturity period of 1 to 12 months. For the ongoing interest rates please Click Here 4. Investment In Securities And Shares -- Government Securities/Units   Can NRIs invest their funds in Government securities or units of Unit Trust of India? Yes. NRIs are freely permitted to invest their funds in Government securities or units of Unit Trust of India through authorized dealers. Units can also be purchased directly from Unit Trust of India.  Can Government securities/units be freely transferred or sold? Yes, provided the transfers/sale are arranged through an authorized dealer in such securities. Units are repurchased directly by Unit Trust of India.   Can sale/maturity proceeds of Government securities/units allowed to be repatriated abroad? Yes, provided such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts. If the securities were purchased out of funds in NRO accounts, then the sale/maturity proceeds of such securities can only be credited to NRO accounts and cannot be remitted abroad.     Direct Investment without repatriation benefits -- Company Shares and Debentures   Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non-repatriation basis? No. Reserve Bank has granted general permission to non-resident individuals of Indian nationality/origin to invest by way of capital contribution in any proprietary or partnership concern in India on non-repatriation basis provided the investee concern is not engaged in any agricultural/plantation activity or real estate business.  Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis? No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights issue provided the investee company does not carry on agricultural/plantation activity and/or real estate business (excluding real estate development i.e., development of property and construction of houses) or chit fund or is not a Nidhi company or is not engaged in the print media sector.   What are the other avenues of investments available for NRIs? NRI individuals can make investments in the following a) Domestic public/private sector Mutual Funds and Money Market Mutual Funds in India on non-repatriation basis. b) Non-convertible debentures of Indian companies.   Is income/interest earned on investments held in India by NRIs on non- repatriation basis allowed to be repatriated? Yes. Only income/interest earned on investments can be repatriated and not the investment/principal amount. -- Direct Investment with repatriation benefits  What are the schemes available to NRIs for direct investment in India with repatriation benefits? NRIs can make investments with repatriation benefits in the following: a) New issues of shares/convertible debentures of Indian companies under direct investment scheme. b) Can invest in Non - convertible debentures. c) Can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by public sector undertakings.   Can NRIs make investments in companies engaged in real estate development in India? Yes. Investments up to 100% in the new issue of equity shares/convertible debentures of Indian companies engaged in the following areas is allowed: a) Development of services plots and construction of built up residential premises; b) Real estate covering construction of residential and commercial premises including business centers and offices; c) Development of township; d) City and region level urban infrastructure facilities including roads and bridges; e) Manufacture of building materials; and f) Financing of housing development through Housing Financial Institutions.  Will repatriation of the original investment and / or dividend income be freely permitted? Yes. Repatriation of original investment will be permitted.Annual dividend/interest on equity shares/debentures can, also, be freely remitted subject to payment of tax.  Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders? Yes. Reserve Bank has granted general permission to NRIs to acquire shares of PSEs according to the terms and conditions stipulated in the notice inviting bids. The purchase consideration/bid money should be paid by way of remittance from abroad or by debit to their NRE/FCNR accounts. -- Company Deposits   Can NRIs keep deposits with companies in India with repatriation benefits? No. A company registered under Companies Act, 1956 or a body corporate created under an Act of Parliament or State Legislature shall not accept deposits on repatriation from a non-resident Indian.  Can NRIs keep deposits with companies in India on non-repatriation basis? Yes. A company registered under Companies Act,1956 or a body corporate, a proprietary concern or a firm in India may accept deposits from an non-resident Indian on non-repatriation basis,subject to the terms and conditions that the amount of deposit shall be received by debit to NRO account only, provided that the amount of the deposit shall not represent inward remittances or transfer of funds from NRE/FCNR accounts into the NRO account.   Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies? Yes. General permission has been granted by the Reserve Bank to Indian companies to issue CP to NRI individuals subject to the conditions that the amount invested will not be repatriated outside India and the CP will not be transferable.   What is the period of such deposits? The period of the deposits accepted by a proprietorship/ firm/companies from NRIs/PIOs should not exceed 3 years. -- Portfolio Investment Scheme  What is the Portfolio Investment Scheme? Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange/s in India.   What is the procedure for making applications? Reserve Bank has authorized a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks located close to the stock exchange/s. NRIs will have to route their applications through any of the designated bank branches who have authorization from the Reserve Bank.  Whether NRI can apply through more than one designated branch? No. Each NRI has to select one branch for this purpose for investment on repatriation/ non-repatriation basis.   Is it necessary to maintain a bank account with the designated branch through whom the application is made? It is advisable to maintain a bank account with the designated branch for administrative convenience.   Is there any ceiling on the investment under the Portfolio Investment Schemes? There is an overall ceiling of 10% of paid up equity shares capital of the company/ paid up value of each series of convertible debentures for purchase by NRIs (including shares/ debentures acquired by FIIs). The overall ceiling can be raised to 24% if the company concerned passes a special resolution to that effect in its general body meeting. Individually NRIs can make investments up to 5% of the paid up equity share capital / each series of convertible debentures. -- Sale of Shares/Securities  Is permission of Reserve Bank required for sale of Government securities/units? No. Authorised dealers have been permitted to undertake sale of Government securities/units on behalf of NRIs without prior approval of Reserve Bank. Sale/maturity proceeds can be remitted abroad if the original investment was made out of funds remitted from abroad or funds in NRE/FCNR accounts. Otherwise, they will have to be credited to NRO account of the holder.  Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs? No. Transfer of shares/debentures of Indian companies by NRIs to other NRIs does not require permission of Reserve Bank.  What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits? In the case of shares/debentures/bonds acquired by NRIs through stock exchanges under the Portfolio Investment Scheme, applications for necessary permission is required to be made to Reserve Bank in Form TS-1. 5. Investment In Immovable Properties  Do NRI's require permission of Reserve Bank to acquire immovable property in India? No. NRI's do not require any permission to acquire any immovable property in India other than agricultural / plantation property or a farmhouse.  Do NRI's require permission of Reserve Bank to transfer immovable property in India? No. NRI's do not require any permission to transfer any immovable property in India to a person resident in India, or to a person outside India who is a citizen of India or to a person of Indian origin resident outside India.  Who are defined as PIO for the purpose of Acquisition and Transfer of immovable property in India? As per Regulation 2(c) of FEMA 21, Person of Indian Origin means of citizen of any country other than Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran or Nepal and Bhutan if - a) He/she at any time held Indian passport;            or b) He/she or either of his/her parents or any of his/her grand parents were a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 (57 of 1955);             or c) the person is a spouse of an Indian citizen or person referred to in sub-clause (a) or (b) above.  Do PIO's require permission of Reserve Bank to purchase immovable property in India for their residential use? Reserve Bank has granted general permission to a person of Indian origin resident outside Indian to - a) acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of 1) funds received in India by way of inward remittance from any place outside India             or 2) 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) 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. 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 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.  Who are prohibited to acquire/transfer property in India? As per Regulation 7 of FEMA 21, citizens of Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran or Nepal and Bhutan are not allowed to acquire or transfer any immovable property in India. However, they are allowed to take residential accommodation on lease not exceeding five years.   In what manner the purchase consideration for the immovable property should be paid by PIO's 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 any non resident accounts maintained with banks in India.  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 another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.  Can sale proceeds of such property if and when sold be remitted out of India? In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a NRI or PIO, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied: --   -- The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999;   -- 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 in non-resident external account for acquisition of the property; and   -- In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.  What other facilities are available for repatriation? Authorized dealers can allow remittance up to USD 1 million for any purpose, per calendar year from balances in NRO accounts subject to payment of applicable taxes. The limit of USD 1 million per year includes sale proceeds of immovable properties acquired by the NRI/PIO's while they were resident in India.  Can NRI's/PIO's rent out the properties (residential/commercial) if not required for immediate use? Yes. Reserve Bank has granted general permission for letting out any immovable property in India.  Can the rental income from such property be remitted outside India? Such rental income (net of applicable taxes) in the first instance, will have to be credited to the ordinary non-resident rupee account of the owner of the property. Thereafter, in accordance with the provisions governing conduct of NRO accounts, current income may be repatriated outside India. In case of NRIs not maintaining NRO account in India, authorised dealers can remit rental income of current year on the basis of an appropriate certificate by a chartered accountant certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid or provided for. In case such NRI is not having taxable income in India, he can remit rental income without CA's certificate, on a simple declaration ( in duplicate) to the effect that he/she is not a tax payer in India.  Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance? Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to NRI's for acquisition of a house/flat for self occupation subject to certain conditions. The purpose of loan margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investor's NRE / FCNR / NRO Accounts.  Can authorized dealer grant housing loan to NRI's where he is a principal borrower with his resident close relative as a co-applicant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative? Yes. Such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower.  What are the guidelines for acquisition of agricultural land /plantation property / farmhouse by NRIs and foreign citizens of Indian origin? All requests for acquisition of agricultural land/ plantation property/ farm house by any person resident outside India may be made to The Chief General Manager, Reserve Bank of India, Central Office,Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.  Can a person who had bought immovable property when he was a resident, continue to hold such property even after becoming an NRI/PIO? Yes, he can continue to hold the residential/ commercial property/ agricultural land/ plantation property/ farmhouse in India without the approval of the Reserve Bank.  In which account can the sale proceeds of such immovable property be credited? The sale proceeds may be credited to NRO account.   Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of Reserve Bank continue to hold the same? Can they transfer such property? Yes, they may continue to hold the immovable property. However, they can transfer the property only with the prior approval of Reserve Bank.  Can Foreign Embassies/ Diplomats/ Consulate General purchase/ sell immovable property in India? Yes. Reserve Bank has granted general permission to Foreign Embassies / Diplomats / Consulate Generals can purchase and sell any immovable property in India other than agricultural land / plantation property / farmhouse with prior clearance from the Government of India, Ministry of External Affairs. The consideration for acquisition should be made by foreign inward remittance through normal banking channel. 6. Miscellaneous -- Operations by Power of Attorney Holders   Can NRI give Power of Attorney to a resident to operate his account and for making investments on his behalf? Yes, NRI can appoint a resident as his Power of Attorney holder to make all his local payment in rupees from his NRE / NRO accounts,including payments for eligible investments subject to compliance with relevant regulations made by Reserve Bank of India from time to time.A Power of Attorney holder can repatriate back the funds only to the NRI account holder.  What are the restrictions imposed on the Power of Attorney holder? A Power of Attorney holder of NRI account cannot do the following acts:   -- Open and close NRI accounts in the name of NRI.   -- Repatriate funds from accounts in the form of Demand draft /Telegraphic Transfer/ etc.   -- Make payment by way of gifts.   -- Transfer funds to other NRE accounts.   -- Cannot raise loans/execute documents on behalf of NRI/OCB.   -- Cannot tender Foreign Currency/ Foreign Currency Travellers Cheques for credit of account. -- Nomination Facilities   Is nomination allowed in NRO / NRE/ FCNR accounts? Yes, NRIs can nominate either a resident or a non-resident as Nominee. However, only one nominee is permitted per account. Nominee can also be a minor in which case, guardian has to be appointed to receive payment on minor's behalf.  What is the benefit of nomination? The Banking Companies (nomination) rules, 1985, framed under Banking Regulation act, 1949, enable banks to pay the amount standing to the credit of the deceased depositors to his/her nominee.   Is repatriation of funds belonging to non-resident nominees permitted? Funds held in the NRO account of the deceased NRI will be allowed to be credited to the non-resident nominee's NRO account only and no repatriation is permitted. Repatriation of funds from the deceased person's NRE account to the non-resident nominee is permitted.  Can an NRI authorize a close relative to operate his NRE account? Yes, by giving a Letter of Authority in the specified format to the Branch in which he is having his account. The authority to operate the account is only for local disbursements. The close relative who is authorized will not have the power to make gifts, transfer or close the account. -- Change of Status from Resident to Non-Resident When an Indian resident leaves India for a country (other than Nepal or Bhutan) for taking up employment, business or vacation outside India or for any other purpose indicating his intention to stay outside India permanently or for an uncertain period, he becomes a person resident outside India. He will have the option of designating his account as Non-Resident Ordinary account. -- Change of Status from Non-Resident to Resident  When a non-resident is treated as resident? Immediately upon 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/her intention to stay in India for an uncertain period, a non-resident becomes resident.  What is the status of NRO & NRE accounts on the return of the account holder to India? . A returning Indian's NRE/FCNR accounts will be designated as Resident account. However, they will continue to run till maturity at the contracted rate of interest.  Does the account holder suffer any loss of interest on such re-designation of accounts? No. Banks have been advised to continue to pay interest at the contracted rate till the maturity of the deposit if the deposit is held for the full term even after conversion into resident rupee account.  On return to India, can the NRI retain his assets abroad? Yes, on return to India, NRI need not declare or surrender their foreign currency assets and the income earned thereon.  Can NRIs hold funds acquired overseas in foreign currency account in India? Yes. They can be held in RFC (Resident Foreign Currency) Accounts either in the form of Current/ Savings/ Fixed deposit accounts.  What if the period of stay exceeds 182 days in India? . Non-resident Indian citizens who comes to India on temporary visits i.e. for purpose other than employment, business etc,indicating no intention to stay in India indefinitely, even if this stay in India exceeds 182 days, will continue to be treated as Non-Residents.  Who is Resident but Not Ordinarily Resident? An individual is treated to be Not Ordinarily Resident in India in any previous year if he/she - a) has been a non-resident in India in 9 out of the 10 previous years preceding the previous year,          or b) has during the seven previous years preceding that year, been in India for a period of or periods amounting in all to 729 days or less. -- Housing Loans To NRIs KBL APNA GHAR Home Loans:  Fulfill your dreams of buying or constructing your own(Apna) home(Ghar) with our housing loan scheme.  Eligibility -- Non resident Indian holding Indian Passport -- Individuals who do not own a house. -- Existing customers of the bank having regular dealings. -- Salaried persons/Businessmen/Professionals/Self Employed -- Should be 21 years and above -- Period of loan plus age of the borrower should not exceed 70 years. -- In case the applicant is 60 years, spouse (if applicable) and major son/daughter in the lineage shall be co-borrower/guarantor. -- Shall be confirmed employee with a minimum of 5 years of service. -- In case of Businessmen/Professional/Self Employed, shall be in business for a minimum period of 3 years. -- Minimum gross monthly salary of Rs.6000. -- Minimum annual gross annual income of Rs.60000/-. -- The other income of the applicant with due proof shall be taken into account while considering the application.  Limit of Loan -- 60 times of latest take Home (Net) salary. -- 5 times of the average annual Net income plus depreciation provided,if any, of the last 2 years as per P&L a/c in case of Traders / self employed / professionals. -- In both cases, maximum amount is Rs.30 lakhs (Rs. 3 million) -- Maximum of Rs.10 lakh(Rs.1.00 million) in case of Renovation/remodeling/repairs of the existing house or upto 40% of the value of the house/Flat owned by the applicant whichever is lower.  Margin -- For construction of a house in a land already owned - 20% of cost of construction. -- For construction of new house on a land to be purchased/purchase of ready built house/flat of less than 5 years old/Booking and purchase of new flat - 25% of either the total cost or market value whichever is less. -- For purchase of a ready built house/flat beyond 5 years but less than 20 years old - 30% of cost/market value whichever is less. -- For repairs / renovation / remodeling, 30% of the estimated repairs subject to maintaining 40% margin on the value of the house/flat.  Repayment -- In Equal/Equated monthly instalments excluding the repayment holiday. -- Instalment, interest and other charges, if any, to be paid out of remittance from abroad or out of funds from NRE/FCNR accounts or out of the rental income derived from renting out the property so acquired by utlising the loan.  Rate of Interest Linked to PLR (Prime Lending Rate) of the bank. Note: Loans above Rs.30 Lakhs (Rs.3 million) will be considered on case to case basis. -- Tax Incidence at a Glance Type of Income Tax Incidence in case of Resident Resident but not Ordinarily Resident Non - Resident Income received or deemed to be received in India, wherever accrued