FAQ RELATING TO RETURNING INDIANS

1. What happens when NRI/PIO returns to India?

Ans. When an NRI/PIO returns to India

He continues holding any assets in foreign currency (foreign securities and properties situated outside India), if the same were acquired while being an NRI or a PIO.

Balances will continue to remain in NRI accounts in India.

Balances held in NRO account will have to be converted to resident status.

Balances lying in the NRE/FCNR Term Deposit may be continued till maturity at the original contracted interest rates or can be converted into Resident Foreign Currency Account (RFC), at the option of the account holder.

Any proceeds of assets held outside India at the time of return as well as salary/pension or other dues received subsequently can also be credited to these deposits.

All the above funds are free from all restrictions on usage

2. Can NRI/PIO returning to India hold assets abroad?

Ans. Under section 6(4) of FEMA, a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.

There is no need of any approval from RBI even after the NRI becomes, after his return, a person resident in India.

This general permission will not apply in respect of any asset received after becoming a resident by way of gift or inheritance from abroad. Similarly, the benefit is not available on earnings from employment secured subsequent to the return. If the ex-NRI wishes to retain such assets abroad or liquidate them and deposit the money in an RFC account, he has to apply for permission from RBI.

3. What will be status of the accounts of an NRI on his/her return to India?

Ans. A returning Indian’s NRE/FCNR accounts will be designated as Resident account. However, they will continue to run till maturity at the contracted rate of interest.

4. Is NRI subject to tax after returning to India and can he maintain a Foreign Currency Account?

Ans. Yes, earnings of NRIs are subject to tax laws of India and the returning NRI can get his NRE, FCNR accounts converted into RFC accounts.

5. Who can open RFC account?

Ans. A returning NRI who was resident outside India earlier and is returning now for residing permanently is permitted to open RFC account.

6. What are the benefits of RFC accounts?

Ans. The benefits of RFC accounts are:

a. In case of conversion from FCNR accounts, there is no exchange loss. Balance in RFC account can be used for local payments and can be remitted abroad for all bonafide purposes.

b. In case the NRI was residing abroad continuously for a period of 9 years out of previous 10 years, then no tax on interest earned of RFC accounts for next 2 years. In the event of the returning Indian regarding his NRI status the balances in his RFC account can be reconverted into NRE/FCNR (B) deposits.

7. Can I have multiple NRE and NRO accounts with designated branches of different authorized banks for the purpose of investing in Indian equity markets under the Portfolio Investment Scheme?

Ans. No. All investments in Indian equity markets under the Portfolio Investment Scheme must be routed through only one dedicated NRE and NRO account opened with any one of the designated branch of authorised banks. Although you can have multiple NRO and NRE account with different banks/branches but Investments under Portfolio Investment Scheme cannot be made through more than one NRE or NRO account maintained with the designated bank branch.

8. Do investments made through subscription to Initial Public Offerings (IPOs) or Private placements also come under the preview of Portfolio Investment Scheme?

Ans. No. Investments made by NRIs through subscription to Initial Public Offerings (IPOs) or Private Placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBI’s regulations with regard to Foreign Direct Investments.

9. Do NRIs need any permission of RBI to subscribe to Initial Public Offerings (IPOs) or Private placements of equity shares/convertible debentures of existing or new companies?

Ans. No. NRIs do not require any permission to invest through Initial Public Offerings (IPOs) or Private placements. In such cases, the Issuing Company should comply with all necessary regulations for issuing securities to a person resident outside India.

10. Do NRIs need any approval from Reserve Bank of India for selling of the securities acquired through IPOs/Private Placement?

Ans. No. NRIs can sell such shares/debentures on the Exchange without any approval. However, while seeking the credit of sale proceeds to NRE/NRO account, the bank should be provided with the details regarding date of allotment and cost of acquisition to calculate the taxes, if any.

11. Do NRIs need to route the sale of securities acquired through IPO/Private Placement through the designated bank branch for Portfolio Investment Scheme, if any?

Ans. No. The shares/convertible debentures acquired under IPO cannot be routed through designated bank branch, as this is not covered by Portfolio Investment Scheme.

12. Is there any limit for purchase of shares/convertible debentures by NRIs under the Portfolio Investment Scheme?

Ans. Yes. An NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the company (equity as well as preference capital) or the aggregate paid up value of each series of convertible debentures as the case may be. For the purpose of this ceiling, investment under the Portfolio Investment Scheme on repatriation as well as non-repatriation basis will be clubbed together.

Convertible debentures acquired through Private Placement are excluded for the purpose of above limits.

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