presentation _ nri

8/3/2019 Presentation _ NRI

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To be or notto be..Presenta tion on Non

resident Indians

Institute of Chartered Ac countants of India

Dahisar Study Circ le

Presenta tion by :CA. Sudha G. Bhushan


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Definition

Regulators

Releva nt definition

Deposits

Investment

By : CA. Sud ha G. Bhusha n


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Regulators

Regula

tors

Reserve Bank of Ind ia

Sec urities andExc hange Boa rd of

India

Authority for Ad vanceRuling

Sec reta riat for Ind ustria lAssista nc e

Foreign InvestmentImplementation

authority


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Person resident inIndiaSec tion 2(v) o f FEMA


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Person resident outside Ind ia

person resident outside Ind ia means aperson who is not resident in Ind ia ; [As per

FEMA Sec 2(w)]


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A person (Ind ividua l) resident inIndia

A person (being an ind ividua l) residing in Ind ia for morethan one hundred and eighty-two days during the c ourseof the prec ed ing financ ial year but does not inc lude

(A) A p erson who has gone out o f Ind ia or who sta ys outsideInd ia , in e ithe r c ase

(a)for or on taking up em ployment outside Ind ia , or

(b)for carrying on outside India a business or vocationoutside Ind ia , or(c)for any other purpose, in suc h c irc umsta nc es as

would ind ic a te his intention to sta y outside Ind ia foran uncerta in pe riod ;


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(B) A person who has come to or stays in India,in e ithe r case, otherwise than

(a) for or on taking up emp loyment in Ind ia ,

(b) for carrying on in India a business orvoc a tion in Ind ia ,

(c ) for any other purpose, in suc hcircumstances as would indicate his intentionto sta y in Ind ia for an uncerta in period ;


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Two Cond itions must-Resident

He should be resid ing in Ind ia for a t lea st 183days during the p rec ed ing financ ia l yea r

He should have c ome to Ind ia or is sta ying inInd ia eithe r for taking up employment or c arrying on business or voc a tion in Ind ia or for any other purpose, that would ind ic a te his

intention to sta y in Ind ia for an unc erta in period .


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An Examp le

Mr. Paul c ame to Ind ia on 1 Sep 07 fortaking up an employment in Ind ia .

Financ ial Year 2006-07Financ ial Year 2007-08


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For the Financial Year 2006-2007, he wasnot in India. As such, for the financial year

2007-2008 he is no t resident of Ind ia .

For the Fina nc ia l Year 2007-2008, he was inIndia for more than 182 days. As such, he is

resident of Ind ia for the financ ia l yea r 2008-2009.


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An Examp le

Mr. Eberha rd t c ame to Ind ia on 1 Sep 07as a tourist and since then he is in India till

today.


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For the Financial Year 2006-2007, he wasnot in India. As such, for the financial year

2007-2008 he is no t resident of Ind ia . For the Fina nc ia l Year 2007-2008, he was in

India for more than 182 days. However, heis not in India for any of the purposes listedin the sec ond c ond ition. As suc h, he is not a

resident of Ind ia for the financ ia l yea r 2008-2009 too.


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An Examp le

Mr. Ashok, born and brought up in India,goes to the USA for taking up an

employment on 15-5-2007. Determine hisresidentia l sta tus und er the Ac t fo r the F.Y.2007-2008.


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An Examp le

Mr. Bharat, born and brought up in India,goes to USA on 10-4-2007 to look after his

mother, who is suffering from a chronicdisease , with the intention to stay in theUSA till his mother rec overs. Dete rmine hisresidential status under the Act for the

financ ia l year 2007-2008 and 2008-2009.


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Mr. Ashok sha ll be trea ted a Resident o f Ind ia till 14-5-2007.

With e ffec t from 15-5-2007, he sha ll be trea ted aNon-Resident as he is c overed by one of the

exc ep tions listed in sub -clause (A) to sec tion 2(v).


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An Examp le Mr. Bharat is going to USA (on 10.04.07) neither for

employment nor for business nor for any purposeswhich indicate his intention to stay there for anunc erta in period . Thus, his physic a l p resenc e inIndia during the preceding F. Y.; i.e., 2006-2007sha ll have to b e c onsidered and as he was in Ind iafor 365 days during the F. Y. 2006-2007 he wouldbe treated Resident of India for the financial year2007-2008.

If he c ont inues to sta y in USA, say, till 31-3-2009, hisstay in India during the preceding financial year;

i.e., 2007-2008 would be less than 183 days andhence he would be treated Non-Resident for thefinancial year 2008-2009 as the first condition ofthe p hysic a l sta y in Ind ia is no t fulfilled .


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Not Permanently Resident

Means a person resident in India for theemployment of a specified duration

(irrespective of length thereof) or for aspec ific job or assignment, the d uration o fwhich does not exc eed three years.


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Not Permanently Resident

(NPR)- Fac ilities enjoyed Remittance for maintenance of close

relatives abroad, exceeding net salary (afterdeduction of taxes, contribution to provident fundand other deduc tions).

Can acquire or sale any foreign security without anyprocedures or formalities or permission out of hisforeign c urrenc y resources outside Ind ia

He can possess without limit, foreign currency in theform of currency notes, bank notes and travellersc heq ues, if suc h foreign c urrency wa s ac quired , heldor owned by him w hen he was resident outside Ind iaand ha s been brought into Ind ia in ac c ordance withthe reg ula tions ma de under the Ac t.


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Restric tions on dea ling in Foreign

Exchange

Sec tion 3 of FEMA p rovides for a b lanketrestric tion on d ea ling in foreign exc hange

by any p erson unless it is permitted Und er the p rovisions of the Ac t

Und er the p rovisions of the Rules madeunder the Ac t

Und er the p rovisions of the Regula tions

framed under the Ac t By Genera l or spec ial permission of RBI


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Restric tions on dea ling in ForeignExchange

Clause (a ) p rohib its any person

To dea l in foreign exc hange or foreign

security To transfer any foreign excha nge sec urity to

any person other tha n an authorised person.

Clause (b ) p rohibits every person for making

any payment to or to the c red it of a personresident outside Ind ia in any manner.


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Illustra tions: Restric tions on d ea ling inForeign Exc ha nge

(1) Ca n Mr. Pandya, a resident of Ca nada,instruc t his b rother sta ying in Mumba i to make apayment of Rs. 5,000 to Mr. Joshi, his c lose friend .

Ans: No. Suc h payment is not permitted underc lause (b) of sec tion 3 of the Ac t

(2) Mr. Rakesh, a resident of UK asks his Cha rteredAc c ountant in Ind ia to form a Pvt. Ltd . Co . andproposes to reimburse a ll the expenses a fte r theforma tion o f the c ompany. Whether, the Ind ian

Chartered Acc ountant, c an spend for the abovepurpose on b eha lf of Mr. Rakesh ?Ans: No, as suc h payment is not permitted underc lause (b) of sec tion 3 of the Ac t.


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Restric tions on dea ling in ForeignExchange

Clause (c ) prohib its every person forrec eiving a ny pa yment from or on b eha lfof a person resident outside Ind ia exc ep t

by wa y of an inwa rd remittance, from ap lac e outside Ind ia through an authorisedperson.Clause (d) p rohib its a person to enter intoany financ ia l transac tion in Ind ia asc onsidera tion for ac quisition, c rea tion or

transfer of a right to ac quire any assetoutside Ind ia by any person. The c lausewould affec t a transac tion in the na ture o f Hawa la Transac tion .


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Restric tions on Ind ian Resident

Sec tion 4 provides for a b lanketp rohib ition on a person resident in Ind ia to

ac quire, ho ld , own, possess or transfer anyforeign exc hange, foreign sec urity or anyimmovab le p roperty situa ted outsideIndia except as permitted under the Ac t,

Rules or Regula tions made thereund er Exc eptions to sec tion 4..


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Exc ep tions to sec tion 4.. Sec tion 6(4) of the Ac t p ermits a person resident in

India to hold, own, transfer or invest in foreigncurrency, foreign security or any immovable

property situated outside India if such currency,security or property was acquired, held or ownedby suc h person when he was resident outside Ind iaor inhe rited from a person resident outside India .IllustrationMr. Pa te l, who was resident of USA fo r many years,

now permanently returns to Ind ia . He c ontinues tohold some immovable property, foreign securityand othe r foreign exc hange assets in USA. Ca n heho ld suc h a ssets outside Ind ia?


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Bank Ac c ountsThe FEM ( Deposit) Regula tions,2000

www.taxper tpro.com


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Rupee Ac c ount

Foreign Currenc yAccount



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Rupee Ac c ount

Non resident (Externa l) Rupee Ac c ounts(NRE Ac c ounts)

Ord ina ry Non resident Rupee Ac c ount(NRO Ac c ounts)

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Differenc e between NRO

NRE Accounts

Interest rate on NRO account is muchhigher than NRE acc ount.

NRE accounts are tax free whereas NROaccounts are not.

Up to a Million Dollars is repatriab le in NROAccount.


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GeneralPermissions


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Resident individuals,pa rtnership/ proprietorship

can ava il interest bearing rupee loa ns fromNRIs/ PIOs out o f funds rem itted by them

from abroad or out of funds held in theirbank accounts in India, on non repa triation

basis.

NRIs/ PIOs to transfer b y way o f g ift sha res

held by them in Indian compa nies andto transfer by way o f gift immovab le

property held by them in India subjec t to

c omp lianc e w ith other app lic ab lerules/ reg ulations includ ing the p rovisions of

Foreign Co ntribution Reg ulations Ac t, 1976by the c haritab le trust/ organisation

concerned.

Domestic public/private sector mutual fundsc an issue Units to NRIs/ PIOs on b oth

rep a tria tion as we ll as non-rep a tria tion basis


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NRIs/ PIOs to p lac e deposits withIndian firms, on non-repatriationbasis and with Ind ian com paniesinc lud ing Non-ba nking financ ia lc ompanies on non-rep a tria tion

basis out o f domestic sourc es.

NRIs/ PIOs fo r sa le of sha resac quired unde r d irec t

investment Sc hemes on stoc k

excha nges in Ind ia .

NRIs/ PIOs fo r sa le of sha resac quired unde r d irec t

investment Sc hemes on stoc kexcha nges in Ind ia .

NRIs / PIOs fo r transfer of sha res,by wa y of sa le und er priva te

a rrange ment toanother NRI or to a resident


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InvestmentOpportunities
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Investment in Immovable Property

Investment in Proprietary and PartnershipFirm

Portfolio Investment (PIS)

Foreign Direct Investment (FDI)

Lending in Rupees

Lending in Foreign Currencies (ECB)


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CA Sud ha G. Bhusha n

Investment in Immovable Property (IP) inIndia

NRI who is either a citizen of India or a Person of IndianOrigin can purchase or sell IP in India under automaticroute.

A citizen of Pakistan or Bangladesh or Sri Lanka orAfghanistan or China or Iran or Nepal or Bhutan cannotacquire IP in India other than lease not exceeding 5 years.

Citizen of foreign countries who are not PIO cannotacquire any IP in India without RBI Permission.

Permitted Immovable Property can be residential orcommercial other than an agricultural property, plantation,or a farm house.


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CA. Sud ha G. Bhusha n

Repatriation of sale proceeds

Sale of IP other than agricultural land/farm house/plantation property in India -repatriation of the saleproceeds permitted subject to conditions as under:

The IP was acquired as per Exchange Laws The amount to be repatriated does not exceed the

original amount invested (i.e. capital gain if anycannot be repatriated).

In case of residential houses, the repatriation isrestricted to two such houses.

US$ 1 million scheme-for IP held in India


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Investment in Firm or Proprietary Concern

Permitted to NRIs/PIOs

PIOs who are not citizen of Bangladesh,Pakistan or Sri Lanka

Firm should not undertake- Print Media,Agricultural/ Plantation & dealing in land andimmovable property

Capital invested cannot be repatriated

Income can however be repatriated


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Sectors/activities where FDI is prohibited.

Approval from Govt.- Approval Route

Automatic Route of RBI


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DirectInvestment

Portfolio

Investment


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India

RepatriationBasis

Non rep atriationBasis


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Foreign Direct InvestmentInvestment in Capital - equity, preference,

convertible preference, Convertible debentures.

Automatic RouteGovernment Approval Route

Investment on repatriation basis- sale proceeds net

of taxes eligible for repatriation out of India


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FE(Transfer or issue of sec urity by a

person resident outsideIndia)regulations, 2000

Sc hedule III

Purchase/sale ofshares and /orc onvertib le deb enturesby a NRI on a stockexchange in India onrepatriation and/or

non repatriation basisunder portfolioinvestment Sc heme

Sc hedule IV

Purchase and sale ofSha res/ c onvertibledebentures by a NRIon non repatriation

basis


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Portfolio Investment by NRIs

Limit of 5% by single NRI, 10% by all NRIs (can beincreased to 24%) to be maintained

Payment to come from NRE/FCNR or NRO (in caseof non repatriable investment)

Delivery based purchase and sale permitted

OCBs are not permitted after 29/11/2001 to invest inPIS


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Sc hedule IV

Chit Fund or a Nidhicomp any or

Agricultural/plantationac tivities or real e sta te

business orconstruction of farmhouses or dealing in

Transfer ofDeve lopm ent Rights.

rea l esta te b usinessshall not inc ludedevelopment of

tow nship, constructionof resident ial/

commercial premises,road s, bridg es, etc .

by way of inwardremittanc e through

normal b ankingc hannels or out o f

funds held inNRE/ FCNR /NRO

ac co unt maintained

with a n authoriseddealer

The am ount investedin sha res or c onvertibledeb entures under this

Sc heme a nd theca pital ap preciationthereon sha ll not b e

allowed to b erepa triated ab road .


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Business of c hit fund , or ii) Nidhi c ompany, or iii) Ag ric ultural or p lanta tion ac tivities, or

iv) Rea l esta te business* or c onstruc tion o f farmhouses, or

v) Trad ing in Transferab le Deve lopment Rights (TDRs).

* Rea l esta te business" does not inc lude c onstruc tion o fhousing / c ommerc ia l p remises, educ a tiona l institutions,rec rea tiona l fac ilities, c ity and reg iona l levelinfrastructure,townships


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Investment in Shares/CDs on

non-repatriation basis by NRIs

Scheme applies to investment other than PI

NRIs may acquire without any limit, shares underpublic issue, private placement or right issue

The Condition of Central Govt., approval if investorhas previous JV or technical collaboration or trademark agreement in the same or allied field has beendone away with

Not permitted- investment in companies engaged inchit fund/nidhi, agricultural/plantation or real estatebusiness or construction of farm house or dealing inTDRs


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Investment in securities other than

shares or CDs by Non Resident

Investment onrepatriation basis in

Dated Govt.,securities/treasury bills,

NCD and Units ofDomestic MF

Bonds issued by Publicsector undertaking

Investment on NonRepatriation basis by

NRIs in units of moneymarket funds in India orNational Plan/SavingCertificates.


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Lending in Indian Rupees by NRI

Non Corporate entity can borrow from NRI orPIO on non-repatriation basis subject tofollowing conditions:

The period of loan should not exceed 3 years

the rate of interest on the loan shall not

exceed 2% over the Bank rate prevailing onthe date of availment of loan;


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Lending in Foreign Currency by NRI

An individual resident in India may borrow a sumnot exceeding US $ 250,000/- form his closerelatives outside India, subject to the conditions that the minimum maturity period of the loan is one

year the loan is free of interest; and 'Close relative' means relative as defined in

Section 6 of the Companies Act, 1956At the end of the term loan amount can be

repatriated.


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THANKS..

CA. Sud ha G. Bhusha n

Taxpert Professiona ls Priva te Limitedwww.taxpertpro.com

09769033172

sudha [email protected] omsudha@ta xpertp ro.c om
http://www.taxpertpro.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.taxpertpro.com/

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