Article contains Provisions related to Buying of the Properties in India by Non Resident Indians (NRIs), Income Tax Act, 1961 provisions applicable to Non Resident Indians (NRIs) in India, Provisions related to Investments in Shares and Securities by Non Resident Indians (NRIs), Investments in Equity shares and Securities on Non-Repatriation basis by NRIs,  Investments in Equity Shares and Securities on Repatriation basis by NRIs, Foreign Portfolio Investments (FPIs) by NRIs, Investments in Govt. Securities, National Plan or National Saving Certificates (NSCs) and units of UTI by NRIS and Summary on Privileges and Non-Privileges related to Investment in India by NRIs.

(A) Buying of the Properties

1. Nature and Numbers for buying of the properties

(i) NRIs are permitted to buy residential or/and commercial properties in India

(ii) NRIs have no restriction on numbers for buying of properties for investments not for trading

(iii) NRIs are permitted to buy the properties under automatic route where general or special permission is not required for own use or investment purpose both

(iv) However NRIs are not permitted for buying of the followings properties

(a) Agricultural land

(b) Plantation land

(c) Farm house in India

2. Funding (Sourcing) for Buying of the Properties

(i) NRIs are permitted to fund for buying of the properties in following ways only:-

(a) Direct remittance from Outside India through regular banking channel

(b) Out of balance is lying in NRO, NRE or FCNR account as maintained in India

(c) Loan from banks or financial institutions for purchase of the properties

(ii) NRIs are permitted to obtain a loan from banks and financial institutions where conditions for margin money and quantum of loan are at par with the residents of India for the properties loans

(iii) NRIs are required to make repayment of the loans in following ways only:-

(a) Direct remittance from Outside India through regular banking channel

(b) Out of balance is lying in NRO, NRE or FCNR account as maintained in India

(c) Out of rental incomes of the same property

(d) Out of loan from a close relative who is also a resident in India

3. Maintenance of the Properties

(i) NRIs are permitted to purchase the properties by way of a registered conveyance deed

(ii) NRIs are permitted to execute a power of attorney in favor of a close relative or friend for execution of the documents on his behalf for

(a) Registering and leasing of the properties

(b) Signing of the properties agreements

(c) Selling of the properties

(iii) NRIs are permitted to rent out the properties in India

4. Repatriation of Money out of the Rent and sale Proceeds from India

(i) NRIs are permitted to repatriate the rent amount or sale proceeds of the properties out of India.

(ii) NRIs are permitted to remit the sale proceeds of the inherited properties through NRO account where maximum USD 1(one) million per financial year is permitted

(iii) (a) NRIs are not permitted to direct repatriate out of sale proceeds of the properties Which are exceeding the amount in foreign currency paid at the time of acquisition of the same properties.

(b) Henceforth NRIs are permitted to repatriate the balance amounts which are exceeding the amount paid at the time of acquisition through NRO account where maximum USD 1 (one) million per financial year is permitted

(iv) (a) NRIs are not permitted to direct repatriate the sale proceeds of more than 2(two) Residential properties

(b) Henceforth NRIs are permitted to repatriate the balance amount which are exceeding the amount paid at the time of acquisition through NRO account where maximum USD 1(one) million per financial year is permitted

5. Definition for a NRI and a PIO

(i) Definition for a NRI in India

  • An individual who is born in India but now a non-resident in India is known as NRI irrespective of the fact that whether he is holding an Indian passport or not holding an Indian passport

(ii) Definition of a PIO in India.

  • An individual who is not born in India and also now non-resident in India but his/her parents or grandparents were born in India

(B) Income Tax Act, 1961

1. Determination of the Residential status for a NRI under the Income Tax for a Financial year

(i) Resident in India is determined with 2 (two) options (under section 6(1) of the Income Tax Act, 1961)

(a) When any Individual (citizen or non citizen of India) is staying for minimum 182 (One hundred eighty two) days in India in a previous financial year is called a resident in India

or

(b) When any Individual (citizen or non citizen of India) is staying for minimum 60 (sixty) days in India in the previous financial year and

(ba) Also stayed for minimum 365 (Three hundreds sixty five) days in the last 4(four) preceding to the previous financial years is also called a resident in India

(ii) Resident in India is also determined with 1(one) more option (under section 6(1) of the Income Tax Act, 1961)

(a) When an individual as citizen of India is staying for minimum 182 (one hundred eighty two) days in India in the previous financial year

and

(aa) Also leaving India for employment outside India or leaving as a crew member on a ship is also called a resident in India.

(b) Henceforth in 2nd option of above mentioned para (i) (b) is replaced with minimum 182 (one hundred eighty two) days instead of 60 (sixty) days in previous financial year

and

(ba) Also staying for minimum 365 (Three hundreds sixty five) days in the last 4 (four) preceding to the previous financial years is also called a resident in India

(iii) Now Resident of India is also determined with 1(one) more options

(Applicable from April, 01, 2020 for the previous financial year ending on March 31, 2021- Assessment year 2021‐22)

(a) Now a citizen of India or a person of Indian origin who is living outside India and coming to visit India during the previous financial year

and

(ab) Also his total incomes excluding income from foreign sources are exceeding Rs. 15 Lac

and

(ac) Also staying in India for minimum 120 (One hundred twenty) days instead of 182 (One hundred eighty two) days as earlier

and

(ad) Also stayed in India for minimum 365 (Three hundred sixty five) days during 4 (four) preceding to the previous financial year is called as resident of India

(iv) Deemed Resident in India (under section 6(1A) of the Income Tax Act, 1961)

(a) Now concept of deemed resident in India is introduced under new section 6(1A) as applicable from April 01, 2020 for the previous financial year ending on March 31, 2021 (Assessment year 2021‐22)

(b) Now a Citizen of India is treated as deemed resident in India where his total incomes excluding incomes from foreign sources are exceeding 15 Lac

and

(ba) Also the citizen of India should not be liable to tax Outside India due to his domicile, residence or any other criteria of similar in nature

(bb) Hence 3 (three) conditions are to be satisfied for becoming a deemed resident in India are as followings:‐

  • An Individual should be a citizen of India.
  • His total incomes excluding incomes from foreign sources are exceeding 15 Lac
  • The Individual should not be liable to tax outside India

(bc) Question of physical stay in India is not required for becoming a deemed resident in India. Hence the Individual will be deemed resident in India where he has not stayed in India even for 1 (one) day during the previous financial year.

(c) Deemed Ordinary resident in India

(ca) Now a citizen of India or a person of Indian origin will be treated as deemed ordinary resident in India where his total incomes excluding income from foreign sources are exceeding Rs. 15 Lac

and

(cb) Also he has stayed in India in previous financial year for minimum 120 (one hundred twenty) days instead of 182 (one hundred eighty two) days as earlier under section 6(6) of Income Tax Act, 1961.

and

(cc) Also the Individual was resident in India for minimum 2 (two) previous financial year out of 10 (ten) proceeding to the previous financial year.

and

(cd) Also the Individual has stayed in India for minimum 730 (Seven Hundred Thirty) days during 7 (seven) preceding to the previous financial years is called an ordinary resident in India.

(ce) Hence total Global incomes of the deemed ordinary resident in India will be taxable in India.

(v) Ordinary Resident in India -(under section 6(6) of the Income Tax Act, 1961)

(a) When any individual (citizen or non citizen of India) is staying in India for minimum 182 (One hundred eighty two) days in a previous financial year

and

(b) Also the Individual was resident in India for minimum in 2 (two) previous financial year out of 10 (ten) preceding to the previous financial years.

and

(c) Also the Individual has stayed in India for a minimum 730 (Seven Hundred Thirty) days during 7 (seven) preceding to the previous financial year is called an ordinary resident in India

(d) Hence total Global incomes of the ordinary resident in India will be taxable in India.

(vi) Not Ordinary Resident in India (under section 6(6) of the Income Tax Act, 1961)

(a) When any individual (citizen or non citizen of India) is staying in India for minimum 182 (One hundred eighty two) days in a previous financial year

and

(b) Also the Individual was resident in India for maximum in 1(one) previous financial year out of 10 (ten) preceding to the previous financial year.

or

(c) Also the Individual has stayed in India for maximum 729 (Seven Hundred Twenty Nine) days during 7 (seven) preceding to the previous financial year is called an Not ordinary resident in India.

(d) Now a citizen of India or a person of Indian origin having total income other than income from foreign sources is exceeding 15 Lac during previous financial year.

and

(da) He is staying in India for minimum 120 (one hundred twenty) day and maximum 182 (one hundred eighty two) days

(e) Hence only Indian incomes of the not ordinary resident in India will be taxable in India.

Investment by Non Resident Indians (NRIs) in India

2. Applicability of the Provisions of Income Tax for a Financial year

(i) Incomes Earned Outside India by a NRI

(a) All 100% Global incomes are taxable in India where a NRI is resident of India in a financial year

(b) Only 100% Indian incomes as accrued or arises, deemed to accrued or arises in India is taxable in India where NRI is not resident of India in a financial year

(ii) Incomes Deemed to be earned in India by a NRI

(a) Where salary is received in India for the services not provided in India

(b) Where salary is received in India or outside India for the services provided in India

(c) Where Incomes are against properties as situated/located in India

(d) Where Capital gain is against the transfer of a asset situated /located in India

(e) Where Interest income is earned on a fixed deposit or on a saving account as maintained with a bank in India is treated income earned or accrued in India.

(f) Where Interest income is earned on NRO account as maintained in India.

(iii) Exempted Interest Incomes in India

  • Interest incomes on NRE or/and on FCNR accounts are not taxable in India.

(iv) Filing of the return of Incomes in India

  • NRIs are required to submit their returns of the incomes where total gross incomes are exceeding Rs 2,50,000 (two lakhs fifty thousands) during a financial year

(v) Last Date for filing of the Income Tax Return in India

(a) 31st July for non-audit cases

(b) 30th September for audit cases

(vi) Liability to pay Advance Tax in India

(a) Advance tax in India is to be paid where income tax liability is exceeding Rs.10(ten) thousands over and above the TDS in a financial

(b) Penal interests under section 234B and 234C are to be paid for the default is made in payment of the advance tax liability

3. Taxability of the Incomes for a NRI

(i) Incomes under the Head Salary

(a) Incomes under the head salary of a NRI is treated as earned in India where services are rendered in India

(b) Incomes under the head salary of a NRI is treated as earned in India where salary is received in India by himself/herself or by someone else on behalf of himself/herself

(c) Incomes from salary of a NRI is treated as earned in India where employer is of India and also NRI is citizen of India beside that services are rendered Outside India

(d) Incomes under the head salary of a NRI is treated exempted where paid to a Diplomat or a Ambassador etc. who is working in India in embassy of a foreign country

(e) Tax on the incomes under the head salary is to be paid in accordance to the slab rate as applicable to a NRI in India.

(ii) Incomes under the Head House Property

(a) Incomes under the head house property of a NRI are treated as earned in India where property is located / situated in India.

(b) Standard deduction for maintenance of the property@ 30% is available to a NRI against the incomes under the head House property

(c) NRI is permitted to take the following deductions out of incomes under the head house property in India

(ca)Property Taxes

(cb) Interest paid on the loan as taken against rented house property

(d) Tax on the incomes under the head house property is to be paid in accordance the slab rate as applicable to a resident in India.

(e) Incomes under the head house property of a NRI is treated as earned in India beside that rent payment is directly credited to his bank account as maintained outside India

(f) NRI is permitted to claim a deduction of maximum Rs 2(two) lacs against interest paid/payable on loan taken on the property

(g) NRI is permitted to claim of maximum 2(two) self-occupied properties without offering as notional rent incomes

(h) NRI is required to offer notional rent incomes where property is not rented out for 12 (twelve)months

(i) NRI is permitted to claim 11 (eleven) months as vacancy allowance out of the notional rent incomes where property is rented out for 1(one) months only

(iii) Incomes under the Head Business or Profession

  • Incomes under the head business or profession of a NRI is treated as earned in India where business or profession is controlled or set up in India

(iv) Incomes under the Head Capital Gains

(a) Incomes under the head capital gains against transfer of a capital asset of a NRI is treated as earned in India where house property is located in India

(b) Incomes under the head capital gains against transfer of the shares and securities is treated as earned in India where shares and securities are issued by an Indian company

(c) Buyer of the house property is required to withhold (deduct) tax @ 20% + education cess @4% + surcharge @15% from the payment as being made to a NRI (commencing from April 01, 2022)

(d) NRI is permitted to claim the following deductions

(da) Exemption against the investments in a house property under the section 54 of the Income Tax Act, 1961

(db) Exemption against the investments in capital gain bonds under the section 54EC of the Income Tax Act, 1961 as maximum Rs 50 (fifty) lacs per financial year. This exemption is now not available for the capital gains other than property cases

(e) NRI is required to deposit the amount of capital gains in a specified bank or institution in India under the head capital gain account scheme where NRI is unable to invest the amount of capital gains in new eligible property or unable to deposit in capital gain bonds till March 31

(f) Now NRI is permitted to claim long term capital gains on sales of the capital assets where holding period is 2(two) years where earlier was permitted against holding period of 3 (three) years.

(g) NRI is required to deposit in capital gain bonds with in 6(six) months from the date of sale/transfer of the house property under the section 54EC

(h) NRI is required to invest in a new property

(ha) with in 1(one) year before the sale/transfer or

(hb) with in 2(two) years after the sale /transfer or

(hc) with in 3(three) years after the sale/transfer in construction a new property.

(i) NRI is required to deduct a TDS @ 1% on the payments to be made against purchase of a property from a resident of India where purchase amount is minimum of Rs 50(fifty) Lacs.

(j) (ja) NRI is required to allow to the purchaser of property to deduct TDS @ 20% plus Education cess and surcharges as applicable against long term capital gains and TDS @ 30% plus education cess and surcharges as applicable against short term capital gains.

(jb) Moreover TDS @ 20% or 30% is applicable without applicability of any limit of Rs 50(fifty) Lacs

(k) NRI is required to hold the capital gain bonds for minimum period of 5(five) years

(v) Income Under the head Other Source

(a) Interest incomes from fixed deposits and from saving accounts as maintained in India will be treated as earned in India like on NRO account

(b) Interest incomes on NRE and FCNR accounts are exempted in India

(c) Interest incomes on the NRI and FCNR accounts are taxable Outside India

4. Special Tax Provisions for a NRI

(i) Exemption against filing of the Income tax Return in India

  • NRI is exempted for filing of the Income Tax Return where

(a) Investing in specified Indian assets only

(b) Already paid Income Tax @ 20% through TDS mode on Long Term Capital Gains (LTGS) of such specified Indian assets

(c) No other incomes is taxable in India except abovementioned incomes on specified Indian assets during the financial year under consideration

(ii) Allowable deductions against the payments and investments in India

(a) Allowable deduction up to Rs 1. 5 Lac per financial year under the Section 80C

(aa) Life insurance premium paid on life of himself/herself, spouse and children a maximum @10% of sum insured/assured

(ab) Children tuition fee paid

(ac) Principal repayments on loan for the purchase of a house property

(ad) Investments in the unit linked insurance plan (ULIPS)

(ae) Investments in the equity linked saving scheme (ELSS)

(af) 5(five) years fixed deposits in a schedule bank in India

(b) Allowable deduction up to Rs. 25000 per financial year under the Section 80D

(ba) Mediclaim Insurance premium paid on the life of himself, spouse and dependent children

(bb) Mediclaim insurance premium paid on the life of parents up to Rs 50,000 additionally

(c) Allowable deduction against interest paid on education loan under the section 80E

(ca) NRI is permitted to claim a deduction against interest paid on the education loan for higher education for himself, spouse or children

(cb) Deduction is not available against repayment of principal loan amount

(cc) Deduction is available for a maximum period of 8 (eight) years or till interest is paid whichever is earlier

(d) Allowable deduction against donations paid for the social causes under the section 80G

  • NRI is permitted to claim a deduction against payments made for donation for the social causes in India

(e) Allowable deduction against incomes from interest on saving bank account under the section 80TTA

(ea) NRI is permitted to claim a deduction on the interest incomes on saving bank account maximum of Rs. 10(ten) thousands per financial year

(eb) Henceforth this deduction is not permitted against the interest incomes on the time deposits (fixed term deposits)

(f) Not allowable deduction against the income on specified investments by NRI under the section 80C

(fa) NRI is not permitted to deposit in new PPF account. However NRI is permitted to continue to deposit in existing account as opened before becoming NRI till original maturity period of 15 (fifteen) years. Henceforth not permitted beyond 15 years

(fb) NRI is not permitted to deposit in certain schemes after becoming NRI like

(fba) Investments in NSCs

(fbb)Deposit in Post office 5 year deposit scheme

(fbc) Senior citizen saving scheme etc.

(g) Not allowable deduction against payment for RAJIV Gandhi Equity Savings Scheme (RGESS) under the Section 80CGS

  • NRI is not permitted to claim a deduction where contribution is made for RGESS

(h) Not allowable deduction for maintenance and medical treatment under the Section 80DD, 80DDB and 80U

  • NRI is not permitted to claim a deduction where expenses are made for maintenance and medical treatments of dependent and himself

5. Important Miscellaneous Clarifications on the Tax Provisions for a NRI

(i) DTAA (Double Taxation Avoidance Agreements) Benefits for a NRI

  • NRI is permitted to claim the benefits of DTAA where can pay tax in India and can claim tax credit in own resident country

(ii) TDS (Tax Deducted at Source) for a NRI

(a) Payer of the specified incomes is required to deduct /withhold an amount of TDS

(b) Specified incomes to include the followings:-

(ba) Rent

(bb) Fee for professional or technical services etc.

(c) Payer is also required to submit form 15CA and 15CB before making the payments

(iii) Applicability of Inheritance tax (Estate Duty) on the assets in India

(a) NRI is also permitted to avail the exemption on inheritance tax (Estate duty) on the assets in India as this exemption is available to a resident in India

(b) However a NRI is to pay capital gain tax at the time of sale of the inherited assets

(C) Investments in Shares and Securities

  • Introduction on the Concept of Investments in Shares and Securities by the NRIs

(i) NRIs are permitted to invest directly in proprietary and/or partnership concerns in India on nonrepatriation basis only

(ii) NRIs are also permitted to invest in the Initial Public Officer (IPO) for issue of shares and convertible debentures of the Indian Companies

(iii) NRIs are also permitted to invest under the Foreign Portfolio Investments (FPIs) through secondary market like

(a) Stock Exchange in India

(b) Purchases direct from shareholders without involving of a stock Exchange

(iv) NRIs are permitted to set up the new companies accordingly to subscribe to the Memorandum and Articles of Association (M&A) of the new companies under the head automatic approval route

(v) However the NRIs are not permitted to invest in the companies where activities relating to agricultural and plantation are being carried on

(vi) (a) NRIs are permitted to invest on the repatriation and non-repatriation basis (both)except to invest in proprietary and partnership concerns where repatriations are not permitted

(b) However NRIs are permitted to repatriate through NRO accounts where a maximum USD 1(one) million per financial year is permitted to repatriate Outside India

(vii)NRIs are required to make payments for the investments in certain modes only like

(a) Direct inward remittance from outside India

(b) Debit to NRO account

(c) Withdrawal out of NRE or FCNR account

(CA) Investments in Equity shares and Securities on Non-Repatriation basis

1. Investments in the Partnership or Proprietorship Concerns on Non-Repatriation basis

(i) NRIs are permitted to invest in the partnership or proprietorship concern on non-repatriation basis under the automatic route where RBI has already granted general permission to the NRIs to invest in the concerns those are engaged in the industrial, trading or commercial activities

(ii) NRIs are required to invest through normal banking channel or transfer of funds from their accounts as maintained in India like

(a) NRO

(b) NRE

(c) FCNR accounts

(iii) NRIs are not permitted to carry the following activities

(a) Agricultural Activities

(b) Plantation Activities

(c) Real Estate business like trading in land and immovable properties

(iv)(a) Indian partnership or proprietorship concerns are not required to obtain any prior permission from the RBI for receiving of the capital contributions from the NRIs where the conditions as specified in the RBI notification for this purpose are satisfied.

(c) However the Indian concerns are required to submit the declarations in form DIN to the RBI with in 90 (ninety) days from the date of receipt of an investment

(v) (a) Indian concerns are permitted to transfer the profits in NRO account as maintained in India

(c) NRIs are permitted to remit a maximum USD 1(one) million per financial year

2. Investments in Initial Public Officers (IPOs) of Equity Shares or Convertible Debentures (CDs) of Indian Companies on Non-Repatriation basis

(i) NRIs are permitted to invest in the equity shares and convertible debentures of the Indian companies on nonrepatriation basis under automatic route where the Indian companies are not engaged in

(a) Agricultural /plantation activities

(b) Real estate business

(c ) Trading in TDRs

(d) Chit fund Company

(e) Nidhi Company

(ii) NRIs are required to make the payments through normal banking channel like

(a) Direct inward remittance from outside India or

(b) Debit to NRE, FCNR or NRO account as maintained in India

(iii) Indian companies are required to file the declarations in form DIN within 90(ninety) days from the date of receipt of the investments on non-repatriation basis

(iv) NRIs are permitted to take the credit in theirs NRO accounts against dividend and/or interest on equity shares and/or convertible debentures respectively

3. Investments in Non-Convertible Debentures (NCDs) of the Indian Companies on Non-Repatriation basis

(i) NRIs are permitted to invest in the NCDs on non-repatriation basis under the automatic route

(ii) NRIs are required to make the payments through normal banking channel like

(a) Direct Inward remittance from outside India or

(b) Debit to NRE, FCNR or NRO accounts as maintained in India

(iii) Rate of interest on the NCDs is not to exceed the prime lending rate (PLR) of State Bank of India (SBI) plus 300 basis points (3%)

(iv) Minimum period for redemption is required 3(three) years for the NCDs

(v) Indian companies should not be engaged in the followings

(a) Agricultural/plantation activities

(b) Real estate business

(c) Trading in TDRs

(d) Nidhi Company

(e) Chit fund Company

(vi) Indian companies are required to submit the reports to the RBI with in 30(thirty) days from the date of receipts of remittance for the NCDs

4. Investments in the Equity shares of Indian companies through Private arrangements on Non-Repatriation basis

(i) NRIs are required the prior approvals permissions from the RBI for purchasing of shares of the an Indian companies through private arrangement

(ii) NRIs are required to submit the applications in to the RBI form FNC-7alongwith undertaking for non-repatriation

5. Investments in the Domestic Public Sector and Private Sector Mutual Funds on the Non-repatriation basis

(i) NRIs are permitted to invest in the Mutual Funds as being owned and managed by the domestic public sector and private sector Mutual Funds on the nonrepatriation basis

(ii) NRIs are not required to submit the applications for approval from the RBI for investing in such mutual funds

(iii) However issuing mutual funds are required to submit the application in Form ISD for issuing the units of mutual funds

6. Investments in Money Market Mutual Funds (MMMFs) on Non-Repatriation basis

(i) NRIs are permitted to invest in the MMMFs as floated by the followings

(a) Commercial banks

(b) Public Sector Financial Institutions

(c) Private Sector Financial Institutions

(ii) These banks or financial institutions are required to submit the application in Form ISD for obtaining the authorization from the RBI for floating the MMMFs

(iii) NRIs are not required to obtain the separate permissions from the RBI for investing in the MMMFs

7. Acceptance of Deposits by the Partnership firms and Companies on the Non-repatriation basis

(i) NRIs are permitted to deposits the funds with Firms and companies on nonrepatriation basis

(ii) Prior approval is required by the depositor or by deposit accepting firm or company from the RBI

(iii)(a) However deposit accepting firms or companies is required to obtain prior approval from the RBI for accepting the deposits from NRIs under Public deposit scheme

(b) Henceforth NRIs are not required to obtain prior approvals from the RBI for accepting deposits under public deposit scheme where deposit accepting firms or companies are mandatory required to obtain prior approval from the RBI

(CB) Investments in Equity Shares and Securities on Repatriation basis

  • Introduction on Investments by the NRIs in Equity Shares and Bonds on Repatriation basis

(i) NRIs are permitted to invest in the equity shares and bonds of the Indian companies on repatriation basis

(ii) Henceforth NRIs are permitted for repatriation Outside India out of the followings:-

(a) Capital already invested in the Indian companies

(b) Dividends/ incomes earned on the investments in the Indian companies

(iii) NRIs are required to invest on repatriation basis in foreign exchange only like

(a) Direct Inward remittance from Outside India or

(b) Debit to NRO, NRE or FCNR account as maintained in India

(iv) NRIs are permitted to invest in the various kinds of Foreign Direct Investments Schemes which are commonly known as Foreign Direct Investments (FDIs) in India

(v) FDIs are permitted for a NRI in different schemes like

(a) 24% FDIs scheme

(b) 40% FDIs scheme

(c) 100% FDIs scheme

(vi) NRIs are also permitted to invest in Domestic mutual funds as floated by the public and private sector institutions or by the companies like UTI and Reliance respectively

(vii) NRIs are also permitted to invest in bonds as issued by the public sector under-takings(PSUs)

(viii) (a) Equity shares and bonds issuing companies are required to obtain the necessary permissions from RBI if needed in the case of approval route

(c) Henceforth NRIs are not required to obtain any separate approval where issuing company has already been obtained an approval from RBI under approval route in case an automatic route is not permitted for the issue of shares and/or bonds

1. Investments in Initial Public Offers (IPOs) of the Indian Companies under 24% schemes

(i) NRIs are permitted to subscribe up to 24% of the IPOs of equity shares or convertible debentures of an existing or new public companies who are already engaged or proposed to be engaged in the following activities

(a) Finance

(b) Hire purchase

(c) Leasing

(d) Trading

(e) Other services

(ii) NRIs are not permitted to subscribe the IPO of a company who is engaged in agricultural/ plantation activities and real estate activities

(iii) An Indian company issuing IPO is required to satisfy the conditions as laid down by RBI for issue of the equity shares or convertible debentures otherwise Indian company is required to obtain a specific approval from RBI before issuing the IPO

(iv) An Indian company is required to submit a form ISD within 30 days from the date of issue of the IPO

(v) NRIs are not required to obtain any specific approval from RBI where Indian company has already satisfied the specified conditions of the RBI otherwise obtained the specific approval from the RBI

2. Investments in IPOs of the Indian Companies under 40% Scheme

(i) NRIs are permitted to subscribe up to 40% in the following IPOs

(a) Equity shares

(b) Preference shares

(c) Convertible debentures of new or existing company on repatriation basis after making payments of Indian Income Tax by the NRIs

(ii) Indian companies should not be already listed at any stock exchange and also should not be engaged in manufacturing activities as specified in Annexure-III to the statement of Industrial Policy 1991 of Govt. of India

(iii) Indian companies are required to take the specific approvals from the RBI for an IPO under this scheme for the following entities

(a) Industrial and the manufacturing units

(b) 3, 4 or 5 star category of the Hotels

(c) Hospital and the Diagnostic centers

(d) Shipping Companies

(e) Development of the computer softwares

(f) Oil Exploration Services

(iv) NRIs are not required to take the specific approvals from RBI where the Indian companies have already been obtained the approvals

3. Investments in the IPOs of Indian Priority Sector Industrial Companies under 100% Scheme

(i) NRIs are permitted to subscribe up to 100% on repatriation basis in priority sector industrial companies which are primarily engaged in export trading activities

(ii) Indian companies are permitted to issue the IPOs without approval from the RBI

(iii) Indian Companies are required to submit the form ISD within 30 days from the date of issue of shares

(iv) This scheme is permitting for opening a new industry or expansion /diversification of the existing industrial undertakings

4. Investments in the Housing and Real Estate Development Projects

(i) NRIs are permitted to invest upto 100% in IPOs of the equity shares or convertible debentures of the Indian companies in the following sectors

(a) Development of the plots and also construction of built up residential premises including business centers and offices

(b) Development of a township

(c) Development of a City and region level unban infrastructure facilities like roads and bridges

(d) Manufacturing of the building materials

(e) Financing of the housing Development projects

Repatriation of original investment is permitted by the RBI after a lock in period of 3(three) years from the date of issue of equity shares or convertible debentures.

5. Investments in the Air Taxi Operations

(i) NRIs are permitted to setup an Indian Company with 100% FDIs for carrying on Air Taxi operations in according to the guidelines as issued by the Director General Aviation for Air Taxi operation in India

(ii) An Indian company is required to submit a form ISD to the RBI as application for this purpose

(iii) Repatriation of the original investment and/or dividend is permitted after expiry of 5(five) years of the operations of Air Taxi and also out of accumulated net foreign exchange earnings only.

6. Investments in the Non-Convertible Debentures (NCDs)

(i) NRIs are permitted to subscribe the NCDs as offered for the public on repatriation basis

(ii) NRIs are required to subscribe the NCDs out of direct inward remittances from Outside India or debit to NRO, NRE or FCNR account as maintained in India

(iii) NRIs are permitted to subscribe a maximum 24%, 49%, 51%, 74% or 100% of each series of NCDs which is equivalent to the ceiling as applicable for issue of the equity shares or convertible debentures to the non-residents under repatriation basis

(iv) Rate of interest on NCDs is not to exceed Prime lending rate (PLR) of State Bank of India (SBI) plus 300 basis points (3%)

(v) Minimum redemption period of NCDs is 3(three) years

(vi) Indian companies issuing the NCDs are not permitted to be engaged in the following activities

(a) Agricultural/Plantation activity

(b) Real Estate business

(c) Trading in TDRs

(d) Act as Nidhi Company

(e) Chit Fund Company

(vii) Indian Companies are required to file a report containing of prescribed informations with in 30(thirty) days from receipt of the remittances

7. Investments in the Sick Industrial Units

(i) NRIs are permitted to undertake the revival of the sick industrial units by way of either bulk investments through purchases of equity shares from the existing shareholders or subscription for new issue of the equity shares

(ii) Bulk investment is permitted by way of private placement a maximum 100% of equity share capital of the sick company on repatriation basis

(iii) Indian companies are required to pass the special resolution for new of the issues or transfer from the existing shares holders to the NRIs

(iv) Indian companies are required to be approved as sick unit under the rehabilitation program as run by the followings banks and financial institutions

(a) Public financial institution

(b) Commercial bank

(c) Consortium of the banks

(d) Board for Industrial and Financial Reconstruction (BIFR)

(vi) Indian companies are required to obtain the prior permissions from RBI through submitting the form RSU for transfer of the existing shareholding or issue of new equity shares to the NRIs

8. Investments in the Schemes of Domestic Mutual Funds

(i) NRIs are permitted to invest in the schemes of Indian Mutual Funds under the automatic route of the RBI on repatriation basis

(ii) However these schemes are to be approved by the SEBI

NRI are required to invest through normal banking channel like (a) Direct inward remittance from Outside India or (b) Debit to NRO, NRE or FCNR account as maintained in India

9. Investments in the Bonds of Public Sector Undertakings(PSUs)

(i) NRIs are permitted to subscribe in the bonds as issued by the PSUs on repatriation basis

(ii) PSUs are required to obtain the necessary approvals from the Govt. of India (GOI) for raising of the funds through issue of bonds

10. Investments in Equity shares of the PSUs under Disinvestment program of the Government of India (GOI)

(i) NRIs are permitted to purchase the equity shares on repatriation basis under the disinvestment program of the GOI

(ii) Single NRI is not permitted to purchase more than 1(one) percent of the equity shares of a PSU

(iii) NRIs are required to invest through transfer of funds under the normal banking channel like

(a) Direct inward remittance from Outside India

(b) Debit to NRO, NRE or FCNR account as maintained in India

(iv) NRIs are required to submit the applications alongwith deposit of the bid money or purchase consideration at the designated branch of the SBI

11. Investments through Fixed Deposits (FDs) in the Indian Companies

(i) NRIs are permitted to invest in the FDs of the Public limited companies and PSUs on repatriation basis for a minimum period of 3(three) years

(ii) Indian companies are required to submit the applications with the RBI for approval to accept FDs from the NRIs

(iii) NRIs are not required to obtain separate permission from the RBI where Indian companies have already been obtain the approvals from the RBI

(CC) Foreign Portfolio Investments (FPIs)

1. General Regulations for the FPIs by NRIs

(i) NRIs are required to obtain prior permission from RBI for acquiring of

(a) Equity shares

(b) Convertible Debentures

(c) Units of domestics mutual funds

(d) Non-Convertible Debentures (NCDs)

(ii) These investments are permitted by the RBI on repatriation and non-repatriation basis (both) through a Stock Exchange in India

(iii) RBI is permitting a prior approval for an initial period of 5(five) years for the investments under the head FPIs which is further renewable for another 5(five) years

(iv) NRIs are permitted to invest through sending of NSNR

(a) Direct Inward remittance from Outside India or

(b) Debit to NRE, FCNR, NRO or NRSR account as maintained in India

(v) NRIs are permitted to invest in the shares and debentures under the FPIs scheme at prevailing market price at stock exchange in India

2. Limit for the FPIs by NRIs

(i) NRIs cumulatively are permitted for investments in equity shares and convertible debentures a maximum 10% of total paidup equity capital of the company and 10% of total convertible debentures of each series on repatriation and nonpatriation basis (both) as permitted by the RBI

(ii) A NRI singly is permitted for the investments in equity shares and/or preference shares and convertible debentures a maximum 5% of the total paid up equity/preference capital and 5% of the convertible debentures issued to a single NRI as FPIs investor

3. Miscellaneous Regulations for the FPIs by NRIs

(i) RBI is required to issue a code number to each NRI as FPI investor for quoting in all future correspondence to the RBI

(ii) NRIs are not permitted to invest under FPIs through private placement or off market transaction except at stock exchange

(iii) NRIs are permitted to authorize an Indian resident or broker of stock exchange as their agents in India

(iv) NRIs are required to route the all transactions through a designated branch of a authorized dealer Category I bank on repatriation or non-repatriation basis

(v) NRIs are required to apply to the RBI for prior approval/permission on repatriation or non- repatriation basis in form NRI through a designated branch of an authorized dealer Category I bank

(vi) NRIs are permitted to invest under FPIs in

(a) Securities of the central or State Government and

(b) Treasury Bills of the Govt. of India

(vii) NRIs are not permitted to invest in the bearer securities

(viii)(a) NRIs are required to take the deliveries for purchase of shares and debentures and to give the deliveries for the sale

(b) NRIs are not permitted for non-delivery purchase and sale of the shares and debentures like speculative tradings

(ix) NRIs are permitted to register the shares and debentures in name of the followings

(a) Himself

(b) Authorized dealer bank

(c) Nominee of the authorized dealer bank

(x) Investments in the Joint Names

(a) NRIs are permitted to purchase the shares and debentures in the joint names with other NRIs with prior permission of the RBI

(b) First holder of the investments will be treated single investor where investments are made on repatriation or non-repatriation basis (both)

(c) Henceforth second and third holder will be eligible for separate investment upto 5% per investor in the same company

(d) RBI is also permitting for the joint investments with a resident of India

(e) NRIs are not permitted for remitting Outside India where they have inherited the shares and debentures in India. However NRIs are permitted to remit through NRO account a maximum USD 1(one) million per financial

(D) Investments in Govt. Securities, National Plan or National Saving Certificates (NSCs) and units of UTI

1. Investments in the Govt. Securities, National Plan & National Savings Certificates (NSCs)

(i) NRIs are permitted to invest freely in securities of the central or State Govt., National Plan certificates and National saving certificates (NSCs) through the following modes:-

(a) Direct Inward remittance from the Outside India

(b) Debit to NRO, NRE or FCNR accounts as maintained in India

(ii) (a) Authorized dealers are permitted to invest on behalf the NRIs out of the funds as available in NRO account where direct repatriation is not permitted for the investments amount and income earned there on both

(b) However NRIs are permitted to remit through NRO account a maximum USD 1(one) million per financial year

2. Investments in the Units of UTI

(i) NRIs are permitted to invest in the units of UTI through

(a) Direct Inward remittance from Outside India or

(b) Debit to NRO, NRE or FCNR account as maintained in India

(ii) NRIs are permitted to remit through NRO account a maximum USD 1(one) million per financial year against the investments amount and income earned thereon (both)

(iii) RBI has permitted an automatic route mode for the investments in units of UTI through granting of a general permission for purchasing of units directly from UTI

(E) Summary on Privileges and Non-Privileges

1. Privileges for the NRIs

(i) NRIs are permitted to have most of the privileges on non-repatriation and repatriation basis as are available for the residents of India like

(a) Investments in the residential and commercial properties for the Investments purpose without any restriction on numbers of the properties

(b) Allowances and deductions out of the Income Tax Liabilities

(c) Investments in the companies’ shares and securities and LLPs

(d) Investments in the Govt. of India securities.

(ii) NRIs are permitted to obtain in an overseas citizen of India (OCI) card to avoid and obtaining of separate Visa for visiting the India.

(iii) NRIs are permitted to participate in most of activities as available for the Residents of India.

(iv) NRIs are permitted to avail an exemption from the liability of Income Tax on the interest incomes on NRE & FCNR accounts as maintained in India.

2. Non-Privileges for the NRIs

(i) Tax deducted at source (TDS) provisions is comparatively tedious for the NRIs in comparative for the residents of India.

(ii) NRIs are required to pass through the tedious process of DTAA to avoid double taxation on his incomes earned in India and also same is to be taxed again in his country of the residence.

(iii) NRIs are not permitted to buy any agricultural and plantation properties and also not permitted to engage in any business relating to agricultural and plantation.

(iv) NRIs are required to pay an income tax on the incomes earned on NRE and FCNR accounts in their country of residence outside India.

*****

Disclaimer : The contents of this presentation are solely for informational purpose. Neither this presentation nor the information contained herein constitutes a contract or will form the basis of a contract. The material contained in this presentation does not constitute/substitute professional advice that may be required before acting on any matter. While every care has been taken in the preparation of this presentation to ensure its accuracy at the time of publication, Satish Agarwal assumes no responsibility for any errors which despite all precautions, may be found herein. In no event shall we be liable for direct or indirect or consequential damages, if any, arising out of or in any way connected with the use of this presentation or the information contained herein.

(Author can be reached at email address [email protected] or on Mobile No. 9811081957)

(Republished with Amendments)

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