FAQs

Who is a Non-Resident Indian (NRI)?

"Non Resident Indian" means a person who is a citizen of India or is a person of Indian origin residing outside India for employment or carrying on business or vocation.

What is an Overseas Corporate Body (OCB)?

Overseas Corporate Body (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least 60% by NRIs and includes overseas trust in which not less than 60% beneficial interest is held by NRIs directly or indirectly but irrevocably.

Who qualifies to be a person of Indian origin?

A foreign citizen (not being a citizen of Pakistan and Bangladesh) is deemed to be of Indian origin if:

  • He or she, at any time, has held Indian passport, or
  • He or she or either of his or her parents, or grandparents was a
citizen of India by virtue of the Constitution of India or Citizenship Act, 1955

A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares or securities in India are made by such persons only jointly with their NRI spouses.

What are the types of rupee accounts are permitted to be maintained by NRIs?

The following are the various types of rupee accounts available for Non-Resident Indians:

Non-Resident Ordinary Account

Non-Resident Non-Repatriable Account

Non-Resident (External) Rupee Account

Non-Resident (Special) Rupee Account

Can an NRI transfer funds between NRE accounts?

Yes. The funds can be transferred between NRE or FCNR accounts of an account holder and also between NRE or FCNR accounts of two different NRIs, ie, the funds lying in NRE or FCNR accounts of an NRI can be freely transferred to NRE or FCNR account of any other NRI.

Are NRO or NRE account holders eligible for loans or overdrafts against their fixed deposits?

The NRO or NRE account holders are eligible to apply for loans or overdrafts against their fixed deposit holdings

In order to facilitate the opening of an NRE or FCNR account, are the Non-Resident Indians permitted to utilize the funds of NRO or NRNR accounts?

Interest on NRO account (subject to payment of tax) is fully repatriable. However, the funds can be utilised to open NRE or FCNR account after the procedural aspects are complied with ie, tax is deducted at source in case of NRO account and procedure for NRE or FCNR account is complied with.

During their visit to India, can the Non-Resident Indian use Travellers Cheques or Currency notes to open an account or credit the existing NRE account?

Non-Resident Indians are permitted to use Travellers Cheques or Currency Notes to open an account or credit the existing NRE account, subject to certain conditions and limits as stated below:

In the case of those foreign currency notes brought by the Non-Resident Indians exceeds USD 5,000 or Travellers Cheques and notes exceeding USD 10,000, the NRI is required to submit the Currency Declaration Form (CDF) to the customs authorities in India. The CDF has to be submitted for endorsement by the bank for opening or credit to an account.

Can the account holder or the dependents of the NRI utilize the funds in the NR accounts for payment towards their airfare expenses to or from India?

The account holder or the dependents of the NRI can utilize the funds in the NRO or NRE accounts for payments towards their airfare expenses to or from India.

What is a Resident Foreign Currency Account Scheme?

The Resident Foreign Currency Account facilitates investment of funds for those individuals of Indian nationality or origin who have returned to India for permanent settlement (Returning Indians) after a stay outside India for a continuous period of not less than one year.

Are NRIs permitted to remit funds through Exchange Houses for investment in shares or debentures of Indian companies?

Subject to general or specific permission from the Reserve Bank of India NRIs are permitted to remit funds through Exchange Houses for their investment in shares or debentures.

Can Non-Resident Indians send drafts issued by Exchange Houses for acquisition of residential flats in India?

NRIs can send drafts issued by Exchange Houses in favour of co-operative housing societies or estate developers for acquisition of residential flats in India on an individual basis.

Can Non-Resident Indians remit premia on policies issued by the Life Insurance Corporation of India by means of drafts issued by Exchange Houses in favour of the Corporation?

Non-Resident Indians are allowed to remit premia on policies issued by the Life Insurance Corporation of India by means of drafts issued by Exchange Houses in favour of the Corporation.

Can Non-Resident Indians remit tuition, boarding or examination fees of their children studying in India by means of drafts issued by Exchange Houses in favour of schools, colleges, universities, technical and educational institutions in India?

Non-Resident Indian's are permitted to remit tuition/boarding/examination fees of their children studying in India by means of drafts issued by Exchange Houses in favour of schools, colleges, universities, technical and educational institutions in India

During their visit to India, are the Non-Resident Indians permitted to take precious stones or jewellery purchased by them?

Non-Resident Indians are permitted to take precious stones and jewellery (both gold and non-gold) purchased by them in India, without any limit, provided the purchase is made against payment in any convertible foreign currency.

What are the investment opportunities available for Non-Resident Indians in India?

The following investment avenues are available for the Non-Resident Indians in India:

  • Government securities or units of Unit Trust of India
  • National Savings Certificates issued by post offices in India
  • Non-convertible debentures of Indian companies
  • Bank Accounts in India
  • Investment in securities or shares and deposits of Indian firms or companies
  • Investment in immovable property in India
  • Investment in Mutual Funds in India
  • Company deposits

Do funds realized on the sale or drafts issued by Exchange Houses in favour of co-operative housing societies or estate developers qualify for free repatriation from India?

The funds realized on the sale or drafts issued by Exchange Houses in favour of co-operative housing societies or estate developers are freely repatriable when the securities are purchased out of funds remitted from abroad.

Is it mandatory for the Non-Resident Indians to seek permission from the RBI to invest in proprietary or partnership concerns on Non-Repatriation basis?

Non-Resident Indians need not seek permission from RBI to invest in proprietary or partnership concerns on a Non-Repatriable basis.

Is it mandatory for the Non-Resident Indians to seek permission from the RBI for making investments in new issues of Indian companies on Non-Repatriable basis?

The Non-Resident Indians need not seek permission from the RBI for making investments in new issues of Indian companies on a Non-Repatriable basis.

Are those funds in the form of incomes or interest earned on investments or deposits held in India by Non-Resident Indians on a non-repatriable basis qualify for free repatriation to the place of residence of the Non-Resident Indian?

The Non-Resident Indians are permitted to repatriate the incomes or interest earned on investments or deposits held in India on a non-repatriable basis, other than the profit or gains realised on sale of immovable property.

Is the Resident Indian liable to pay tax on holding a joint account with the Non-Resident Indian?

The Indian Resident is not exposed to tax obligations when he or she has a joint account holding with a Non-Resident Indian.

For the purposes of investment in mutual funds, is it required by a Non-Resident Indian to seek permission from the RBI?

NRI's need not seek permission from the RBI to invest and redeem units in Mutual Funds.

What are the tax concessions available to NRIs on balances or deposits held in NRE or FCNR accounts?

The income from interest on moneys standing to the credit of NRE or FCNR accounts is exempt from Income Tax. Gifts from such accounts are not liable to Gift Tax as the Gift Tax is abolished w.e.f. 30/9/1998. Similar tax concessions however are not available for NRO accounts.

Are those assets held by Non-Resident Indians during their stay in India as Resident Indians freely transferable to their place of residence abroad?

The Non-Resident Indians are not permitted to transfer those assets held by them in India as residents before they qualify themselves as Non-Resident Indians.

During their visit to India, are the Non-Resident Indians permitted to take household articles such as carpets, curios, etc. purchased out of funds in NRO accounts during their temporary visit to India?

Reserve Bank of India permits such requests on application received from NRIs up to the value of Rs 20,000 for such articles (other than those made of gold or silver or those banned for export).

Are NRIs allowed to settle their hotel bills in India in Indian rupees?

NRIs are allowed to settle their hotel bills in India in Indian rupees.

Are the NRIs permitted to give a Power of Attorney to a resident Indian to operate the Non-Resident accounts?

A Power of Attorney is given only for operations in the account and not for opening the account. Further the operations are restricted only for making legitimate local payments.

In no circumstance is the Power of Attorney holder allowed to repatriate the funds abroad or make payments of gifts on behalf of the account holder.

Are Power of Attorney Holders allowed to credit proceeds of foreign currency notes, bank notes and travellers cheques to the NRE accounts?

Power of Attorney Holders are not allowed to credit proceeds of foreign currency notes, bank notes and travellers cheques to the NRE accounts.

Is the interest earned on RFC account liable to tax?

Interest earned on RFC account is not only liable to tax in the hands of the account holder provided he is a Non Resident or Resident but not ordinarily Resident as defined under the Income Tax act. There is an obligation on part of the Bank to deduct tax at source on interest on such deposits. However, an individual account holder can summit the prescribed form for nil/lesser deduction.

Are the balances in NRE or FCNR account permitted to be credited to RFC account? Is the NRI required to satisfy any minimum period of NRI status for the above purpose? How long is the NRI permitted to maintain RFC account once he becomes a resident?

The balances in NRE or FCNR account can be credited to RFC Account on the change of the status of the NRE or FCNR Account holder from a Non-Resident to a Resident. Under the current FEMA regulations the Non-Resident Indian is not required to satisfy a minimum period of stay of one year.

A person can maintain an RFC Account, once he becomes a resident for any length of time as long as he remains to be a resident. If his status changes from once again from Resident to Non-Resident, the funds held in RFC account are allowed to be freely remitted abroad or credited to fresh NRE or FCNR account. However the current regulation under FEMA is silent about the above provision.

The treatment of deducting tax at source on interest on RFC Account is similar to Domestic Term Deposits. However it is possible for a person, whose status under the Income Tax Provision is Resident but not Ordinarily Resident to claim that the interest on Term deposits is not liable to tax under the provisions of Section 10 of the Income Tax Act, 1961. The individual should furnish Form 15AA if he does not require the bank to deduct tax at source.