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NRI Investments in India & Overseas Investments by Indians -Anup P. Shah 25th December, 2011 JB Nagar CPESC of WIRC

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Page 1: NRI Investments in India & Overseas Investments by Indiansjbnagarca.org/wp-content/uploads/2012/07/NRI-25Dec11-HO-Anup-P.pdf · NRI Investments in India & Overseas Investments by

NRI Investments in India & Overseas Investments by Indians

-Anup P. Shah

25th December, 2011

JB Nagar CPESC of WIRC

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PROI & NRI

© PRAVIN P. SHAH & CO. 2

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Person Resident Outside India

� PRII – S.2

� Any person who has stayed in India

� For more than 182 days in Preceding PY

� Ram is in India in 2009-10 for 315 days

� In 2010-11 he would be in India only for 170 days� In 2010-11 he would be in India only for 170 days

since he would go abroad for medical treatment

� Status for 2010-11: PRII since in 2009-10 he was in

India for > 182 days

� Preceding PY’s stay is relevant and not current PY

� Any person not a PRII is a PROI

© PRAVIN P. SHAH & CO. 3

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Person Resident Outside India

� Student going abroad for Studies

� Treated as NRIs?

� Correct?

� Are they eligible for all facilities which NRIs get

under FEMA?under FEMA?

� Educational Loans availed of by them as Residents

� Continue to be available

© PRAVIN P. SHAH & CO. 4

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PRII- Exceptions

PROI inspite of staying in India > 182

days in Preceding PY

PRII inspite of not staying in India >

182 days in Preceding PY

If he comes for Other than 3 purposes

Goes abroad on Employment On Employment

Goes abroad on Business For Business / Vocation

Goes abroad for:

• any other purpose

• in such circumstances

• which indicate an intention to stay

abroad for an uncertain period

For:

• any other purpose

• in such circumstances

• which indicate an intention to stay in

India for an uncertain period

© PRAVIN P. SHAH & CO. 5

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PRII- Exceptions

� Ali who is living in India all his

life goes to Dubai to start a

business on 30th Mar 2011

� Patel comes to India on 1st Oct

� Gita goes to Harvard for an

MBA on 1st June 2011

� John comes to India for the

first time and stays for 150� Patel comes to India on 1st Oct

2010 for a job. He has never

been to India before

first time and stays for 150

days in 2010-11 for medical

treatment

© PRAVIN P. SHAH & CO. 6

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NRI & PIO

� NRI: PROI who is an Indian Citizen or PIO

� PIO: Citizen of any Country

(Other than Bangladesh / Pakistan):

� At any time held an Indian PassportAt any time held an Indian Passport

� Whose Parents at any time were Indian citizens

� Whose Grand Parents at any time were Indian

citizens

� Whose Spouse is an Indian Citizen

© PRAVIN P. SHAH & CO. 7

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Visas

� OCI Card

� Dual Citizenship

� Multiple Entry Lifelong Visa

� No need for registration with FPRO

� Parity with NRIs in Economic benefits

� But no Voting Rights

� PIO Card

� Multiple Entry 15 Years Visa

� Need for registration with FPRO

© PRAVIN P. SHAH & CO. 8

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FDI & Instruments

© PRAVIN P. SHAH & CO. 9

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Key Types of Foreign Invst.

Foreign Investment

Primary - FDI Secondary

Invst by PROI in

Capital of an Indian

Co.

Purchase by PROI

of Shs. Of Indian Co.

© PRAVIN P. SHAH & CO. 10

Direct Downstream Portfolio Off-Market

FIIs

NRIs / PIOs

Repatriable

Non-repatriable

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PIS

© PRAVIN P. SHAH & CO. 11

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PIS

� NRIs /PIOs can Buy / Sell on St. Ex.

� Through a Bank Branch approved by RBI

� Limit per NRI: Up to 5% of Paid-up value of Shares

� Total Limit for all NRIs: 10%

� Can be Extended Up to: 24%

� No Speculative Trades – only Delivery based

� Payment by:

� Inward Remittance / NRE/ FCNR - if on R basis

� Inward Remittance / NRE/ FCNR / NRO - if on NR basis

© PRAVIN P. SHAH & CO. 12

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PIS

� NRIs /PIOs can trade on St. Ex.

� No Sectoral Caps or Restrictions

� Can they buy Retail, Real Estate, NBFC, Telecom, etc.

stocks listed on BSE/ NSE?

� What about Min. Area Conditions / Min. Cap / Lock-in as� What about Min. Area Conditions / Min. Cap / Lock-in as

under FDI

� Sale Proceeds After tax to be Credited to:

� To NRO A/c. – If on NR Basis

� To NRE / FCBR / NRO / Abroad – If on R Basis

© PRAVIN P. SHAH & CO. 13

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PIS

� NRIs /PIOs can trade on St. Ex.

� Shares purchased under PIS cannot be gifted / sold

by Private Arrangement

� However, NRIs can gift them to their Relatives or to a

registered Charity Trustregistered Charity Trust

� Relatives: S.6 of Companies Act

� Must be sold on the Stock Exchange alone

� Can invest in Exchange Traded Derivatives

� But on NR Basis

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Non-Repatriable

© PRAVIN P. SHAH & CO. 15

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Non-Repatriable FDI

� Meaning:

� Only Dividend / Interest can be sent back abroad

� Principal + Gains cannot be repatriated

� Must be credited to NRO A/c.

NRI/PIO can buy shares on NR Basis:� NRI/PIO can buy shares on NR Basis:

� Without any limit

� Not Nidhi / Chit Fund / Plantations/ Farm Houses /

Dealing in TDRs

© PRAVIN P. SHAH & CO. 16

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Non-repatriable

� Non-repatriable FDI

� Q Would the Sectoral Caps and Limits of

Repatriable FDI apply?

� Sale Proceeds credited to NRO A/c.

� Q. Is Repatriation Possible from NRO A/c.?

© PRAVIN P. SHAH & CO. 17

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Transfer of Shares From / To NRI

© PRAVIN P. SHAH & CO. 18

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Share Sale by Resident to NRI

� Auto Route of FIPB, except in following:

� Sectors with caps

� Including:

� Defence

� Air transport

© PRAVIN P. SHAH & CO. 19

� Air transport

� ARC / banks

� Broadcasting

� Commodity Exchanges

� Credit Info Cos.

� Insurance

� Print

� Telecom / satellites

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Share Sale by Resident to NRI

� Auto Route of RBI, even where:

� FIPB approval required for Transfer

� Cases where Takeover Regs. attracted

� Provided pricing Guidelines met

� Co. in Financial Services / Banks, Insurances,

© PRAVIN P. SHAH & CO. 20

� Co. in Financial Services / Banks, Insurances,NBFCs, ARCs, etc.

� NOC from Financial Service Regulator obtained

� Pricing Guidelines not met

� Provided FDI Policy met, SEBI Regulations complied,CA’s Certificate to this effect annexed

� Approval if Consideration is deferred

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Share Sale by Resident to NRI

� Auto Route of RBI:

� Pricing Guidelines

� Listed Cos. – as per Preferential Issue Price

� Unlisted Cos. – Equal to or Higher than DCF

Valuation of Company by CA / MB

© PRAVIN P. SHAH & CO. 21

Valuation of Company by CA / MB

� Form FC-TRS should be filed with documents

� Quadruplicate

� With Bank

� Undertaking from NRI: He is eligible to Buy

� Copy of SPA

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Share Sale by NRI to Resident

� Auto Route of RBI:

� Pricing Guidelines

� Listed Cos. – as per Preferential Issue Price

� Unlisted Cos. – Equal to or Lower than DCF

Valuation of Company by CA / MB

© PRAVIN P. SHAH & CO. 22

Valuation of Company by CA / MB

� Even if Pricing G/L not met

� FEMA /FDI Policy & SEBI Regs. met & CA’s Cert.

� Form FC-TRS should be filed with documents

� Quadruplicate

� With Bank

� Copy of SPA

� Tax Clearance from AO / CA’s Certificate

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Share Sale by NRI to NRI / PROI

� Sale by NRI to NRI

� Automatic Route permission of RBI

� No documentation

� No Pricing Guidelines

� Sale by NRI to any PROI

� Automatic Route available?

� Documentation?

� Pricing Guidelines?

© PRAVIN P. SHAH & CO. 23

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Other Instruments

© PRAVIN P. SHAH & CO. 24

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Other Instruments

� NRI / PIO can purchase :

� On Repatriation Basis

� Without any Other Limit

� G-Secs / T-Bills / Units of MFs

PSU Bonds� PSU Bonds

� PSU Divestment Shares

� On NR Basis

� Above Instruments

� NSCs

© PRAVIN P. SHAH & CO. 25

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Other Instruments

� NRI / PIO can purchase :

� Foll. Issued by Banks -

� Re. denominated Perpetual Debt Instruments:

� Total Ceiling of 24% of each Issue

� Per NRI: 5% of each issue� Per NRI: 5% of each issue

� Debt Capital Instruments

� As per the applicable policy from time to time

� What about:

� PPF

� Senior Citizen Bonds / RBI 8% Taxable Bonds

© PRAVIN P. SHAH & CO. 26

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Loans by NRIs

© PRAVIN P. SHAH & CO. 27

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Loans by NRIs

Loans by NRIs

To Close Relatives

To Ind/Firm/LLP in Rupees

Loans by NRIs In NCDs of Co.

Public Deposits

Deposits with Firm/Co/Sole

© PRAVIN P. SHAH & CO. 28

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Loans by NRIs – Close Relatives

� NRIs may lend to close relatives in India

� Up to $250,000

� Limit is per Individual relative in India

� Thus, an NRI can lend up to $250,000 to each relative

Minimum maturity of Loan: 1 year� Minimum maturity of Loan: 1 year

� Interest-free Loan

� Inward remittance / NRE/FCNR

� Close Relative:

� S.6 ~ Companies Act

© PRAVIN P. SHAH & CO. 29

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Loans by NRIs – Rupees

� NRI /PIO may lend to Individuals / Firms/ LLPs

� To Residents

� Loan in Rupees

� Not to Indian Companies

� Maximum Tenure of Loan: 3 years

� Interest @ 2%over Bank Rate

� Inward remittance / NRE/FCNR

� Principal cannot be repatriated

� Credited to NRO A/c.

© PRAVIN P. SHAH & CO. 30

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Loans by NRIs – Rupees

� NRI /PIO may lend to Individuals / Firms/ LLPs

� Borrower not in Chit fund / Agr. Plantation / Real

Estate Business / TDRs trading

� Borrower cannot use loan for:

Capital / Equity Contribution in a Firm / Co. / Proprietory� Capital / Equity Contribution in a Firm / Co. / Proprietory

Concern

� Relending

© PRAVIN P. SHAH & CO. 31

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Loans by NRIs – NCDs Invst

� NRI /PIO may invest in NCDs of a Co.

� Issue by Public Offer

� Min. Tenure of NCDs: 3 years

� Interest < SBI’s PLR + 3%

� Co. not in Agro Plantations / Real Estate

Business/TDR trading / Nidhi / Chit Fund

� Max. Limit = Sectoral Cap for FDI for Co.

� Can be on R or NR Basis

© PRAVIN P. SHAH & CO. 32

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Loans by NRIs – Public Deposits

� NRI can place Public Deposits

� With Co / NBFCs

� As per Cos Deposit Rules u/s. 58A / NBFC

Regulations

Max maturity 3 years & up to 35% of NOF of Co.� Max maturity 3 years & up to 35% of NOF of Co.

� Out of NRE/NRO /Inward remittance

� Can be on R / NR Basis

� Not used in Agro Plantations / Real Estate

Business/TDR trading / Nidhi / Chit Fund

© PRAVIN P. SHAH & CO. 33

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Loans by NRIs –Deposits

� NRI can place Deposits

� With Co / Firm / Sole Proprietary Concern / NBFC

� Pvt Arrangement / Public Deposit Scheme

� Max maturity 3 years

� Only from NRO A/c – No Repatriation allowed

� Not from Inward Remittance / Transfer from NRE /

FCNR A/c. balance

� Co. not in Agro Plantations / Real Estate

Business/TDR trading / Nidhi / Chit Fund

© PRAVIN P. SHAH & CO. 34

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Loans by NRIs

� NRIs cannot give any other loans to any Co./

Firm / Person in India

� It would become an ECB

� Must comply with ECB Regulations & Restrictions

Only certain Lenders are eligible to lend� Only certain Lenders are eligible to lend

� Rate Cap

� End-use restrictions

� Involves Heavy penalties

© PRAVIN P. SHAH & CO. 35

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Loans to NRIs

© PRAVIN P. SHAH & CO. 36

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Loans to NRIs – By Banks

� Banks can grant Loans in India to NRIs:

� Loans can be against:

� Shares

� Imm. Property

For meeting Personal / Business purposes� For meeting Personal / Business purposes

� Not in restricted sectors – Agr/ RE Bus. / TDR

� Loan credited to NRE/FCNR/NRNR A/c

� Cannot be remitted abroad

� Repayment - NRO / NRE/FCNR/ Inward Remittance

Or by a close relative resident in India

© PRAVIN P. SHAH & CO. 37

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Loans to NRIs- By Close Relatives

� Loan by Residents to Close Relative NRI/PIO :

� By credit to NRO A/c

� Cannot be remitted abroad

� Interest-free & minimum maturity of 1 year

Within the LRS limit of $200,000 / FY� Within the LRS limit of $200,000 / FY

� For Borrowers’ personal requirements / business in

India

� Not for Agr. / RE Business / Tdg in TDRs/ Nidhi

� Repymt by Inward remittance/NRO/NRE/FCNR/Sale

of Shares / Property against which loan granted

© PRAVIN P. SHAH & CO. 38

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Gift by / to NRIs

© PRAVIN P. SHAH & CO. 39

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Gift of Money

� Gift of money in forex by a Resident to NRI

� Earlier limit of $5,000 per annum

� Now under LRS

� Resident can remit up to $100,000 per recipientfor maintenance of close relatives

© PRAVIN P. SHAH & CO. 40

for maintenance of close relatives

� Gift of money in Rupees by Resident

� To NRI/PIO who is a Close Relative

� Credit to NRO A/c

� Within overall LRS limit of $200,000

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Gift of Money

� Gift of money by a NRI to Resident

� No prohibition in FEMA

� Gift must be Genuine

� Consider s.56(2) for Donee

© PRAVIN P. SHAH & CO. 41

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Meeting of Expenses

� Person resident in India can make payments

in Rupees

� For Boarding/Lodging / related Services / Travel to

and From and Within India of NRIs on a visit to

IndiaIndia

� For Medical Expenses in India of NRI who is a close

relative of payer

© PRAVIN P. SHAH & CO. 42

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Gift of Shares

� Gift of shares by R to NR

� Not on Automatic Route of RBI

� Prior permission required

� RBI considers the following:

© PRAVIN P. SHAH & CO. 43

� RBI considers the following:

� Donee is eligible to hold the shares under FEMA

� Gift ≤ 5% of paid-up capital

� Sectoral caps are not breached

� Donee and Donor are close relatives u/s. 6 of

Companies Act

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Gift of Shares

� Gift of shares by R to NR

� RBI considers the following:

� Total of all Gifts by way of shares by that Donor

to any Donees in a calendar year ≤ $50,000

© PRAVIN P. SHAH & CO. 44

� Earlier $25,000

� Application must include:

� Relationship between Donor-Donee

� CA’s Valuation

� NAV Certificate from MF for Units

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Gift of Shares

� Gift of shares by R to NR

� Application must include:

� Certificate from Co. that Gift ≤ 5% of capital

� Reasons for Gift

© PRAVIN P. SHAH & CO. 45

∴ Genuineness of Gifts is very important

� Gift of foreign securities by NR to R

� General permission of RBI

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Bank Accounts of NRIs

© PRAVIN P. SHAH & CO. 46

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NRE A/c.

� Only NRIs / PIOs can open NRE A/c.

� Bangladesh / Pakistan Citizens need RBI Approval

� With Authorised Banks, Co-op Banks

� Cannot be opened by PoA Holder

Savings, Current, FD� Savings, Current, FD

� Credits:

� Any Credit in any Currency

� Notes, TCs, DDs, etc.

� Transfer from other NRE/FCNR A/c.

� Interest, Refund of EMD, etc.

© PRAVIN P. SHAH & CO. 47

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NRE A/c.

� Debits:

� Local debts

� Remittances abroad

� Transfer to NRE / FCNR

� Investments in India in Shares / Property� Investments in India in Shares / Property

� Other permissible Debits

� Loans possible in certain cases against security of

NRE A/c.

� Repatriation allowed fully

© PRAVIN P. SHAH & CO. 48

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NRE A/c.

� Joint A/c:

� Resident Close Relative can be added as a Joint A/c.

Holder

� Earlier not allowed

� On Former or Survivor Basis

� Resident Relative eligible to operate the A/c. as a Power

of Attorney Holder during lifetime of NRI/PIO

© PRAVIN P. SHAH & CO. 49

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NRE A/c.

� Others:

� Jt A/c. with other NRIs allowed

� NRI can open NRE A/c during visit to India

� Overdrawing up to Rs.50,000 may be allowed by Bank

� Nomination allowed� Nomination allowed

� Interest not taxable

� Rate of Interest:

� Savings

� FD

© PRAVIN P. SHAH & CO. 50

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FCNR(B) A/c.

� Only NRIs / PIOs can open FCNR A/c.

� Bangladesh / Pakistan Citizens need RBI Approval

� Can be opened in any Foreign Currency

� Only Term Deposits

All Debits / Credits permissible for NRE A/c.� All Debits / Credits permissible for NRE A/c.

� Interest on Half-yearly / Annual Basis

� Repatriable?

� JT A/c with Resident Close Relatives permissible

� Same as in case of NRE A/c

© PRAVIN P. SHAH & CO. 51

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NRO A/c.

� Any PROI can open NRO A/c.

� Bangladesh / Pakistan Citizens need RBI Approval

� With Authorised Banks, Co-op Banks

� Savings, Current, FD

Credits:� Credits:

� Any remittances from abroad / Legitimate Dues

� Debits:

� All local payments

� Repatriation of Current Income – Dividend, Interest, Rent

© PRAVIN P. SHAH & CO. 52

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NRO A/c.

� Other than Current Income NO Repatriation

� However, now relaxation

� Others:

� Jt A/c. with other NRIs / Residents allowed

� Resident PoA Holder can operate NRE A/c.� Resident PoA Holder can operate NRE A/c.

� Nomination allowed

� Interest Rates:

� Savings

� FD

© PRAVIN P. SHAH & CO. 53

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Repatriation from NRO A/c.

� NRO = Non-Repatriable

� However, Repatriation now possible by PIOs:

� Who has retired from Employment in India

� Inherited assets from a PROI who was resident in IndiaInherited assets from a PROI who was resident in India

� Widow who is PROI and inherited assets of her Husband

who was an Indian Citizen & PROI

� Can remit up to $1m / FY on production of:

� Documentary Evidence of Inheritance

� CA’s Certificate for No Taxes

© PRAVIN P. SHAH & CO. 54

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Repatriation from NRO A/c.

� Repatriation possible by NRIs / PIOs:

� Can remit up to $1m / FY

� Out of balances in NRO A/c. / Sale Proceeds of Assets /Assets acquired on Inheritance / Legacy

� On production of:

Documentary Evidence of Acquisition / Inheritance� Documentary Evidence of Acquisition / Inheritance

� CA’s Certificate for No Taxes

� Under Deed of Settlement by Parents / Close Relative andDeed taking effect on death of Settler

� Original Deed of Settlement

� CA’s Certificate for No Taxes

© PRAVIN P. SHAH & CO. 55

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Repatriation from NRO A/c.

� Not available to citizens of foll. Countries

� If Sale Proceeds of Imm. Property – Not Available To:

� Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka, China,

Afghanistan, Iran

� If Sale Proceeds of Financial Assets – Not Available To:

� Pakistan, Bangladesh, Nepal, Bhutan

© PRAVIN P. SHAH & CO. 56

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Credit Cards to NRIs

� Indian Banks can issue

� International Credit Cards

� To NRIs/PIOs

� Payment for all charges / dues should be out of

Inward Remittance / NRE/FCNRInward Remittance / NRE/FCNR

� Can use them for all payments

� Including for import of Goods & Services from India

� Except Lottery, Banned Magazines, Call Back services,

Sweepstakes

© PRAVIN P. SHAH & CO. 57

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LRS

� Is the LRS of $200,000 available to NRIs?

� No

� Available only to Persons Resident in India

� If NRI becomes Resident (change of Status) then he

can avail of LRScan avail of LRS

© PRAVIN P. SHAH & CO. 58

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Joint Holders

� Resident Individuals can add

� Close Relatives who are NRIs as Joint Holders

� In Resident Bank A/cs.

� On Former or Survivor Basis

� Close Relatives cannot operate A/cs. during

lifetime of Resident Holder

© PRAVIN P. SHAH & CO. 59

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Foreign Invst. in RE

Foreign InvestmentForeign Investment

FDI in Co. FDI in Co. Real Estate ProjectsReal Estate Projects

NRINRI

Non-NRINon-NRI

NRINRI

© PRAVIN P. SHAH & CO. 60

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Imm. Property

© PRAVIN P. SHAH & CO. 61

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Buying of Imm. Property - NRIs

� Which type of IPs can be purchased?

� Any IP?

� Number of IPs?

� How can Payment be made?

� Inward remittances from abroad

� NRE/NRO/FCNR

� Can it be out of Travellers Cheque/Notes?

© PRAVIN P. SHAH & CO. 62

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Buying of Imm. Property - PIOs

� Which type of IPs can be purchased?

� Any IP?

� Number of IPs?

� How can Payment be made?

� Can it be out of Travellers Cheque/Notes?

© PRAVIN P. SHAH & CO. 63

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Buying of Imm. Property

� Reporting to RBI?

� Foll. Citizens cannot without RBI Approval:

� Pakistan / Bangladesh / Sri Lanka / China /Pakistan / Bangladesh / Sri Lanka / China /

Afghanistan / Iran / Nepal / Bhutan

� Buy or Transfer IP

� However, can take on lease for max. 5 years

© PRAVIN P. SHAH & CO. 64

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Inheritance of IP

� NRI can inherit any type of IP in India

� PIOs

� Can INHERIT any IP from a PROI who had acquired

it as per applicable Exchange Control Law

� Can acquire any IP except Agr Land / Plantation /

Farm House by way of GIFT from a PRII / NRI / PIO

© PRAVIN P. SHAH & CO. 65

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Renting of IP

� NRI/PIO can rent out their property

� Full repatriation of Rent allowed?

� Even if IP purchased out of NRO A/c?

Can NRI carry out any business ~ Warehousing?� Can NRI carry out any business ~ Warehousing?

© PRAVIN P. SHAH & CO. 66

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Transfer of IP by NRI/PIOTYPE OF IP & TRANSFER BY TO

SELL / GIFT any IP NRI

SELL / GIFT any IP except Agr. Land / Farm

Houses / Plantations

NRI

SELL any IP except Agr. Land / Farm PIO

© PRAVIN P. SHAH & CO. 67

SELL any IP except Agr. Land / Farm

Houses / Plantations

PIO

GIFT any Res / Comm’l IP PIO

SELL / GIFT of Agr. Land / Farm Houses /

Plantations

PIO

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Selling of IP by NRI/PIO

� Repatriation of Proceeds

� Auto. Route if:

� IP was acquired as per provisions of law

� Repatriation Less than

� Cost Price paid from Inward Remittance / NRE / FCNR� Cost Price paid from Inward Remittance / NRE / FCNR

� Gains credited to NRO A/c.

� For Residential Property =

� For Comm’l =

� Gains have to be credited to NRO A/c.

� Q. Can Gains be repatriated??

© PRAVIN P. SHAH & CO. 68

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Acquisition by Non-NRIs

� Non-NRIs cannot acquire IP

� FEMA v FERA

� Citizenship relevant?

� Q. Position of Foreign nationals resident in India?Q. Position of Foreign nationals resident in India?

� Can they buy IP or do they need RBI Approvals?

� E.g.: Mr. Smith who is MD of Excel Auto Ltd and staying in

India for 3 years wants to buy a home in Gujarat?

� E.g.: Mr. Chang is on a 6-months Tourist visa wants to

buy a villa in Goa?

© PRAVIN P. SHAH & CO. 69

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Foreign Cos.

� Foreign Cos. Cannot acquire IP in India

� If ForCo opens a Branch / Project Office

� It can acquire property for its own activity

� It must file a Form with RBIIt must file a Form with RBI

� Requires RBI permission for selling such a

property

© PRAVIN P. SHAH & CO. 70

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RBI Permission

� If Permission required apply to:

� Chief General Manager

Exchange Control Dept

Reserve Bank of India

Mumbai 400 001

� No format has been prescribed

� Give full details and reasons for application

© PRAVIN P. SHAH & CO. 71

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Commission to Agents

� Flats sold to NRIs

� Agents can be appointed

� Commission

� US$ 25,000 or 5% of Inward remittance – Higher� US$ 25,000 or 5% of Inward remittance – Higher

� Limit per Transaction

� Can be paid to Agent or Agent can deduct

commission and remit net amount to Builder

� Q. if NRI purchases out of NRO A/c.?

© PRAVIN P. SHAH & CO. 72

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Foreign Consultants

� Foreign Consultancy Services for Indian RE

project

� Architect / Interior Designer / Lawyers

� Limit US $1 million / project

© PRAVIN P. SHAH & CO. 73

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FDI in Real Estate

© PRAVIN P. SHAH & CO. 74

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FDI & Instruments

© PRAVIN P. SHAH & CO. 75

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Key Types of Foreign Invst.

Foreign Investment

Primary - FDI Secondary

Invst by PROI in

Capital of an Indian

Co.

Purchase by PROI

of Shs. Of Indian Co.

© PRAVIN P. SHAH & CO. 76

Direct Downstream Portfolio Off-Market

FIIs

NRIs / PIOs

Repatriable

Non-repatriable

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Relevant Regulations

Consolidated FDI Policy – DIPP, Ministry of Commerce

© PRAVIN P. SHAH & CO. 77

FEMA Regulations –Mode of Investments

+ Reporting

AP Dir Circulars –RBI’s changes

from time to time

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Relevant Regulators

FIPB –Cases

requiring Govt.

Approval

DIPP –Formulates FDI Policy

Part of FinanceMinistry

Part of Commerce

Ministry

© PRAVIN P. SHAH & CO. 78

Approval

RBI –Nodal

Regulatory Authority

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Repatriable FDI

� Repatriable:

� Principal + Profits / Gains + Current Income

(Dividend / Interest) can be sent back abroad

� NRIs living in Nepal & Bhutan:

� Consideration must be by way of inward remittance

in free foreign exchange through Banks

© PRAVIN P. SHAH & CO. 79

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FDI Prohibited

� FDI in following Sectors is Banned:

� Chit Fund / Nidhi

� Agricultural / Plantation (except certain areas)

� Real Estate business / Trading in TDRs

© PRAVIN P. SHAH & CO. 80

� Lottery / Gambling/ Betting / Casinos

� Atomic Energy

� Manufacturing of Tobacco & related products

� Sectors not yet opened to Private Sectors

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Types of FDI

Foreign Direct Investment

© PRAVIN P. SHAH & CO. 81

Automatic Approval

No PermissionMoF/FIPB – Inflows

up to Rs.1200 cr.CCEA – Inflows

above Rs. 1200 cr.

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Instruments

Foreign Direct Investment

© PRAVIN P. SHAH & CO. 82

EquityHybrid

Voting Non-Voting CCDs CCPS

Warrants

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FDI in Real Estate

� General Prohibitions

� Real Estate Business

� Construction of Farm House

� Trading in Transferable Development Rights (TDRs)

© PRAVIN P. SHAH & CO. 83© PRAVIN P. SHAH & CO. 83

� ‘Real Estate Business’:

� Buying and selling of immovable properties

� Assignment of Development Agreements?

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FDI in Real Estate – Guidelines

� 100% FDI allowed under Automatic Route subject to

conditions in Construction & Development Projects

� Projects Permitted

� Housing

� Commercial Premises

© PRAVIN P. SHAH & CO. 84© PRAVIN P. SHAH & CO. 84

� Commercial Premises

� Resorts

� Educational Institutions

� Recreational Facilities

� City & Regional Level Infrastructure

� Townships

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Conditions

� Minimum Area

� Serviced Housing Plots – 10 hectares/25 acres

� Built-up area: 50,000 sq. mtrs. or 5,38,200 s.ft.

� Combination Project – Any one of above 2

© PRAVIN P. SHAH & CO. 85© PRAVIN P. SHAH & CO. 85

Combination Project – Any one of above 2conditions

� What is ‘built-up area’?

� What is included and what is excluded in it?

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Conditions

� Investment – Minimum Capitalisation

� In case of WOS – US $10M

� In case of JV – US $ 5M

� FDI in a JV in 99:1 between Foreign & Indian

© PRAVIN P. SHAH & CO. 86© PRAVIN P. SHAH & CO. 86

� FDI in a JV in 99:1 between Foreign & Indian

Partner – What should be the min. capital?

� Securities Premium included in Min. Cap?

� Whether Preference Shares included?

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Conditions

� Funds to be brought within 6 months of

commencement of business

� What is Commencement of Business?

� Would it be date when Co. buys land as its SIT

© PRAVIN P. SHAH & CO. 87© PRAVIN P. SHAH & CO. 87

� Would it be date of approval by Local Authority?

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Conditions

� Original Investment locked-in for 3 years

� Entire Invst. or only what is brought in initially?

� If Invst. in Tranches?

� Is Invst. In excess of Min. Cap. also locked-in?

© PRAVIN P. SHAH & CO. 88© PRAVIN P. SHAH & CO. 88

� 50% project must be developed in 5 years

from date of obtaining all statutory clearances

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Conditions

� Lock-in of Initial Investment

� Can Foreign Investor sell to another NR within 3

years?

� No outflow /remittance from Co.

Is lock-in on Investor or on Investment?

© PRAVIN P. SHAH & CO. 89

� Is lock-in on Investor or on Investment?

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Exemptions

� Foll. 4 Conditions:� Minimum Area

� Minimum Capitalisation

� Lock-in for 3 years

� 50% Project Completion in 5 years

© PRAVIN P. SHAH & CO. 90© PRAVIN P. SHAH & CO. 90

� Not Applicable for 5 RE Projects:

� Hotels & tourism sector

� Hospitals

� SEZs / IT Parks

� Old Age Homes

� Education Sector

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FDI in Real Estate – Issues

� Whether Agricultural Land can be acquired for

developing serviced housing plots?

� If FDI & non-FDI compliant projects, can Co. get

© PRAVIN P. SHAH & CO. 91© PRAVIN P. SHAH & CO. 91

FDI?

� Can FDI be made in a Co. engaged in leasing of

real estate?

� What if property is constructed and then leased?

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Investment by NRIs and PIOs

� Prohibited Investments

� Investment in Agricultural Property,

Plantations & Farm Houses

� Trading in Real Estate and TDRs

© PRAVIN P. SHAH & CO. 92© PRAVIN P. SHAH & CO. 92

� Trading in Real Estate and TDRs

� Conditions of Press Note No. 2/2005?

� Can invest in smaller size projects also

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Reporting under FDI

� Reporting of Inflow

� IndCo. receiving foreign funds should report to

Regional office (RO) of RBI

� Within 30 days of receipt in Advance Reporting

Form

© PRAVIN P. SHAH & CO. 93© PRAVIN P. SHAH & CO. 93

Form

� File FIRC with AD

� File KYC on NRI Investor with AD

� Report would be acknowledged by RO which

will allot a Unique ID No. (UIN)

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Reporting under FDI

� Reporting of Issue of Shares

� After issue of Shares file FC-GPR with RBI

� Signed by MD/Director /CS

� File with AD

© PRAVIN P. SHAH & CO. 94© PRAVIN P. SHAH & CO. 94

� CS’ Certificate

� Valuation Certificate from CA / Auditor

� AD would submit to RO

� Annual Return of Foreign A&L with RBI

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Loans to NRIs

© PRAVIN P. SHAH & CO. 95

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Loans to NRIs- Housing Loans

� Bank / HFI can grant to NRI/PIO

� For acquisition / renovation/repairs of Residential HP

� Quantum of loans, margin money, repayment period shall

be at par with Resident loans

� Loan cannot be credited to NRE/FCNR/NRNR� Loan cannot be credited to NRE/FCNR/NRNR

� Fully secured by Equitable Mortgage of Property to

be purchased / Other assets

� Source of paying Interest / EMIs:

� NRE/FCNR/NRO A/c. or out of rental income

� Rental Income from Renting of Property

� Relative in India of borrower

© PRAVIN P. SHAH & CO. 96

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Change of Status

© PRAVIN P. SHAH & CO. 97

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Change of Status: R to NR

� Shares

� Existing Bank Accounts

� New Bank Accounts

� Loans / Overdrafts availed when he was a Resident

� Can they be continued?� Can they be continued?

� Payment of Interest & repayment of loans?

� Imm. Prop / Bullion / Movables?

� Insurance Policies?

� Directorship / Trustee/Karta

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Change of Status: NR to R

� NRI becoming Resident

� S.6(4) of FEMA

� Foreign Shares

� Foreign Property

� Foreign currency� Foreign currency

� Foreign Bank Accounts?

� Jewellery/Cars/ Movables abroad?

� Insurance Policies abroad?

� Income earned on assets held abroad by NRIs who

have returned to India permanently can be retained

abroad – RBI Clarification

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Overseas Invst by Indians

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Liberalised Remittance Scheme

� LRS of RBI

� For Resident Individuals

� Foreign citizens?

� Minors?

US $200,000 equivalent / FY� US $200,000 equivalent / FY

� Earlier $50,000 - $100,000

� Any permissible Capital or Current A/c Transaction

� Bank A/c., Invst, Property, Expenses, Overseas Gifts

� Which Countries are prohibited?

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Liberalised Remittance Scheme

� Out of owned funds?

� Borrow and Invest?

� Banks can lend for LRS?

� Setting-up of a Co. under LRS?

� Application-cum-Declaration Form� Application-cum-Declaration Form

� Income earned on assets held abroad under LRS

can be retained abroad and reinvested – RBI

Clarification

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Other Investments

� General Permission for foreign securities :

� PRII can get a gift from PROI

� PRII can subscribe to under Cashless ESOP by a

foreign Co.

PRII can get inheritance from PRII / PROI� PRII can get inheritance from PRII / PROI

� PRII – Employee / Director of Indian Sub. Of

Foreign Co. can acquire foreign securities, if:

� Shares under ESOP are offered on uniform basis

� Annual Return is filed by Indian Co. with RBI

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Remittances for Travel

� Basic Travel Quota for Private Visits

� $10,000 equivalent / FY / person

� Up to $3,000 in Cash Balance TC/ Forex Card

� Also for minors

� For excess RBI approval� For excess RBI approval

� Can get up to 60 days in Advance

� Other

� Business / Conferences/ Sp. Training / Maintenance

of patients for medical treatment / check-up/

attendants

� $25,000 equivalent / person

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Remittances for Travel

� Formalities

� No endorsement on Passport unless requested

� Form A-2 to be filled

� Self-declaration & Air Tickets

� Surrender unspent forex within

� 90 days of return for Cash & 180 days for TCs

� Can retain up to $2,000 of Cash / TC / Card

� Can retain any amount of coins

� BTQ Limit N.A. if spent through CC

� Applicable to DC

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Other Remittances

� Medical Treatment

� Up to $1,00,000 for treatment

� Excess Estimate from Doctor in India / abroad

� Self declaration

� Maintenance - $25,000

� Immigration

� Up to $1,00,000

� Self-declaration & A2

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Other Remittances

� Employment abroad

� Up to $1,00,000

� Self-declaration & A2

� Study Abroad

� Students treated as NRIs

� Up to $1,00,000 or estimate from Foreign Institution

–whichever is Higher per Academic Year

� Self-declaration & A2

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Thank You!!

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