Facilities for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)
( Link to RBI Website )
(Updated up to September 19, 2014)
In terms of the Foreign Exchange Management
Act (FEMA), 1999 a person resident outside India means a person who is
not resident in India.
If a person is NRI or PIO, she/ he can,
without the permission from the Reserve Bank, open, hold and maintain
the different types of accounts given below with an Authorised Dealer
in India, i.e. a bank authorised to deal in foreign exchange. NRO Savings accounts can also be maintained with the Post Offices in India.
Types of accounts which can be maintained by an NRI / PIO in India
A. Non-Resident Ordinary Rupee Account (NRO Account)
Any person resident outside India may open NRO
account with an authorised dealer or an authorised bank for the
purpose of putting through bona fide transaction in rupees.
Opening of accounts by individual/ entities of
Pakistan and entities of Bangladesh require prior approval of Reserve
Bank of India.
NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.
● Savings Account - Normally
maintained for crediting legitimate dues /earnings / income such as
dividends, interest etc. Banks are free to determine the interest rates.
● Term Deposits - Banks are free to
determine the interest rates. Interest rates offered by banks on NRO
deposits cannot be higher than those offered by them on comparable
domestic rupee deposits.
● Account should be denominated in Indian Rupees.
● Permissible credits to NRO account are
transfers from rupee accounts of non-resident banks, remittances
received in permitted currency from outside India through normal
banking channels, permitted currency tendered by account holder during
his temporary visit to India, legitimate dues in India of the account
holder like current income like rent, dividend, pension, interest,
etc., sale proceeds of assets including immovable property acquired out
of rupee/ foreign currency funds or by way of legacy/ inheritance.
● Eligible debits such as all local payments
in rupees including payments for investments as specified by the
Reserve Bank and remittance outside India of current income like rent,
dividend, pension, interest, etc., net of applicable taxes, of the
account holder.
● NRI/PIO may remit from the balances held in
NRO account an amount not exceeding USD one million per financial year,
subject to payment of applicable taxes.
● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/ PIOs.
● Other than current income and the limit of
USD 1 Mn per financial year applicable to NRIs/PIOs, balances in NRO
accounts cannot be repatriated without the prior approval of RBI.
● The accounts may be held jointly with residents and / or with non-resident Indian.
● The NRO account holder may opt for nomination facility.
● NRO (current/savings) account can also be
opened by a foreign national of non-Indian origin visiting India, with
funds remitted from outside India through banking channel or by sale of
foreign exchange brought by him to India. The details of this facility
are given in the FAQs on “Accounts opened by Foreign Nationals and
Foreign Tourists” available on the RBI website.
● Loans to non-resident account holders and to
third parties may be granted in Rupees by Authorized Dealer / bank
against the security of fixed deposits subject to certain terms and
conditions.
B. Non-Resident (External) Rupee Account (NRE Account)
● NRE account may be in the form of savings,
current, recurring or fixed deposit accounts (with maturity of minimum
one year). Such accounts can be opened only by the NRI (as defined
under Regulation 2(vi) of Notification No. FEMA 5/2000-RB dated May 3, 2000) himself and not through the holder of the power of attorney.
● NRIs may be permitted to open NRE account
with their resident close relatives (relative as defined in Section 6
of the Companies Act, 1956) on ‘former or survivor ‘basis. The
resident close relative shall be eligible to operate the account as a
Power of Attorney holder in accordance with the extant instructions
during the life time of the NRI/PIO account holder.
● Account will be maintained in Indian Rupees.
● Balances held in the NRE account are freely repatriable.
● Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.
● Authorised dealers/authorised banks may at
their discretion/commercial judgement allow for a period of not more
than two weeks, overdrawings in NRE savings bank accounts, up to a
limit of Rs.50,000 subject to the condition that such overdrawings
together with the interest payable thereon are cleared/repaid within a
period of two weeks, out of inward remittances through normal banking
channels or by transfer of funds from other NRE/FCNR accounts.
● Savings - Banks are free to determine the interest rates.
● Term deposits – Banks are free to
determine the interest rates of term deposits of maturity of one year
and above. Interest rates offered by banks on NRE deposits cannot be
higher than those offered by them on comparable domestic rupee
deposits.
● Permissible credits to NRE account are
inward remittance to India in permitted currency, proceeds of account
payee cheques, demand drafts / bankers' cheques, issued against
encashment of foreign currency, where the instruments issued to the NRE
account holder are supported by encashment certificate issued by AD
Category-I / Category-II, transfers from other NRE / FCNR accounts,
sale proceeds of FDI investments, interest accruing on the funds held
in such accounts, interest on Government securities/dividends on units
of mutual funds purchased by debit to the NRE/FCNR(B) account of the
holder, certain types of refunds, etc.
● Eligible debits are local disbursements,
transfer to other NRE / FCNR accounts of person eligible to open such
accounts, remittance outside India, investments in shares /
securities/commercial paper of an Indian company, etc.
● Loans can be extended against security of
funds held in NRE Account either to the depositors or third parties
without any ceiling subject to usual margin requirements.
● Such accounts can be operated through power
of attorney in favour of residents for the limited purpose of
withdrawal of local payments or remittances through normal banking
channels to the account holder himself.
C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account
● NRIs are eligible to open and maintain these accounts.
● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years
● All debits / credits permissible in respect
of NRE accounts, including credit of sale proceeds of FDI investments,
are permissible in FCNR (B) accounts also.
● Account can be held in any freely convertible currency.
● Loans can be extended against security of
funds held in FCNR (B) deposit either to the depositors or third
parties without any ceiling subject to usual margin requirements.
● The interest rates are stipulated by the Department of
Banking Operations and Development, Reserve Bank of India. With effect
from March 1, 2014, in respect of FCNR (B) deposits of maturities, 1
year to less than 3 years, interest shall be paid within the ceiling
rate of LIBOR/ SWAP rates plus 200 basis points for the respective
currency/ corresponding maturity. For FCNR(B) deposits with maturity of
3-5 years interest shall be paid within the ceiling rate of LIBOR/
SWAP rates plus 300 basis points. On floating rate deposits, interest
shall be paid within the ceiling of SWAP rates for the respective
currency/ maturity plus 200 bps/ 300 bps, as the case may be. For
floating rate deposits, the interest reset period shall be six months.
● When an account holder becomes a person
resident in India, deposits may be allowed to continue till maturity at
the contracted rate of interest, if so desired by him.
● Terms and conditions as applicable to NRE
accounts in respect of joint accounts, repatriation of funds, opening
account during temporary visit, operation by power of attorney,
loans/overdrafts against security of funds held in accounts, shall
apply mutatis mutandis to FCNR (B). NRI can open joint account with a
resident close relative (relative as defined in Section 6 of the
Companies Act, 1956) on former or survivor basis. The resident close
relative will be eligible to operate the account as a Power of Attorney
holder in accordance with extant instructions during the life time of
the NRI/ PIO account holder.
Is the permission of the Reserve
Bank required for opening the various accounts, mentioned above, by
Bangladesh / Pakistan individuals/entities?
Opening of accounts by individuals/entities of
Pakistan and entities of Bangladesh nationality requires prior
approval of the Reserve Bank.. All such requests may be referred to the
General Manager, Foreign Exchange Department, Central Office Cell,
Reserve Bank of India, 6 Sansad Marg, New Delhi - 110 001. However,
individuals of Bangladesh nationality are permitted to open NRO accounts
without the prior approval of Reserve Bank of India, subject to
conditions.
1 A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India or is a person of Indian origin.
2
A Person of Indian Origin (PIO) for this purpose is defined in
Regulation 2 of FEMA Notification ibid as a citizen of any country
other than Bangladesh or Pakistan, if (a) he at any time held Indian
passport; or (b) he or either of his parents or any of his grandparents
was a citizen of India by virtue of the Constitution of India or the
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).3 'Close relative' means relative as defined in Section 6 of the Companies Act, 1956.
4 'A Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
5 For the
purpose of acquisition and transfer of immovable property in India an
NRI refers to an Indian Citizen resident outside India (Notification No. FEMA 21/2000_RB dated May 3, 2000, as amended from time to time)
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