NRI BANKING
loan should not be utili-ed for re#lending. Lo7n6 o"t6%e In%7
$uthori-ed dealers may allow their overseas branches+correspondents to grant fund based and+or non#fund based facilities to on !esident depositors against the security of funds held in the ! accounts and also agree to remittance of funds from India if necessary, for liquidation of debts. C57n;e o9 Re6%ent St7t"6 o9 Acco"nt Hoer
! $ccounts should be re designated as resident account or the funds held in these accounts may be transferred to the !esident 8oreign 3urrency 5!836 $ccounts 5if the account holder is eligible for maintaining !83 $ccount6 at the option of the account holder immediately upon the return of the account holder to India 5except where the account holder is on a short visit to India6. !epatriation of funds to on !esident ominee can be permitted by the authori-ed dealer or bank in the case of an account holder who is deceased. Ot5er Fe7t"re6 !
oint $ccounts # in the names of two or more on !esident individuals may be opened provided all the account holders are persons of Indian nationality or origin. hen one of the joint holder become residents, the authori-ed dealer may either delete his name or allow the account to continue as ! account or redesignate the account as resident account at the option of the account holders. Opening of these accounts by a on !esident jointly with a resident is not permissible.
$n $ccount may be opened in the name of eligible !I during his temporary visit to India. 34
NRI BANKING
Operation by :ower of $ttorney # !esident :ower of $ttorney holder can operate on the ! accounts but only for local payments to be made on behalf of the account holder. *he :ower of $ttorney 5:O$6 holder cannot credit proceeds of foreign currency notes+bank notes and travellers cheques to the ! accounts.
In cases where the account holder or a bank designated by him has been granted permission by !eserve "ank to make investments in India, the :O$ holder is permitted to operate the account to facilitate such investments. :O$ holders cannot, however, make gifts from ! accounts.
Fore%;n C"rrenc' Non!Re6%ent In%7n6 FCNR B Acco"nt E%;%#%%t' to O:en 7n M7%nt7%n FCNR A
ith the exception of persons of Indian origin from "angladesh and :akistan, all !Is and :IOs are eligible to maintain an 83! account with an authorised bank in India.
$ccounts may be opened with funds remitted from outside, existing !+ 83! accounts, etc.
!emittances should be in the designated currency.
3onversion to currency other than the designated currency also permitted at the risk and cost of the remitter.
Fe7t"re6 o9 FCNR Acco"nt
35
NRI BANKING
*he account can be opened with funds remitted from abroad, or transferred from an existing !+83! account.
83! accounts can be opened with designated currencies, which are4 0":, B1A, Aeutsche Mark, apanese Ken and the uro.
3onversion to another designated currency is permitted at a cost to the account holder.
Only term deposits can be maintained in 83! accounts, in a time range of H months to = years.
$s per !"I guidelines, banks are free to offer interest on 83! deposits below GI"O! rates, less 9' basis points for deposits between H months to one year, and GI"O! rates plus '( basis points for deposits over a year.
"anks are also free to decide on a fixed or a floating rate of interest on 83! term deposits.
Interest rates are reviewed periodically and determined by directives from the !eserve "ank 5Aepartment of "anking Operations and Aevelopment6.
*he account holder can choose the periodicity of interest, from half#yearly to annual payments. *he interest can be credited to a new 83! 5"6 account or a !+!O account.
8or permissible debits and credits, the regulations for 83! accounts are similar to the ! accounts.
8or conversion of currencies, from designated currency to rupees and vice versa, the day&s rate of conversion will apply.
8unds from the 83! account are allowed to move within the country at no
36
NRI BANKING
extra cost to the account holder.
8or loans and overdrafts against 83! accounts, the same conditions as the ! accounts apply.
In case of premature withdrawal of the 83! *erm Aeposit, a penalty is levied. Interest paid on the account is calculated at a
) below the committed rate if accounts are closed prematurely.
7owever, no interest is paid on deposits held for less than H months, and a penalty would have to be paid as per directives from the apex bank. *he !"I guidelines prevail on these terms, issued as and when required.
FCNR A
!I deposits such as the 83! can continue till the maturity date at the contracted rate of interest even after the account holder&s resident status changes to resident Indian.
7owever, except for interest rates and reserve requirements of 83! deposits, these accounts are treated as resident accounts effective from the account holder&s date of return to India.
On maturity, these accounts are converted to either an !83 account or the !esident !upee Aeposit account.
$s for joint accounts, the same rules as those for ! accounts apply to 83! deposits too.
8or repatriation of funds from the 83! account, the same conditions as those for ! accounts apply.
37
NRI BANKING
*he !"I does not provide any guarantee on foreign exchange.
Ot5er Fe7t"re6 !
!eserve "ank will not provide foreign exchange guarantee.
Gending of resources mobili-ed by authori-ed dealers under these accounts are not subject to any interest rate stipulations.
Non!Re6%ent Or%n7r' R":ee NRO Acco"nt E%;%#%%t'
$ny person or entity residing outside India is entitled to open a !O account with an authorised dealer or an authorised bank for transactions conducted in Indian !upees.
Individuals or entities of "angladeshi or :akistani nationality or ownership require approval from the !"I.
T':e6 o9 Acco"nt6
!O accounts can be opened as current, savings, recurring or fixed deposit accounts. *he !"I determines the rate of interest on these accounts and issues guidelines for opening, operating and maintaining them.
(o%nt Acco"nt6 %t5 Re6%ent6
oint accounts are permitted with resident and non#residents. Per$%66%#e Cre%t6
!
Cre%t6 !
38
NRI BANKING
!emittances from outside India through normal banking channels received in freely convertible foreign currency.
$ny freely convertible foreign currency can be deposited into the account during the account holderLs visit to India. 8oreign currency exceeding B1A '(((+# or its equivalent in the form of cash has to be supported by a 3urrency Aeclaration 8orm. !upee funds must be supported by an ncashment 3ertificate, if they are funds brought from outside India.
3urrent income earned in India, such as rent, dividend, pension or interest. ven proceeds from sale of assets including immovable property acquired out of rupee or foreign currency funds or through inheritance.
De#%t6 !
$ll payments towards expenses and investments in India
:ayment outside India of current income like rent, dividend, pension, interest etc. in India of the account holder.
!epatriation up to B1A One million, per calendar year, for all bonafide purposes with the approval of the authorised dealer.
Re$%tt7nce
o9
A66et6
!Is and :IO may remit upto B1A One million per calendar year, out of balances held in the !O account which could be acquired from the sale proceeds of assets acquired in India out of rupee or foreign currency funds or by way of inheritance
39
NRI BANKING
from a resident Indian, provided4 A66et6 7c"%re %n In%7 o"t o9 r":ee<9ore%;n c"rrenc' 9"n6
5a6 Immovable property4 !Is and :IO may remit sale proceeds of immovable property purchased by them when they were resident or out of !upee as !I
or
funds
:IO.
5b6 Other financial assets4 *here is no lock#in period for remittance of sale proceeds of other financial assets A66et6 7c"%re #' 7' o9 %n5er%t7nce4
1ale proceeds of assets acquired through inheritance can be remitted. o lock#in period applies here if the authorised dealer is satisfied that the proceeds are from inherited property. Re$%tt7nce o9 766et6 o"t o9 NRO 7cco"nt #' 7 :er6on re6%ent o"t6%e In%7 ot5er t57n NRI
has retired as an employee in India,
has inherited assets from a resident Indian, or
is a widow residing outside India and has inherited assets of her deceased husband who was a resident Indian can remit upto B1A one million per calendar year on production of documentary evidence to support the acquisition by way of inheritance or legacy of assets to the authorised dealer.
Re6tr%ct%on6
*he above facility of repatriation from sale of immovable property is not extended to citi-ens of :akistan, "angladesh, 1ri Ganka, 3hina, $fghanistan, Iran, epal and
40
NRI BANKING
"hutan. !emittance of sale proceeds from other financial assets is not extended to citi-ens of :akistan, "angladesh, epal and "hutan. Fore%;n N7t%on76 o9 non!In%7n or%;%n on 7 %6%t to In%7
8oreign nationals of non#Indian origin are permitted to open a !O account 5current+savings6 on their visit to India with funds remitted from outside India through normal banking channels or by foreign exchange brought to India. *he balance in the !O account is converted by the bank into foreign currency for payment to the account holder when he leaves India, provided the account was maintained for less than six months. *he account should not be credited with any local funds during the term, except for interest accrued on it. Gr7nt o9 Lo7n6< Oerr79t6 #' A"t5or%6e De7er6< B7n to Acco"nt Hoer6 7n T5%r :7rt%e6
Goans to !I account holders and to third parties is granted in Indian !upees by authori-ed dealers 5banks6 against the security of fixed deposits provided4
*he loans are utili-ed only for meeting the borrowerLs personal requirements or for business and not for agricultural+plantation +real estate or relending activities
!"I regulations pertaining to margin and rate of interest will apply
$ll norms and considerations which apply to loans to trade and industry will apply to loans and facilities granted to third parties.
*he authori-ed dealer+bank may allow an overdraft to the account holder subject to his commercial discretion and compliance with the interest rate directives. C57n;e o9 Re6%ent St7t"6 o9 Acco"nt 5oer 7 Fro$ Re6%ent to Non!re6%ent
41
NRI BANKING
hen a resident Indian leaves India for taking up employment or for carrying on business outside India, his existing account is designated as a on#!esident 5Ordinary6 $ccount, except in the case of persons shifting to "hutan and epal. 8or the latter, the resident accounts do not change to !O accounts. # Fro$ Non!Re6%ent
to Re6%ent
!O accounts may be re#designated as resident rupee accounts once the account holder returns to India for taking up employment, or for carrying on business or for any other purpose indicating his objective to stay in India for an uncertain period. here the account holder is only on a temporary visit to India, the account continues to be treated as non#resident during the visit. Tre7t$ent o9 Lo7n6< Oerr79t6 %n t5e Eent o9 C57n;e %n t5e Re6%ent St7t"6 o9 t5e Borroer
In case of a resident Indian who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a !I, the authorised dealer may at its discretion allow the loan facility to continue. In this case, payment of interest and repayment of loan may be made by inward remittance or out of bonafide resources in India.
P7'$ent o9
9"n6 to Non!re6%ent
*he amount payable to a non#resident nominee from the !O account of a
42
NRI BANKING
deceased account holder is credited to the !O account of the nominee. F7c%%t%e6 to 7 :er6on ;o%n; 7#ro7 9or 6t"%e6
1tudents going abroad for studies are treated as on#!esident Indians 5!Is6 and are eligible for all the facilities enjoyed by !Is. $ll loans availed of by them as residents in India will continue to be extended as per 8M$
regulations.
Intern7t%on7 Cre%t C7r6
$uthori-ed dealers are allowed to issue International 3redit 3ards to !Is and :IO, without the permission of the !"I. 1uch transactions can be made by inward remittance or out of balances held in the cardholderLs 83!+!+!O $ccounts. Inco$e T7?
*he remittances, after payment of tax are allowed to be made by the authori-ed dealers on production of a statement by the remitter and a 3ertificate from a 3hartered $ccountant in the formats prescribed by the 3entral "oard of Airect *axes, Ministry of 8inance, 0overnment of India
TA/ BENEFITS 9or NRI6
43
NRI BANKING
Interest on ! % 83! deposits are free of income tax. *ax S =( will be deducted at source on all interest income in !O accounts. On permanent return to India, income on all investments out of foreign exchange funds would be eligible for a flat tax rate of 9( 5excluding surcharge6 till maturity of the investments.
CHAPTER + SERVICES OFFERED B, VARIOUS BANK TO NRI@S
44
NRI BANKING
BANKING SERVICES
!I banking services including deposits, savings accounts, finance like home loans, personal loans etc. 2arious banks like I3I3I "ank, 3itibank, 7A83 "ank and many other nationali-ed and private banks that hold authori-ed dealerLs licenses from the !eserve "ank of India 5!"I6 provide remittances, savings, earnings,
investments
and
repatriation
services.
"esides the major commercial banks, certain cooperative and regional rural banks 5!!"Ls6 have also been specifically permitted to maintain !I accounts. *his would increase !I remittances in "ihar, /erala, B.:. and 0ujarat where a large chunk of the rural population have settled abroad. *he banks also offer finance services to the !ILs that cover home loans for buying new residential property, housing renovation loans for constructing or modifying on the existing properties, personal loans and other loan products. $nother 8AI 58oreign Airect Investment6 magnet has been the various money transfer services provided. 2arious banks provide quick, convenient and economical fund remit to India. *hese include4
Online remittance services
!emittance of funds to partner exchange houses in India
*elegraphic or wire transfer
8und transfer through cheques+ AALs and *ravelersL cheques.
Many banks also offer Aemat account services to the !ILs that enable !ILs online stock investment and share trading services. 1pecial !I credit cards acceptable globally are available with various banks. *hese speciali-ed services
45
NRI BANKING
and banking accounts have drawn enormous !I funds to India. SERVICE OFFERED B, ICICI BANK4! R":ee :"6 :7n 4! $t I3I3I "ank, we believe in providing you with the most
competitive returns on your hard earned money. ow you can earn even higher returns on your deposits by investing in !upee plus plan. .57t oe6 t5e R":ee :"6 :7n o99er 'o" 4# !#8A interest rates rate being
regulated by !"I, is nearly same across banks. In !upee plus plan we have devised a way to make your money work harder and smarter and earn higher returns in terms of !I as compared to a ! 8A. C"rrenc%e6 4! you can being funds in any convertible currency, which will be
converted to B1A 5if not in B1A already6. M%n%$"$ De:o6%t 4# B1A 9',((( or equivalent. Tenor4 ! for ) year only. Ho oe6 t5e R":ee :"6 :7n or8 Instead of putting the money in ! 8A
directly, the money is put in B1A denominated 83!. *his 83! earns interest as per prevailing 83! interest rates. $dditionally, at the time of booking the 83! a 8orward $greement is also drawn to exchange the maturity amount of B1A to !upees at a given rate 58orward !ate6. R":ee :"6 :7n 77nt7;e 4# on a average the returns are significantly higher
compared to putting your money in ! 8A as per the prevailing market rates. !eturns in rupee terms are assured once the deal is booked irrespective of the future movements in currency markets.
46
NRI BANKING
T5e 9oo%n; #7n%n; 97c%%t%e6 7re 77%7#e to NRI6- 76 :er t5e c"rrent RBI
P7rt%c"7r6
ho can open an
Non!Re6%ent
Non!Re6%ent
E?tern7 R":ee Or%n7r' R":ee
Acco"nt B7n6
Acco"nt
Acco"nt
Sc5e$eFCNRB Sc5e$eNRE
Sc5e$eNRO
Acco"nt !Is+:IOs
Acco"nt $ny person resident
Acco"nt !Is+:IOs
account
outside India 5other than a person resident in epal
oint account
In the names of two In the names of or
and "hutan6 May be held jointly
two or more !Is with residents
!Is
omination
:ermitted
:ermitted
3urrency in which
:ound 1terling, B1 Indian !upees
account
Aollar, ap. Ken or
is denominated
uro. $ustralian
:ermitted Indian !upees
Aollar, 3anadian !epatriability
Aollar !epatriable
*ype of $ccount
*erm Aeposit only 1avings, 3urrent, 1avings, 3urrent,
!epatriable
on#repatriableT
!ecurring, 8ixed
!ecurring, 8ixed
Aeposit
Aeposit
47
NRI BANKING
!ate of Interest
1ubject to cap4
!ate of interest on !ate of interest on
GI"O! minus 9'
domestic savings domestic savings
basis points except account will also
account will also be
in case of apanese be applicable to
applicable to !O
Ken where the cap ! savings
savings account. 8or
would be based on account. 8or 8ixed 8ixed Aeposits, the at the prevailing
Aeposits, the rates rates can be fixed by
GI"O! rates
can be fixed by
banks subject to
banks subject to
ceilings prescribed
ceilings prescribed by !"I by !"I
*ax $spects
Interest income tax Interest income tax Interest income free and no tax
free and no tax
deduction at source. deduction at source.
taxable and liable for *A1 S=( plus applicable surcharge subject to conditions. A*$$ benefit may be available subject to fulfillment of conditions.
48
NRI BANKING
CHAPTER 5 RBI issues guidelines for money transfer s!eme
49
NRI BANKING
MONE, TRANSFER -oney can be transferred either through on line or drafts or telegra!hically or by 'ire transfer or (he.ues, ransfer is co!letely online$ !a!erless oney transfer ser"ice 'hich enables the custoer to send oney directly fro one bank account in foreign country to #ndia, )rafts in #ndian ru!ees can be !urchased fro echange co!anies of one country and ailed to the branch of another country 'here the custoer has the account, elegra!hic or 'ire transfers can be ade through branch to branch, (he.ues can be de!osited for credit of the custoers accounts and the (he.ues 'ill be collected and credited to their accounts,
Intern7t%on7 S.IFT Tr7n69er
*his is a secure, quick and efficient method of transferring funds, which enables you to send money easily to any bank which is part of the 1I8* network. *here is a flat#rate charge of !s '(( for each 1I8* transfer made from your account. *here is no charge when you make a transfer from your "arclays !I account in India
to
a
"arclays
account
50
in
B/
or
B$.
NRI BANKING
De$7n or B7ner6 Dr79t
*his is a means of initiating a transfer from your account to a named payee. Kou can send the Aemand Araft to your intended payee, who will then be able to take the Araft into their bank N following presentation of this Araft, he+she will then receive payment. $ Aemand Araft made payable to a non#"arclays account will incur a charge of !s =.' per !s ),((( sent 5minimum charge !s )((6. $ Aemand Araft made payable to a "arclays account and a 8oreign currency AA will incur a flat#rate charge of !s =((.
UAE E/CHANGE
:!O2IAI0 speed, convenience and security of transactions, the Upress Money 1ervice of B$ xchange company is proving to be a modern and reliable way of sending and receiving money from anywhere in the world, especially among the immigrant Indian in 0ulf countries. ith an extensive network of branches in B$ and a global presence in $ustralia, India, /uwait, Oman, Jatar, B/, B1$,
51
NRI BANKING
8iji, 1ri Ganka and "angladesh, the B$ xchange 3entre speciali-es in 8und *ransfer across the globe and enjoys a numerous uno status in the industry. B$ xchange and 8inancial 1ervices Gtd makes <(,((( remittances a month. *he average amount of remittances per transfer is !s ),9',(((. .e6tern Un%on Mone' Tr7n69er
estern Bnion is a global leader in money transfer services, with a history of pioneering dating back more than )'( years. on#resident Indians can now transfer their funds to India through the Money *ransfer 1ervice offered by estern Bnion. *his
service
is
currently
available
for
inward
remittances
in
India.
E3redits to !+83! accounts are not permitted to be routed through Money *ransfer 1ervice 1cheme 5M*116E SEND.ISE4!
$ rupee demand draft delivered to the recipient&s doorstep within three to four working days and can be encashed at any nationali-ed bank in India.
MONE,GRAM Sen $one' on%ne to7'4!
Kou can send money around the world online to over <;,((( moneygram agent locations, in more than )?( countries. ot only is sending money with moneygram safe and convenient, you&ll find the same day services to be one fastest way to send your money online#usually arriving within minutes. 1end money online or at a moneygram agent location near you. Moneygram is a global leader in international
52
NRI BANKING
money transfers and the largest processor of money orders in the B.1. e help people and business by providing affordable, reliable and convenient payment services.
ICICI B7n NRI Mone' Tr7n69er4!
I3I3I "ank, the leading bank in India offering financial services to the !I community through !I saving account, ! $ccounts, 8ixed Aeposit, 83! deposits, and the quickest way to send money online to India.
53
NRI BANKING
CHAPTER " #RI I#$E%T&E#T%
*he 0overnment of India has adopted a liberal policy, with respect to investment by !Is and O3"s in India, such investment are allowed, both, through the !"I route and also through the 0overnment route, i.e., through the 8oreign Investment :romotion "oard 58I:"6 !Is and O3"s are permitted to invest up to )(( equity in real estate development activity and civil aviation sectors. Investment, made by the !Is and O3"s, are fully repatriable, except in the case of real estate, which has a = year lock#in period on original investment and, )H cap on dividend repatriation. V7r%o"6 %ne6t$ent o::ort"n%t%e6 %n In%7 77%7#e to NRI64!
If one is !I, the following investment opportunities are open to you4
54
NRI BANKING
Maintenance of bank accounts in India.
Investment in securities+shares and deposits of Indian firms+companies.
Investment in mutual funds in India.
Ine6t$ent Po%c' 9or Non!re6%ent In%7n6 NRI64!
!ecogni-ing the investment potential of the on#resident Indians, a number of steps are being taken by the government on an ongoing basis to attract from them in Indian companies. 1ome of the investment schemes presently available to on# resident Indians 5!Is6 include the facility to invest upto )(( percent equity with full benefits of repatriation of capital invested and income accruing thereon in high priority industries mentioned in the $nnexure#III to the industrial policy )>>), )(( percent export oriented units, sick units under revival, housing and real estate development companies, etc,. !Is+:IOs+O3"s are also permitted to make portfolio investments through secondary markets. In terms of the relaxations announced in )>><#>>, investment limits for an individual !I has been revised upwards from ) to ', aggregate portfolio investment limits by all !Is increased from '' to )( of the issued and paid#up capital of the company. *he aggregate investment limit would be separate and exclusive of 8II portfolio investment limits. FOR NRI@S INVESTMENT4!
55
NRI BANKING
In order to help the tax#payers to plan their Income#tax affairs well in advance and to avoid long drawn and expensive litigation, a scheme of $dvance !ulings has been introduced under the Income#*ax $ct, )>H). $uthority for advance rulings has been constituted. *he tax#payer can obtain a binding ruling from the $uthority on issues which could arise in the determination of his tax liability. $ non#resident or certain categories of resident can obtain binding rulings from the $uthority on any question of law or fact arising out of any transaction+proposed transactions which are relevant for the determination of this tax liability.
PORTFOLIO INVESTMENT
!Is+O3"s are permitted to make portfolio investment in shares+debentures 5convertible and non#convertible6 of Indian companies, with or without repatriation benefit provided the purchase is made through a stock exchange and also through designated branch of an authori-ed dealer. !Is+O3"s are required to designate only one branch authori-ed by !eserve "ank for this purpose. NRI@S INTEREST4!
!Is invested only ' of their investible assets in India with the balance being parked overseas. $ major reason for this was that the Indian banking system was not a very preferred and trusted mode of investment for the !I. *he customer was looking for convenience, speed, high yield on investment with manageable risks, reasonable costs and quality services N $ face of India he could associate with. 3ompetition was not only from India based banks, but also from local banks based overseasF conventional and non conventional routes of money transfer. FACILITATION AGENCIES 56
NRI BANKING
*he main regulatory and facilitation agencies involved in the matters related to !Is+O3"s investment are !eserve "ank of India 5!"I6, 1ecurities and xchange "oard of India 51"I6, $uthority for $dvance !ulings 5$$!6, 1ecretariat for Industrial $ssistance 51I$6, Ministry of 3ommerce and IndustryF and Office of the 3hief 3ommissioner 5Investments % !Is6.
RBI FORMS !Is+O3"s+:IOs do not have to seek specific permission for approved activities covered under C0eneral permission& schemes. *he activities relating to !Is+O3"s+:IOs not covered under those schemes either require declaration to !"I or permission from !"I. *he activities requiring Aeclaration+:ermission along with corresponding forms are as underF
*1 )
*ransfer of 1hares+Aebentures by on#residents to !esidents
83 :ermission to establish a branch office in India by an Overseas 3ompany )
establishing a !epresentative Office by Overseas 3ompany for Giaison $ctivities to open a :roject+1ite Office in India.
I:I
3ompany+Individual 5declaration6 acquiring property
57
NRI BANKING
CHAPTER '
NRI
Ine6t$ent
In
I$$o7#e Pro:ert' In In%7
!Is, irrespective of their citi-enship can freely acquire and transfer residential as also commercial properties in India barring agricultural land and plantation, with repatriation of foreign exchange equivalent of cost of acquisition 5maxi. two in case of resi.houses6 and no restrictions as regards holding period.
!ules for $cquisition % *ransfer by !Is being4
Indian citi-en % 8oreign citi-en
Mode of :ayment
oint 7olding + !estrictions 58
NRI BANKING
!epatriation of 1ale :roceeds
*axation of 3apital 0ains % ealth#*ax
R"e6 9or Ac"%6%t%on & Tr7n69er #' Fore%;n C%t%en NRI6 P"rc576e < Ac"%6%t%on4
*here is a general permission to acquire any immovable property 5other than agricultural land, plantation or farm#house property6 by way of purchase, provided the payment is made out of foreign exchange inward remittance or any on !esident bank account in India, i.e.!56,83!5"6 or !O a+c..
Ac"%6%t%on #' 7' o9 G%9t4
0eneral permission is granted to acquire any immovable property 5other than agricultural land, plantation or farmhouse property6 by way of gift from a person 5donor6 who is
$ person resident in India, or
$person resident outside India 5an !I 6who is Indian citi-en or foreign citi-en of Indian origin.
Ac"%6%t%on #' 7' o9 %n5er%t7nce 4
0eneral permission is granted for inheritance of immovable property including agricultural land, plantation or farm#house property from
$ person resident in India, or
59
NRI BANKING
$ person resident outside India who may be an Indian citi-en or foreign citi-en of Indian origin provided such person had acquired said property in accordance with the provisions of 8oreign xchange Gaw in force at the time of acquisition. i.e. 8!$, )>?= or 8M$ )>>>.
7ence $gricultural land, plantation or farmhouse property
can be acquired by
way of inheritance only. Tr7n69er < S7e4
0eneral permission is granted for sale of any immovable property 5other than agricultural land, plantation or farmhouse property6 to a person who is resident in India.
Tr7n69er o9 re6%ent%7 or co$$erc%7 :ro:ert' #' 7' o9 ;%9t4
0eneral permission is granted to gift residential or commercial property to
$ person resident in India, or
$ person resident outside India who may be an Indian citi-en or foreign citi-en of Indian origin,
Tr7n69er o9 7;r%c"t"r7 7n- :7nt7t%on or 97r$5o"6e :ro:ert' #' 67e< ;%9t
0eneral permission is granted to sell or gift such property to a person who is resident in India and also an Indian citi-en.
Moe o9 P7'$ent 4!
60
NRI BANKING
*he payment for purchase of immovable properties is required to be made from
!ILs bank account, being4 a6 on !esident xternal $ccount 5!6F b6 8oreign 3urrency on !esident 5"6 $ccount 583!6 5"6, or c6 on !esident Ordinary $ccount 5!O6, or d6 8oreign xchange Inward !emittance from abroad.
It is advisable to retain records of payment made i.e. banker&s certificate
$ll incidental expenses such as stamp duty, registration fees etc. should also be paid through bank only.
Re:7tr%7t%on o9 S7e :rocee6
$n !I being an Indian citi-en or a foreign citi-en of Indian origin is allowed to repatriate the sale proceeds of an immovable property subject to the following conditions4
a6 . the acquisition should be in accordance with the existing 8oreign xchange Gaws 5i.e. 8!$, C?= or 8M$ C>>6. b6 the purchase price was met out of 8oreign xchange Inward !emittance or ! + 83! 5" 6 account, and
61
NRI BANKING
c6 in case of residential properties, repatriation is restricted to a maximum of two properties. It may be noted that the eligibility criteria of holding period of = years for repatriation is removed w.e.f. 9>#(H#(9. vide notification no 8M$ H'+9((9 !" dated 9>#(H#(9.P;
It may be noted that there are no restrictions as re4 repatriation of sale proceeds vis#a#vis number of commercial or industrial properties.
*he amount of repatriation is restricted to foreign exchange equivalent of the purchase price i.e. profits + gains are not allowed to be repatriated.
62
NRI BANKING
CHAPTER 3 PAN C7r 9or NRI6
8or all Indian citi-ens who are liable to pay tax under the Income *ax $ct, )>H), or are required to enter into financial transactions in India, it is mandatory to have a :ermanent $ccount umber. *he :ermanent $ccount umber 5:$6 is a combination of )( alphanumeric numbers issued by the Income *ax Aepartment. *he Aepartment has entrusted B*I Investor 1ervices Gtd. 5B*II1G6 with the task of managing I* :$ 1ervice 3enters wherever the I* department has an office in the country. *he ational 1ecurities Aepository Gimited 51AG6 has also been engaged to allot :$ cards from *I 8acilitation centers. A::'%n; 9or 7 PAN
63
NRI BANKING
8orm ;>$, which is the application form for a :$, can be downloaded from the Income *ax, B*II1G and A1G websites4 www.incometaxindia.gov.in
%
www.utiisl.co.intin.nsdl.com
*he forms care also available at the I* :$ 1ervice 3enters and *I 8acilitation 3enters. $ RtatkalV or priority service has been provided for, to enable speedy allotment of the :$ card through the Internet. *he :$ is allotted through e#mail on priority in ' days as against the normal )' days to the applicant upon online payment through a credit card. *he :$ has lifetime validity. T5e nece66%t' 9or 7 PAN C7r to NRI6
$part from income returns which must carry the :$, it is mandatory to submit the :$ in all financial transactions, like the purchase and sale of property in India, payments for purchase of vehicles, foreign visits, securing a telephone connection or making time deposits in a bank worth over !s.'(,(((. 8or !I&s, :$ is necessary to conduct monetary transactions in India, invest in stocks, and pay tax on their Indian income. *he application for a :$ must be accompanied by4
a recent colored photograph of si-e =.' cms x 9.' cms on the application form .
a proof of residence and identity 5attested school leaving+matriculation certificate+degree+credit
card+voter
identity+ration+passport+driving
license+telephone+electricity bill+employer certificate .
code of the concerned $ssessing Officer of the I* Aepartment obtainable from the I* office where form is submitted .
64
NRI BANKING
DEMAT ACCOUNT 4!
$ demat account facilitates buying and selling shares, precluding cumbersome paperwork and meaningless meaningless delays. A7nt7;e6 o9 7 De$7t Acco"nt #
It is a safe, secure and convenient mode of transacting in shares.
Minimi-es brokerage charges
65
NRI BANKING
nsures immediate liquidity
!emoves uncertainty on ownership title of securities
$llows quick allotment of public issues
nables smooth process in pledging shares
$voids delays due to wrong+incorrect signatures, post, and misplacement of certificates
:revents risks like forgery and counterfeit, theft or damage to documents
1aves on stamp duty, paperwork on transfer deeds
0ives immediate benefits from bonus shares and stock splits
.5o o99er6 De$7t F7c%%t'8
Aepository :articipants or A:s offer demat account services, which would include banks. 7olding a demat account with a bank enables quick on#line dealings, ensuring credit of a transaction to the account holder&s savings account by the third day. "anks have an added advantage over other A:s with their large network of branches. Ho to O:en 7 De$7t Acco"nt %n In%7
8ill up the demat account opening form at the nearest Aepository :articipant
Kou may refer to either
3A1Gathttp4++www.cdslindia.com 3A1Gathttp4++www.cdslindia.com+dematWacct+open +dematWacct+openWdemat.jsp Wdemat.jsp or 1AGathttps4++nsdl.co.in+for 1AGathttps4++nsdl.co.in+for the list list of A:s in India. India.
66
NRI BANKING
oint demat accounts can be opened, retaining the same order of names
1eparate demat accounts have to be opened for different combinations of names in the case of three or more joint holders.
$ny number of demat accounts and A:s are permitted
$ multiple#sign demat is feasible, operated by several holders
A:s charge a fee for switching shares from electronic to physical form and vice# versa, which varies from a flat fee to a variable fee. !emat and demat charges may also show a discrepancy between A:s.
1ome A:s offer a discount to frequent traders.
It is advisable to maintain all demat accounts with the same A: to keep track of capital gains liabilities. Aifferent A:s follow dissimilar methods of computing the capital gains, which is determined by the period of holding.
*he charges on a demat account vary between A:s. "roadly, they are4 account opening fee, an annual folio maintenance charge paid in advance, a monthly custodian fee, and a charge on transactions, which may either be charged every month or as a flat fee per transaction, and its nature. 1ome A:s may skip the accoun accountt openin opening g fee fee but charge charge a re#ope re#openin ning g fee fee for for the accoun account. t. $ccoun $ccountt holders are also subject to a service tax.
o opening balance balance is required for for a demat account.
S"::ort%n; oc"$ent6 to o:en 7 e$7t 7cco"nt
:assport#si-e photograph
:roof of identity, address and date of birth
67
NRI BANKING
A:#client agreement on non#judicial stamp paper
:$ 3ard
*he applicant receives an account number and a A: IA number which are required for all future communication with the A:.
NRI De$7t Acco"nt6
!Is need to fill in R !IV in the type and Rrepatriable or Rnon#repatriableV in the sub#type on the form. o special permission from the !"I is required by !Is to open a demat account, though specific cases may require authori-ation from the designated authorised dealers. !Is require separate demat accounts for securities under the foreign direct investment 58AI6 scheme, which is repatriableF and the :ortfolio Investment 1cheme and 1cheme for Investment which can be either repatriable or non# repatriable. !epatriable and non#repatriable securities cannot be held in a single Aemat account.
!esident Indians can continue to hold non#repatriable demat accounts they hold even after they acquire non#resident Indian status. 7owever, when a !I returns to India permanently, he must inform his designated authorised dealer of his new status, and a fresh account would have to be opened. *he securities held in the !I Aemat account would have to be transferred to the new resident demat account, and the !I Aemat account closed. *he Aemat account would have to be linked with the !I&s !O account for non#repatriable accounts and ! accounts for repatriable accounts to credit dividends and interest.
68
NRI BANKING
CASE STUD, ON NRI BANKING Increasingly at :ersonal we are meeting Indians living abroad who are relocating to India. Bsually such individuals have a significant portion of their assets in the foreign countryF investments in India are usually linked to inheritance or savings made before shifting abroad *he task we are entrusted with is to help such individuals plan their finances. 7ereLs how we assisted one such family. 69
NRI BANKING
e recently met a :erson of Indian Origin 5:IO6 who was based in the Bnited 1tates 5B16F he has now shifted permanently to India. GetLs call this individual !ajeev. $lmost all of rajeevLs savings are in the B1F in B1 mutual funds and bonds. 7e has no exposure to India in his asset allocation, although he does expect to inherit some Indian assets over time.
More 7#o"t R7jee !
7e is ;; years of age and was settled in B1 for many years before relocating to India 7e is married and has a <#yr old daughter $lthough he is not sure, there is a likelihood that his daughter might want to go back to B1 for further studies
R7jee6 %ne6t$ent et7%6 7re 76 9oo64
7is combined investment in stocks and funds in the B1 accounts for '( of his net assets. !emaining '( of his investments are in short#term deposits, again in the B1. Important to note that he does not own any residential property, either in the B1 or in India. $s mentioned earlier, since the client is now settled in India, and is certain to be here for the rest of his life, in our view, it makes sense to shift his assets back to
70
NRI BANKING
India. hy do we say that@ ell, if you know you are going to be in India, and all your future incomes and expenses are going to be in Indian !upees, why take on the risk of being invested in B1 Aollars@ In case the B1 Aollar were to depreciate vis#a#vis the !upee, the value of your B1 assets would effectively erode. *his is not to say that no one should have money invested in other currency assets. 8rom our perspective, one should evaluate such investment opportunities only when one has completed their investment plans for domestic assets. Importantly, you should have that much money in another currency asset that is required to meet future needs 5that need to be provided for in the other currency6. In order to reallocate his assets, 1anjeev will need to liquidate his assets in the B1 and transfer the proceeds to India. 1ince his daughter might go back to B1 for higher education in future he will require money 5B1 Aollars6 at that point of time. *herefore, in his case, the liquidation and then allocation of assets must be based on his needs in India as well as in the B1. /eeping this in mind we proposed to conduct his entire financial planning exercise in two phases. *he first phase involved understanding of his needs in India and the B1 and accordingly liquidating his investments. *he second phase involved, investing the proceeds in India.
L%"%7t%on :roce664
e first started with liquidation of his investments in B1, and for this, demarcating his needs in India and B1 became the starting point for us. 1ince the client has no prior investments in India, it gave us a good opportunity to define a well# diversified portfolio for him. *he next step was to decide the quantum of investment to be liquidated based on
71
NRI BANKING
his needs. In B1, he has to continue with some of his investments for his daughterLs future education. e found that around )( of the clientLs total wealth will be sufficient for this purpose and rest he can liquidate. *hus, we advised him to liquidate >( of his total investments in B1. *he next step was to transfer the proceeds to India. ormally, people who have foreign currency 5in this case B1 Aollar6 get apprehensive about the exchange rate at which their proceeds are to be transferred. In this particular case, since the client is already settled in India, we advised him not to pay much heed to the exchange rate and instead start transferring the funds.
A66et 7oc7t%on #76e on t5e c%ent6 nee6 %n In%74
0iven that the client has no investment in property 5he was living in a rented premise6, the top priority was to invest in a property. $bout ;( of his assets were allocated for the purpose. 0iven the hype about property, 1anjeev was keen to consider a higher exposureF however we recommended otherwise. In our view, and this holds true for most individuals, the number of properties you own should be linked to your LrealL needs i.e. property which you need to give as inheritance or property for self use.
*he fact that the client is financially very sound and in a position to take some risk, we recommended that he invest upto =' of the surplus in well#managed diversified equity funds in a disciplined manner based on his needs and objectives. *he portfolio consisted of no more than six schemes. quities as an asset class are best equipped to generate high returns over longer
72
NRI BANKING
time frames 5=#' years6. *hus, his investment in equities should be well equipped to cater his future needs such as his daughterLs marriage, his retirement planning or any other need as and when required. $nother )( of the surplus cash inflows could be invested in debt funds 5short# term debt funds, as at present interest rates are on the rise6. Inclusion of debt funds in the portfolio will ensure that the portfolio becomes well diversified across asset classes. *he balance 5'6 could be maintained in liquid assets for any immediate requirement or for contingency.!ajeev was also advised to take up a term insurance policy for himself. *his is a pure risk cover plan that enables the individual to opt for a high insurance cover at relatively lower premiums. It goes without saying that our recommendation to !ajeev 5although very critical6 was just a starting point. 8irst and foremost, it needs to be executed 5investing in mutual funds, buying property6 and then the plan needs to be monitored regularly. *his is necessary as over time, !ajeevLs risk profile will change, as he gets older, he may not be comfortable with a higher allocation to equity, so a portion of his money will have to be shifted to lower risk assets. $lso the performance of the mutual fund schemes will have to be monitored. 0iven the nature of the task, it is best for !ajeev that he engages the services of a professional and competent financial planner who can actively monitor his financial plan CONCLUSION
!I "anking today stands as one of the most profitable business for banks. ith India having one of the largest !I populations and a very prosperous one too, !I banking is one hot business no bank can afford to ignore today. India needs
73
NRI BANKING
foreign exchange reserves for its developing economy. !eali-ing this, banks are shaping up their strategies in order to attract this !I money. 8urther with India pushing for 3apital $ccount 3onvertibility, and the success of :ravasi "haratiya Aiwas, prospects for !I banking has never been so good than today.
PRIMAR, DATA UESTIONARIES 4! VISITED ICICI BANK ANDGERI BRANCH MET MR) KALPESH DHAN(I MOTA
74
NRI BANKING
$UB! 4#
•
3an I break my deposit before the maturity period@
•
If I am visiting India, can I use travelers cheques or currency to open an account or credit my existing ! $ccount@
•
3an any person in India be authorised to operate the !ILs account@
•
3an an 83! deposit in one currency be converted to a deposit in another currency
•
3an 83!+! deposits be value dated@
•
7ow much money can an !I remit abroad annually from his !O accounts@
•
3an an !I repatriate sale proceeds of his property purchased by him by remittance from abroad@
•
hat is the frequency of interest payment in an ! savings account@
•
hat is the limit on the international $*M#cum#Aebit card for !I customers@
•
hat are the charges applicable for debit card@
•
3an I repatriate money out of balances held in my !O accounts@
75
NRI BANKING
FINDINGS & SUGGESTIONS 4! •
Kes.deposits can be broken before the maturity period but the interest payable would be the applicable interest rate prevailing for that period at the time of opening the deposit. *he minimum period for ! and 83! would be ) year. $ penalty charge as applicable will be levied.
•
*ravelers cheques can be used to credit+open the account. If you are bringing foreign currency notes % travellers cheques, you will have to submit a 3urrency Aeclaration 8orm 53A86 to the 3ustoms authorities on arrival in India if the foreign currency notes exceed B1A ',((( or travellers cheques and notes exceed B1A )(,(((. Kou must produce the 3A8 for endorsement by the bank when you submit the money for opening+credit to an account.
•
Kes. *he mandate facility is available for !I customers. *he mandate form duly completed 5with 8orm H( or :$ card, proof of identity, proof of address, and photo6 may be handed over to the branch when the account is opened to authorise a person in India to operate the account. *his is possible only in the case of savings accounts.
•
Kes. 7owever, you may consider doing so only on maturity of the deposit so that there is no loss of interest.
•
Aeposits are value dated. *he date will be the date on which the funds are received by "arclays 5India6 in its ostro accounts.
•
$ !I can remit up to B1A ) million 5or equivalent6 per calendar year for any bonafide purpose subject to payment of tax and furnishing the required documents.
76
NRI BANKING
•
Kes. 7owever the amount repatriated should not exceed the amount paid for acquisition i.e.
•
$mount received in foreign exchange through normal banking channel
•
*he foreign currency equivalent as on date of payment of amount paid by debit to !I a+c
•
*he frequency of interest payment would be half yearly.
•
*he International $*M#cum#Aebit card offers !s '(,((( of cash withdrawal per day and transactions worth !s '(,((( at merchant establishments.
•
*here are no withdrawal charges for cash withdrawn from any 2I1$ $*M network across the world. 8or purchases and $*M transaction5s6 outside India there is a 9.' currency conversion charge, at all 2I1$ enabled :O1 and $*M machines. 1ervice *ax 5currently )9.=H6 on these charges will be levied.8or details of charges on Aomestic debit cards, kindly refer the schedule of charges for 3onsumer banking.
•
Interest earnings can be repatriated. In addition to this, remittance+s up to B1A ) million per calendar year from balances in !O accounts subject to payment of applicable taxes is allowed.
77
NRI BANKING
B%#%o;r7:5'
.e#6%te •
) Goo;e)co$
•
!!!#icici#com
•
!!!#goog$e#com
•
!!!#!i%ipedia#com
Boo6<(o"rn7 •
Nr% B7n%n;
•
Art%ce6 %n Ne6:7:er6
L%#r7r%e6 re9erre •
Coe;e %#r7r'
78
