NRI Account

8/3/2019 NRI Account

http://slidepdf.com/reader/full/nri-account 1/49

1

Foreign Exchange Management-

an overview of Current accountTransactions



2

What is new in FEMA regime ?

Preamble itself is changedAll current account transactions are freeCapital account transactions are deregulatedDefinition of NRI changed from purpose toresidenceFrom Criminal law to Civil LawLess punishment – No ImprisonmentCompounding powers to RBILess stringent & more business friendly



3

Forex Management – Shift in focus

1991-Downward correction of exchange rate( Devaluation)1992- LERMS (Liberalised Exchange

Rate Management System)1993- Modified LERMS1994 – Current Account Convertibility - declared1997 – Capital Account Convertibility – debatestarted2000 – FEMA 1999 replaced FERA 1973 w.e.f.1.6.2000

IMF loans repaid2003 - Money Laundering Act, 1999 passed

- IMF designates India as Creditor under itsFinancial Transaction Plan (FTP)

2004 – Reserves exceed external debt

2006 – Capital Account Convertibility – further steps



4

Foreign Exchange Market inIndia

Regulator: Reserve Bank of India

Regulation: Foreign Exchange Management Act, 1999

Authorised Dealers, Money changers

Buyers and sellers: exporters, importers, individuals,Corporates, FIIs, Non-Residents, NRIs etc.

Tier-I

Tier - II

Tier-III



5

Forex Activities in India – Facilitators

Ministry of FinanceMinistry of Commerce , DGFTDirectorate of EnforcementCustomsExport Promotion Councils – FIEOExport Inspection UnitsAuthorised PersonsFEDAIEXIM BankECGCRBI



6

Current Account Capital Account

Trade Invisibles

Exports Imports

TourTravelRemittanceGiftProfit/Div/int

FDI Portfolio

Foreign IndianSource Source

(FII) (GDR/ADR)

Loan

(Govt/

Pvt(ECB)

Fcy A/RI & N

FOREIGN EXCHANGE TRANSACTIONS



7

Forex – the Concept ( contd. ) –

Current & Capital Account Current account transaction – All transactionsundertaken by a resident that do not alter his assets orliabilities outside India are current account transactions.affects cash position of an entity – Trade-related

remittances & miscellaneous remittances fullyconvertible - fully delegated to ADsCapital account transaction – affects asset & liability position of an entity - borrowing, lending& investment – FDI , FII, ECBs , NRI deposits ,Overseas Investments – expanding convertibility



8

General

In terms of the Rules -Foreign ExchangeManagement (Current Account Transactions)Rules, 2000 (Annex I)- drawal of exchange forcertain categories of transactions as listed inSchedule I - expressly prohibitedSchedule II - permitted by the ADs if approvalfrom the Ministry/Dept of GoI is securedSchedule III- prior approval of the RBI requiredfor remittance exceeding limits.



9

Schedule IRemittance out of lottery winningsRemittance of income from racing/riding or anyother hobby etcRemittance for purchase of lottery tickets,

banned/ proscribed magazines, football pools,sweepstakes etcPayment of commission on exports made towardsinvestment in JV / WOS abroad of Indiancompanies.

Payment related to callback services of telephones



10

Schedule I (contd…)

Remittance of dividend by any company wheredividend balancing is applicableRemittance of interest income on funds held inNon – Resident Special Rupee ( Account )Scheme.Payment of commission on exports under Rupeestate credit Route, except commission upto 10%of invoice value of exports of tea and tobaco.



11

Schedule IIRemittances which need prior approval from thedealing ministry / department of GoI andpermitted up to the amounts as mentioned in theapproval letter –

Cultural tours , Advertisement in foreign printmedia , Freight of vessel charted by a PSU ,Payment for import by a Govt, dept. or PSU onc.i.f. basis, Multi modal transport operatorsmaking remittance to their agents abroad ,hiring of transponders by TV channels , ISPs ,Remittances under technical collaborationagreements etc.



12

Schedule III

Transactions needing RBI approval foramounts exceeding delegated powers of ADs

– travel , gift , donation , employment ,emigration , maintenance , medicalexpenses exceeding the estimates , higherstudies exceeding the estimates,commission to agents for sale of flats etc.in India , consultancy fees , pre-incorporation expenses.



13

Limits upto which ADs can releaseforeign Exchange

Sl no Transaction Limit in US $

1 Private visit USD 10,000 per financial year

2 Business travel,Conference,Training

USD 25,000 per trip

3 Medicaltreatment

USD 100,000 or its equivalent on self declarationbasis

4 Higher studies USD1,00,000 per academic year



14

Limits upto which ADs can releaseforeign Exchange

Sl.no.

Transaction Limit

5

Employment Upto USD 1,00,000

6

Emigration Upto USD 1,00,000

7

Gift/donation USD 5,000 per remitter/donor per annum.

8 Maintenance of closerelatives abroad –

USD 1,00,000 per recipient

9 Cultural as sanctioned by GoI

10 LRS USD 2,00,000 per financial year



15

Liberalised Remittance Scheme ofUSD 200000

Facility extended to all resident individualsfreely remit upto USD 200,000 per financial yearfor any permissible current or capital accounttransaction or a combination of both.Not available for purposes specifically prohibited(Sch I) or GOI (Sch II) of FEMA(Current AccountTransactions) Rules, 2000.free to acquire and hold immovable property,shares or any other asset outside India withoutprior approval of RBI using the scheme.



16

Liberalised Remittance Scheme ofUSD 200000

Free to open, hold and maintain foreign currencyaccounts with a bank outside India forremittances under the scheme without the priorapproval of RBI.Remittance cannot be made directly or indirectlyto Bhutan, Nepal, Mauritius or Pakistan.Not available for making remittances directly orindirectly to countries identified by the FinancialAction Task Force (FATF) as ‘non -co-operativeCountries or Territories, from time to time(website site www.fatf-gafi.org ).

http://www.fatf-gafi.org/










17

Release of Foreign Currency-restrictions

No release of foreign exchange for anykind of travel to Nepal and Bhutan or forany transaction with persons resident inNepal and Bhutan.

Travellers allowed to purchase/carryforeign currency notes/coins only up toUSD 2000.

Balance amount in the form of traveller’s cheque or banker’s draft.



18

Release of foreign Currency-Restrictions

Exceptions to this are

• (a) travellers proceeding to Iraq andLibya - not exceeding USD 5000 or itsequivalent;

• (b) travellers proceeding to the IslamicRepublic of Iran, Russian Federation andother Republics of Commonwealth of Independent States - entire foreignexchange released in the form of foreigncurrency notes or coins.



19

Resident Going Abroad-Indian Currency

Residents are free to take outside India (otherthan to Nepal and Bhutan) currency notes of GOIand RBI notes up to not exceeding Rs. 5,000/ -per person.

They may take or send outside India (other thanto Nepal and Bhutan) commemorative coins notexceeding two coins each.



20

Utilisation of forex

The foreign exchange acquired has to be usedwithin 180 days of purchase.If not possible, to be surrendered to an AD

within 180 days.Can retain upto USD 2000 in currencynotes/travellers cheque.Foreign Exchange purchased for a specificpurpose is not utilized for that purpose, it couldbe utilized for any other eligible purposepermitted under the relevant regulation.



21

Residents coming to India fromabroad-

regarding Indian Currency - can bring in with him(a) up to Rs. 5,000 from any country other than Nepal or

Bhutan, and(b) any amount in denomination not exceeding Rs.100 from

Nepal or Bhutan. Foreign Exchange- can bring without any limit.

1. If the aggregate value of the foreign exchange in theform of currency notes, bank notes or TCs brought inexceeds USD 10,000/- or its equivalent and/or

2. the value of foreign currency exceeds USD 5,000/- or itsequivalent,

3. To be declared to the Customs Authorities at the Airportin the Currency Declaration Form (CDF), on arrival inIndia.



FACILITIES FOR NON-RESIDENT INDIANS(NRI)/

PERSON OF INDIAN ORIGIN(PIO)



DefinitionNon-Resident Indian (NRI):

is a person resident outside India who is a citizenof India or is a person of Indian origin .( defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000)

Person of Indian Origin (PIO) :

(defined in Regulation 2 of FEMA)is a citizen of any country other than Bangladesh orPakistan, if (a) he at any time held Indian passport; or(b) he or either of his parents or any of his grand-parents was a citizen of India by virtue of theConstitution of India or the Citizenship Act,1955 or(c) the person is a spouse of an Indian citizen or a

person referred to in sub-clause (a) or (b) above.



Relevant Circulars

Master Circular No.4 on Remittance Facilitiesfor Non-Resident Indians / Persons of Indian Origin / Foreign Nationals dated July01, 2009

Notification FEMA 13/2000-RB dated03/05/2000

Notification FEMA 21/2000-RB dated03/05/2000



Accounts and Deposits-NRI

Non-Resident (External) Rupee (NRE)Accounts

Foreign Currency (Non-Resident)Account (Banks) Scheme (FCNR(B)Account

NRO AccountsNRO/NRE/FCNR accounts can be maintainedwith ADs.Also certain co-operative banks and RRBshave been authorised.



Non Resident Accounts

• NRE /NRO A/c.- Indian Rupee

type: Savings, Current & Recurring, Fixed deposits

FCNR (B) A/c.–

Foreign currency• In designated currencies-

USD, Pound Sterling, Euro, JY, AD, CDType: Only Term Deposit

Restriction• Individuals / entities of Bangladesh /

Pakistan nationality / ownership requireprior approval of RBI.



Non Resident Accounts

NRO A/c:-• Any person resident outside India other

than those resident in Nepal/Bhutan canopen an NRO a/c. with an AD for thepurpose of putting through bonafidetranscations in Rupees.

• POA cannot open any a/c. on behalf of the

Non-resident.

• Individuals / entities of Bangladesh /Pakistan nationality / ownership requireprior approval of RBI.



Remittance Facilities for NRI/PIO Remittance of current Income

Remittance of Rent, Dividend, Pension, Interest etc.of NRI/PIO ( even those who do not maintain an NRO

account ) is freely allowed on the basis of

• appropriate certification by a CA that the amount

proposed to be remitted is eligible for remittance• and that applicable taxes have been paid/provided for.

NRI/PIO have the option to credit the current incometo their NRE (rupee) account provided

• the AD is satisfied that the credit represents currentincome of the Non resident account holder and incometax thereon has been deducted / provided for.



Remittance of assets by NRI/PIO

remit an amount upto USD 1 million perfinancial year , out of the balances held in hisNRO account/sale proceeds of assets (inclusive of assets acquired by way of inheritance orsettlement) for all bona fide purposes, to thesatisfaction of the AD bank,• on production of an undertaking by the

remitter

• certificate by CA in the formats prescribed byCBDT vide circular No.10/2002 dated October09, 2002.



Remittance of assets by NRI/PIO

remit sale proceeds immovableproperty purchased by him out of Rupee funds ( as a person in India)

without any lock in period subject to-submit documentary evidence in support of inheritance or legacy of assetsAn undertaking by the remitterCertificate by CA in the prescribed format



Restriction on Remittance Facility

The remittance facility in respect of sale proceedsof immovable property is not available to citizensof -• Pakistan, Bangladesh, Sri Lanka, China,

Afghanistan, Iran, Nepal and BhutanThe facility of remittance of sale proceeds of other financial assets is not available to citizensof • Pakistan, Bangladesh, Nepal and Bhutan



32

Exports



33

References..

Foreign Trade Policy 2005 - 2009Section 7 of FEMA, 1999Notification No. FEMA 23/2000-RB dated3.5.2000, as amended from time to time.Master Circular No.9/2009-10 dated 1.07.2009read with AP(DIR Series) Circulars issuedthereafter.GSR 381(E) dated May 3, 2000



34

Exemptions from Declaration under Regulation 4 of FEMA 23

13 items exempted under regulation 4 of FEMA 23.a few are as under;

A few such cases are as under;Trade samples of goods and publicity material supplied free of payment

Personal effects of travellers , whether accompanied or unaccompanied;

Goods or software accompanied by a declaration by theexporter that they are not more than USD 25000 in value

By way of gift of goods accompanied by a declaration by the exporter that they are not more than five lakh rupees invalue etc



35

GR Approval for Trade Fair/Exhibitions abroadFirms / Companies and other organisations take/exportgoods for exhibition outside India without the priorapproval of the Reserve Bank of India.

Unsold exhibit items may be sold outside theexhibition/trade fair in the same country or in a thirdcountry.

Such sales at discounted value are also permissible.It would also be permissible to `gift' unsold goods up to

the value of USD 5000 per exporter, per exhibition/tradefair.

AD Banks may approve GR Form of export items for displayor display-cum-sale in trade fairs/exhibitions outside Indiasubject to conditions



36

GR approval for Export of Goods

for re-imports AD banks may consider request from exporters for grantingGR approval in cases where goods are being exported forre-import after repairs / maintenance / testing / calibrationetc. subject to the condition that the exporter shall;

• produce relative Bill of Entry within one month of re-import of the exported item from India.• Where the goods being exported for testing are

destroyed during testing, AD banks may obtain acertificate issued by the testing agency that the goods

have been destroyed during testing, in lieu of Bill of Entry for import.• Ap dir 21 dated Jan 10, 2006



37

Direct dispatch of documents by theexporter

AD Banks should normally dispatch shipping documents totheir overseas branches/correspondents expeditiously.

However, they may dispatch shipping documents direct tothe consignees where:Advance payment or an irrevocable letter of credit

The exporter is a regular customer and the AD Banksis satisfied, on the basis of standing and track recordof the exporter

Status Holder Exporters' and SEZ units may bepermitted to dispatch the export documents tothe consignees outside India subject to the termsand conditions that:

The export proceeds are repatriated through the AD Banksnamed in the GR Form.The duplicate copy of the GR form is

submitted to the AD Banks for monitoring purposes, by theexporters within 21 days from the date of export.



38

Period of realisation

the prescribed period of realization andrepatriation of export proceeds has beenincreased from six months to twelve monthsfrom the date of export, subject to review afterone year.The provisions in respect of Special EconomicZone (SEZ) and exports made to warehousesestablished outside India (with the permission of

Reserve Bank) remain unchanged. • AP DIR 50 dated June 3, 2008



39

Reduction in Value ADs can allow reduction in value subject to the following

conditions:

a. The reduction does not exceed 25 per cent of invoicevalue:

b. It does not relate to export of commodities subject tofloor price stipulations

c. The exporter is not on the exporters’ caution list of

Reserve Bank, andd. The exporter is advised to surrender proportionate exportincentives availed of, if any.

e. In the case of exporters who have been in the exportbusiness for more than three years, no such ceilingsubject to the above conditions as also subject to their

track record being satisfactory, i.e., the export outstandings donot exceed 5 per cent of the average annual export realisation duringthe preceding three financial years.

E t i f ti d S lf it ff



40

Extension of time and Self write offby the exporters

all exporters have been allowed to self write off (includingreduction in invoice value) outstanding export dues andextend the period of realisation, provided;

The aggregate value of such export bills, written-off andextended, does not exceed 10 per cent of the export

proceeds due during the financial year and

such export bills are not a subject of investigation byEnforcement Directorate / Central Bureau of Investigationor any other Investigating Agencies.

Exporters dealing with more than one AD Banks can avail

of this facility through each AD bank



41

Extension of Time by AD Bank Reserve Bank of India has permitted the ADBanks to extend the period of realisation of export proceeds beyond the prescribed periodfrom the date of export, up to a period of sixmonths, at a time, irrespective of the invoicevalue of the export subject to conditions.

While considering extension beyond one yearfrom the date of export, the total outstanding of the exporter does not exceed USD one million or

10 per cent of the average export realisationsduring the preceding three financial years,whichever is higher



42

Write off by AD Banks AD Banks may accede to requests for write off

subject to the under noted conditions:• The relevant amount has remained

outstanding for one year or more;• The aggregate amount of write off allowed by

the AD does not exceed 10 per cent of thetotal export proceeds realised by theconcerned exporter during the previousfinancial year;

• Satisfactory documentary evidence isfurnished in support of the exporter havingmade all efforts to realise the dues; etc



43

Imports

Section 5 of FEMA 1999Master Circular No.8/2009-10 dated1.07.2009 read with AP(DIR Series)

Circulars issued thereafter.GOI Notification No.381 (E) of May 3,2000follow KYC guidelines (issued by DBOD)



44

Time Limit for Settlement of Import Payments

remittances against imports should becompleted not later than six months from

the date of shipment except in caseswhere amounts are withheld towardsguarantee of performance etc.



45

Time Limit for Settlement of ImportPayments…

Authorised Dealers may permit settlement of import dues delayed due to disputes,financial difficulties etc.

Interest in respect of such delayed payments may be permitted in terms of the directions/guidelines on trade credit.



46

Advance Remittance

If the amount of advance remittanceexceeds USD 100,000 or its equivalent

an unconditional, irrevocable standby Letter of Credit or a guarantee from aninternational bank of repute situated outside India



47

Advance Remittance…

the importer unable to obtain bank guarantee from overseassuppliers and the Authorised Dealer is satisfied about the track record

and bonafides of the importer the requirement of the bank guarantee/ standby

Letter of Credit may not be insisted upon for advance remittances upto USD 5,000,000

Authorised Dealers may frame their own internal guidelines to as per a suitable policy framed by the bank's Board of Directors .



48

Non Physical Imports

Where imports are made in non-physicalform,• i.e., software or data through internet /

datacom channels and drawings and designsthrough e-mail/fax,

• a certificate from a Chartered Accountant thatthe software / data / drawing/ design has beenreceived by the importer, may be obtained.



49

Receipt of import documents by the importerdirectly from overseas suppliers

Import bills and documents should be received from the banker of the supplier by the banker of the importer in India. AD bankshould not, therefore, make remittances where import bills havebeen received directly by the importers from the overseassupplier, except in the following cases:

i. Where the value of import bill does not exceed USD 300,000.ii. Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.iii. Import bills received by Status Holder Exporters as defined inthe Foreign Trade Policy, 100% Export Oriented Units / Units inFree Trade Zones, Public Sector Undertakings and LimitedCompanies.iv. Import bills received by all limited companies viz. publiclimited, deemed public limited and private limited companies.

Documents

NRI Account