NRI Guidelines

Q : Who is a Non Resident Indian (NRI)?

A : 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 Organisation (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.

Q : What kind of Bank Accounts can be operated by NRIs?

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 accounts can be opened?

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

What types 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, which requires to be reported to RBI in prescribed forms.

 

Can these 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The funds can be freely withdrawn for the local disbursements without RBI approval.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 NRO account is not exempt from Income tax and balances to the credit of NRO 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 the NRIs abroad and the signature of NRI 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, travelers cheques or foreign currency notes.

 

What types of accounts can be opened?

All types of accounts, 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 of 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 of India.

 

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:

1. Pound Sterling (GBP)
2. US Dollar (USD)
3. Euro
4. Japanese Yen (JPY)

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

 

What types of accounts 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:

1. To ask for the repayment in designated foreign currency.
2. To ask for the repayment in Indian rupees or in any foreign currency other than designated foreign currency.
3. To ask for the conversion of FCNR account into NRE fixed deposit.

How does it differ from NRE account?

The FCNR account, primarily differs from NRE account on the point of fact that 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 is 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:
   1. The property is for the purchaser's bonafide residential purpose.
   2. The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE account or FCNR account.
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.
   1. A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name.
   2. 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 residing 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 or incidental to carrying on such activity.

Can NRI avail loans for purpose of immovable property?

The loan amount shall not exceed 85% of the cost of the dwelling unit.

 

For what purposes are loans available to NRIs?

NRIs can avail loan for buying or constructing a new home, extending or improving an existing home or even for buying a plot.

 

What is meant by "Own Contribution"? How is "Own Contribution" to be paid?

"Own Contribution" is the cost of the dwelling unit financed, less the loan amount. The "Own Contribution" should be met from direct remittances from abroad through normal banking channels or from the Non Resident (External) Account / Non Resident (Ordinary) or the Non Resident special rupee account in India.

 

What are the common documents to be submitted along with the application?

The following documents are required along with the application form:

• Photocopy of the labour contract duly countersigned by your employer (translated to English for Non-English documents)

Latest salary certificate (in English) specifying the following:

• Name (as it appears in the passport)
• Date of joining
• Designation
• Perquisites and salary
• Photocopy of passport
• Photocopy of labour card / identity card
• Photocopy of valid resident visa stamped on the passport
• Photocopy of last three months' monthly statements of local bank account
• Property related documents

What security will NRIs have to provide?

Typically the security for the loan is first mortgage of the property to be financed, normally by way of deposit of title deeds and / or such other collateral security as may be necessary. In addition, interim security may be required, if the property is under construction. Collateral or interim security could be in the form of assignment of life insurance policies, surrender value of which is at least equal to the loan amount, pledge of shares and such other investments.

 

Can NRIs give a Power of Attorney in favour of a person of his choice in India to complete loan formalities on his behalf?

Yes, normally it is desirable to appoint a Power of Attorney in India to represent him in dealings in India. The Power of Attorney should be executed as per drafts provided by the housing finance company. The Power of Attorney can be given to any person of his choice in India.

 

Can the house occupied by NRI be let out?

The RBI has granted general permission to NRIs and foreign citizens of Indian origin, to let out their residential properties acquired for their bonafide residential purpose but which on account of their residence abroad, are not required for their immediate residential purpose. The rental income cannot be repatriated. Thus rental income must be credited to the NRO account / resident accounts in India.