Investment
in India - Banking System
- What
are the special features of each bank account?
The special features are as under:
NRO A/c.: The funds, credited to this
account, cannot be repatriated outside India in foreign exchange,
without prior permission of the Reserve Bank of India. Interest,
earned is eligible for repatriation outside India, net of Indian
taxes. The remittance of interest (net of taxes) will be permitted
by the authorised dealer who maintains the account, if the account
holder makes an application to the authorised dealer, in the
prescribed form. No RBI permission is required for remittance of
interest.
NRE A/c.: The funds, standing to the
credit of this account, as well as interest earned thereon, are
remittable outside India in free foreign exchange, without
permission of the RBI. The interest income is not subject to Indian
Income-tax. Credits to the accounts should be in the form of
remittance in foreign exchange from outside India, as well as other
funds, which are eligible to be remitted outside India, in free
foreign exchange. Funds, emanating from local sources, are not
eligible to be credited to these accounts, unless these funds are
otherwise remittable outside India, in terms of the existing
Exchange Control Regulations.
FCNR A/c.: These accounts can be opened
in four foreign currencies:
- Pounds Sterling;
- US Dollars;
- Japanese Yen;
- Euro.
For the purpose of opening an
account, remittance in foreign exchange, in the same currency,
should be received in India. The accounts can be opened only as
fixed deposits, with a minimum maturity of one year and, a maximum
maturity of three years. The principal, as well as interest, earned
on these accounts, is remittable outside India, in the same currency
or, in other convertible currency, as desired by the account holder.
The interest, earned on these deposits, is exempt from Indian
Income-tax.
- Can
Non Resident accounts be opened/ operated by the Power of Attorney
holder in India, on behalf of the non-resident?
The accounts cannot be opened by the Power of Attorney holder in
India. However, the latter can operate the accounts for the purpose
of local payments to be made on behalf of the non-resident account
holder. The Power of Attorney holder is not permitted to make gifts
from these accounts and, is not allowed to make remittances outside
India.
- What
happens to the status of these accounts when the non-resident holder
becomes a person, resident in India?
The accounts are to be re-designed as resident accounts, when the
non-resident account holder becomes a person, resident in India. In
the case of fixed deposits opened by the account holder, before
becoming resident in India, the contracted rate of interest will be
paid till maturity of the deposits. Similarly, FCNR deposits will be
eligible to be held in respective currencies till maturity of the
deposits, even after the non-resident holder become a resident in
India. He will, however, cease to get tax exemption on interest on
the erstwhile deposits (NRE/FCNR deposits), after he becomes
resident in India. In certain situations, it might be advisable for
the account holder to convert the account to a Resident Foreign
Currency Account Deposit (RFC)
- What
are the various facilities available to NRIs/OCBs?
The facilities available to NRIs/OCBs for making investment in
India are as follows:
- opening and maintenance of bank
accounts in India;
- investment in shares and
securities of Indian companies, government securities, units of
domestic mutual funds and ,deposits with Indian companies/firms;
- investment in immovable
properties in India;
- investment in
proprietorship/partnership concerns in India.
- Are
NRIs permitted to send remittances outside India out of the assets
in India that are inherited by them?
Yes. RBI will consider application from NRIs for remittance of
assets, inherited by them in India. Such remittance may be permitted
up to US$ 100,000 per year.
- Can
a person of Indian origin acquire any immovable property in India by
way of inheritance?
A person of Indian origin, resident outside India, may 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 foreign exchange law in force at the time of
acquisition by him or the provisions of Foreign Exchange Management
(Acquisition and Transfer of Immovable Property in India)
Regulations, 2000. Immovable property, by way of inheritance, can
also be acquired by a person of Indian origin resident outside from
a person resident in India.
- Can
NRIs and Overseas Corporate Bodies (OCBs) invest in India?
The Government of India has adopted a liberal policy, with respect
to investments by NRIs and OCBs in India. Such investments are
allowed, both, through the RBI route and also through the Government
route, i.e., through the Foreign Investment Promotion Board (FIPB)
NRIs and OCBs are permitted to invest up to 100% equity in real
estate development activity and civil aviation sectors. Investment,
made by the NRIs and OCBs, are fully repatriable, except in the case
of real estate, which has a 3 year lock-in period on original
investment and, 16% cap on dividend repatriation. For those
proposals that do not qualify under the automatic route, Government
approval is granted through FIPB.
- What
is the extent and application of Foreign Exchange Management Act
(FEMA)?
FEMA extends to the whole of India. It also 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
is the penalty for contravention of FEMA?
Any person, contravening FEMA, shall be liable, upon adjudication,
to a penalty up to three times the sum involved in such
contravention, where such amount is quantifiable, or up to Rupees
Two hundred thousand, where the amount is not quantifiable. In
addition, where such contravention is a continuing one, the person
will be liable to further penalty, which may extend to Rupees Five
thousand for every day after the first day, during which the
contravention continues.
- Can
a person of Indian origin resident outside India gift properties
acquired earlier in terms of the provisions of FERA/FEMA?
Yes. A person of Indian origin resident outside India may 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. A Person of Indian origin resident outside India may
also transfer by way of gift agriculture land/farm house/plantation
property in India to a person resident in India who is a citizen of
India.
- Can
an NRI account be opened in the name of crew members of shipping
companies?
Yes, if their posting is not based in India and they derive their
income from other country in foreign currency.
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