A Dissertation

ON

POLICIES AND LEGISLATION TO PROTECT NRI INVESTMENT IN INDIA

Submitted to the
DEPARTMENT OF LAW

JAI NARAIN VYAS UNIVERSITY, JODHPUR

In the partial fulfillment of Course - IV of

LL.M. III Semester in Constitutional Law Branch

Under the Supervision of Submitted by

PROF. Sunil Asopa Ayushi Singhal

FACULTY OF LAW
JAI NARAIN VYAS UNIVERSITY, JODHPUR
2023-2024
 DECLARATION
I Ayushi Singhal, student of LL.M III-Semester, Business Law
Branch do hereby declare that:

1. The work contained in this dissertation is my own work and is

original.
2. The present work has not been submitted to any other University
for any degree or diploma.
3. I have followed the guidelines of the University.

4. I have properly acknowledged the material collected from

secondary sources wherever required

5. I own the responsibility for the originality of the entire contents.

SINGATURE OF STUDENT

Ayushi Singhal

PROF. SUNIL ASOPA

(DEAN)

Faculty of Law

Jai Narain Vyas University,

Jodhpur
 CERTIFICATE

This is to certify that Ayushi Singhal, is a student of LL.M III

Semester, Constitution Law branch, Faculty of Law, Jai Narain
Vyas University, Jodhpur. She has completed the dissertation
entitled “POLICIES AND LEGISLATION TO PROTECT NRI
INVESTMENT OF INDIA” under my supervision. She has carried
her work with utmost sincerity and dedication.

___________________

Signature of Supervisor

ACKNOWLEDGEMENT
I would like to express my deepest gratitude and appreciation to all
those who have supported and guided me throughout the completion
of this LLM thesis. Firstly, I am indebted to my supervisor, Prof.Sunil
Asopa Sir, for their invaluable insights, unwavering support, and
constructive feedback, which have been instrumental in shaping this
work.
I would also like to extend my heartfelt thanks to my family and
friends for their encouragement, patience, and understanding during
this academic journey. Your belief in me has been a constant source
of motivation.
Furthermore, I want to acknowledge the assistance of Jai Narain
Vyas University, faculty and staff, especially the Faculty of Law, for
providing the necessary resources and research facilities. Lastly, I
appreciate the countless authors, scholars, and legal experts whose
work and contributions have enriched this thesis.
Their dedication to advancing legal knowledge is an inspiration. This
thesis would not have been possible without the collective support
and guidance I have received. Thank you all for being an integral part
of this academic endeavor.

1. Introduction

• Background and context of NRI investments in India

• Significance of NRIs as investors in the Indian economy
• Purpose and scope of the dissertation

2. Literature Review

• Overview of existing literature on NRI investments in India

• Historical evolution of policies and legislation governing NRI investments
• Analysis of scholarly articles, reports, and case studies related to NRI investment
protection

3. Theoretical Framework

• Theoretical perspectives on foreign investment protection

• Relevant international legal frameworks (e.g., BITs, international arbitration)
• Application of legal theories to NRI investments in India
4. Policies and Legislation

• Overview of key policies and legislation protecting NRI investments

o Foreign Exchange Management Act (FEMA), 1999
o RBI regulations and guidelines
o Foreign Direct Investment (FDI) policy and sectoral caps
o Taxation laws and exemptions for NRIs
o SEZ Act and incentives for NRI investments
o Bilateral Investment Treaties (BITs) and their impact
• Comparative analysis with other countries’ policies

5. Regulatory Mechanisms

• Role of regulatory authorities (e.g., RBI, SEBI) in protecting NRI investments

• Compliance requirements and monitoring mechanisms
• Case studies of regulatory challenges and their resolution

6. Challenges and Issues

• Legal and regulatory challenges faced by NRIs investing in India

• Dispute resolution mechanisms and their effectiveness
• Case studies of disputes involving NRI investments

7. Impact Assessment

• Economic impact of NRI investments on India’s economy

• Socio-cultural impact of NRI investments in local communities
• Long-term implications for India’s development and growth

8. Case Studies

• Detailed case studies of successful NRI investments in India

• Lessons learned and best practices for protecting NRI investments

9. Conclusion

• Summary of findings and key insights from the dissertation

• Evaluation of the effectiveness of policies and legislation
• Recommendations for policy improvements and future research directions
10. References

• Bibliography of cited sources and materials

• List of legislation, reports, and scholarly articles consulted
 INTRODUCTION
In the World Bank’s ease, India climbed 23 points by doing business index

to 77th place and becoming a top-ranked country in South Asia for the

first time and third among BRICS. Historically in India investment

climates have never been so attractive. Easing the business process,

removal of red tape and establishing a domestic consumer market are the

efforts done by the government which all combine to give handsome

returns on Non-Resident India’s investment. Various steps are taken to

promote investment by Indians living abroad in India by the government

of India. It has been taken up as a priority to promote investments by

advising prospective investors including Non-Resident Indians on

investment climate opportunities policies and producers. The government

is now focusing on the Indians who live in foreign countries and their

ability by investing in India and the Indian economy as India becomes the

global community to invest.i

In the last few years, there is gigantic boost in investment possibilities for

NRIs and Persons of India Origin (PIO). A nonresident Indian (NRI) has an

exclusive place under the Indian foreign investment law. Government of

India has simplified directions and guidelines applicable for NRI’s and

encouraging them to invest in India. NRI’s are showing larger interest in

investing into India. An NRI is playing a significant role in the

development of India through investments. The connection that an NRI

has with India has led to a number of investments since liberalization. The

focus of Indian principle has been thus to encourage NRI Investments.

What does NRI really mean?

Before we move to the technicalities of the topic let us first understand

who are NRIs? There is a lot of confusion about who is an NRI? Non-
Resident Indians are specifically defined in two major laws in India that is
the Income Tax Act 1961, and Foreign Exchange Management Act 1999.
In the Income Tax Act, the NRI is determined on the basis of the number
of days the person resides abroad. In Foreign Exchange Management Act
the NRI is determined upon the intention of that person to reside abroad.

According to the Income Tax Act, 1961

Non-Resident India is an individual who is not a resident of India yet a

citizen of India or a person of Indian origin. Therefore, in order to figure
out whether an individual is a Non-Resident Indian or not, under Section
6 of the Income Tax Act, his residential status is required to be
determined.
An individual is said to be a non-resident in India if he is not a resident in
India according to Section 6 of the Income Tax Act, 1961.

If an individual satisfies any of the following then he is deemed to be a

resident in India in any previous year;

• If an individual resides in India for a period of 182 days or more during

the previous year or,
• If he resides in India for 60 days or more during the previous year and
365 days or more during 4 years immediately preceding that year.
For example; Mr. Shah went to Canada for her graduation of three years
from a reputed university. While studying his professor suggested doing a
post-graduation course from the same university Upon the completion of
the course the company offered him a permanent position. She worked
there for the past four years which means he stayed out of India for nine
years now so the above conditions are not fulfilled which makes him a
non-resident.

Although the period of 60 days is substituted by 182 days as mentioned in

the second point if an Indian citizen or a person of Indian origin visits
India during the year. The same thing is also applicable to India who
leaves India in any previous year as a crew member for the sake of
employment.

An individual is said to be a not ordinarily resident in India in any

previous year if such individual;

• Has been a non-resident in India in nine out of ten previous years

preceding that year or during the seven previous years preceding that
year amounts to seven hundred and twenty-nine days or less or,
• Manager of a Hindu undivided family has been non-resident in India in
nine out of ten previous years preceding that year or during the seven
years preceding that years amounts seven hundred and twenty-nine
days or less or,
• Citizen of India or a person of Indian origin having total income
excluding from foreign resources exceeding fifteen lakh rupees during
the previous years for a period which amounts to one hundred and
twenty days or more but less than one hundred and eighty-two days.
According to FEMA Act, 1999

An individual is said to be a non-resident according to the FEMA Act, 1999

if a person is a citizen of India but resides outside India.

According to the provision of FEMA, 1999 as contained in Section 2(v)

person who is a resident in India means if he resides in India for a period
of more than 182 days during the preceding year still there are few
exceptions in which the above definition is not applicable;

• If you stay out of India for the sake of employment.

• If you have gone abroad to set up your business.
• If you have gone abroad which explains your intention to stay outside
India.
In such cases, a person is regarded as a person outside India(NRI) if he
stays in India for more than 182 days.

A person which is resident outside India if he resides in India for 182 days
or less than during the preceding year yet there are exceptions in which
the above definition does not apply;

• If an individual stays in India for the sake of employment.

• If an individual comes to India for setting up a business.
• If an individual comes to India for any reason which specifically clears
the intention of residing in India for a certain period of time.
For example; If an individual is settled abroad and comes to India for a
reason other than business or employment and has no such intention to
stay in India then he is considered to be a resident outside India.

Understanding NRIs and Their Investment Avenues

India’s economy is on a supersonic growth streak, destined to become the

world’s fourth-largest by 2026, leaving Japan in the dust. Foreign
investment is fueling this incredible journey, hitting an all-time high of
$112 billion in FY23, proving India’s remarkable resilience even after the
pandemic’s brutal blow.
Battered but not broken, India’s economy has bounced back with a
vengeance. India’s skyrocketing foreign investment ($112 billion in FY23)
is fueling its economic ascent, aiming to make it the world’s fourth-largest
by 2026 despite the pandemic’s setbacks.

As the world reshapes itself, India’s record-breaking foreign investment

opens a treasure trove of possibilities for NRIs. In 2024, India’s booming
and dynamic investment landscape, backed by robust policies,
infrastructure upgrades, and better connectivity, will be a guiding light for
NRIs seeking to diversify their portfolios. With its ever-growing and
dynamic investment market, dedicated government initiatives, improved
infrastructure, and enhanced connectivity, India is a bright beacon for
NRIs seeking to spread their investment wings in 2024.

To the World of Real estate!

Gone are the days of dull bank deposits! NRIs are increasingly chasing
Indian growth through commercial real estate, lured by high rental yields,
government support, and the sector’s unwavering resilience. The
emotional pull of investing in their homeland adds fuel to the fire, making
2024 a prime year for NRI real estate domination.

Ditch the myth that NRIs can’t invest in India! Clear FEMA guidelines pave
the way for them to invest and rake in passive income. Lack of trust in
third-party handlers, however, has been a roadblock. Enter tech-driven
NRI platforms in 2024, promising transparency and ease, paving the way
for diverse and confident NRI investments.

Mutual Funds: Opening the Door to Growth for NRIs

As knowledge about the Indian market becomes more readily available,
Non-Resident Indians (NRIs) turn to mutual funds as a preferred
investment choice.

Mutual funds offer flexibility and diverse options for various investment
goals and risk appetites. These range from equity funds for higher returns
to hybrid and debt funds for risk-averse investors. Recent years have
seen a surge in NRI interest in mutual funds, fueled by:

• Increased per-user SIP amounts: NRIs are investing bigger and

brighter, with average SIP contributions rising.

• Market boom: All-time highs for Nifty and Sensex point towards a
promising future for Indian markets, further attracting NRI investments.

Beyond the Usual Suspects: Diving into New-Age SectorsNRIs are no

longer content with traditional investment options. Witnessing the
potential of emerging sectors like:

Healthcare and Insurance: The booming healthcare and insurance space

presents exciting growth opportunities.

• Fintech: Rapid technology adoption in the financial sector offers

promising returns.

• Renewable Energy and Electric Vehicles: The focus on sustainability

makes these sectors attractive for environmentally conscious investors.

• IT Services, R&D, and AI: The tech revolution continues, paving the way
for lucrative investments in these areas.

This interest in new-age sectors is evident in the rising number of NRIs

inquiring about future trends in healthcare, electric vehicles, blockchain,
and other innovative fields. They are actively seeking investment vehicles
that provide exposure to these high-growth areas.
With their growing awareness of the Indian market and a thirst for
diversification, NRIs find both established and emerging sectors attractive
for their investments. Mutual funds serve as a gateway to explore various
options, while new-age sectors offer the potential for significant returns.
As technology simplifies investment processes and information becomes
readily available, we can expect NRI participation in the Indian market to
continue its upward climb.

Focusing on the shift towards Tier 2 and 3 cities:

2023 saw states revving their engine with startup camps and fundraisers,
revealing hidden gems beyond just bustling Tier 1 cities. As 2024 gears
up, get ready for investment action to shift, thanks to government
initiatives like improved road, rail, and air connectivity. With upgraded
infrastructure and reliable energy, Tier 2 and 3 cities are becoming
hotbeds for lucrative opportunities.

2024: The Golden Gateway Opens for NRI Investments

As we turn the page to 2024, India’s investment landscape beckons to

NRIs with a siren of opportunity. Several factors converge to create a
prime window for participation, and here’s why:

1. Safe Harbor in a Stormy Sea: Stable Economic Environment

India’s resilient economy, even amidst global turbulence, is a beacon of

security and stability for NRIs seeking dependable investment havens.
Navigating volatile waters, India has proven its mettle, instilling
confidence in NRIs about the long--term health of their investments.

2. Open Arms for Investors: Favourable Government Policies

The Indian government’s proactive economic reforms and investor-

friendly policies offer NRI investments a welcome mat. Initiatives like
Make in India, Smart Cities, and ease of doing business paint India as a
land of possibilities, ripe for investment.

3. Building Bridges for Growth: Infrastructural Development

With a hammer and anvil approach, India is forging its future through
massive infrastructure projects. Modern highways, airports, and intelligent
cities enhance connectivity and open, vibrant investment avenues.

4. Homes for All: Affordable Housing Projects

India’s focus on affordable housing resonates with NRIs seeking

sustainable and inclusive investment options. Government-backed
schemes and incentives create a win-win situation, fostering social impact
and attractive returns.

5. Weathering the Storm: Resilience Amid Global Challenges

India’s ability to weather global economic storms like a seasoned sailor

makes it a safe investment harbour. This resilience is a magnet for NRIs
who value stability and long-term growth.

6. A Click Away from Bricks: Technological Advancements in Real Estate

Virtual reality tours, online transactions, and streamlined processes make

investing in Indian real estate a remote, hassle-free experience for NRIs.
Technology bridges the physical gap, empowering NRIs to invest with
confidence.

7. Investing in the Future: Demonstrated Commitment to Sustainable

Growth
India’s dedication to sustainable development and eco-friendly initiatives
aligns with the values of environmentally conscious NRIs. Green projects
offer socially responsible investments with promising returns.

8. Connected and Informed: Global Connectivity and Accessibility

Improved global connectivity and digital communication shrink distances

and make monitoring investments a breeze. NRIs can stay informed and
engaged with their Indian investments in real time, fostering a sense of
connectedness and control.

Conclusion

With 2024 at the doorstep, the sky’s the limit for NRI investments in
India. The government’s unwavering commitment to economic growth
and ongoing reforms pave the way for a lucrative and fulfilling investment
journey. Dive into the vibrant real estate sector, explore new frontiers,
and become a part of India’s remarkable growth story.

Factors to consider while making nri investment

in india :

1. KNOWLEDGE ABOUT THE PROPERTY

According to the Foreign Exchange Management Act,

"An NRI (Non-Resident Indian) or an OCI (Overseas Citizen of India) may
acquire immovable property in India other than agricultural land/ farm
house/ plantation property either by purchase or in the form of a gift."
NRIs should have complete knowledge of the type of property.
If you're a non-resident Indian, understand that you can purchase
residential and commercial property.
However, it is unlawful to invest in agricultural land, farmhouse, and
plantation. Any NRI buying property in India can freely put their money
into residential and commercial properties and in as many as they want.

2. DOCUMENTS NEEDED

Any real estate investment requires a thorough check and alignment of

the correct documents. These documents not only provide credibility but
also help in establishing certainty. A piece of good news for NRI
investment in India is the hassle-free documentation for the property. The
paperwork is straightforward and requires a passport, address proof,
permanent account number (PAN), and most recent photograph. The
minimal documentation is one reason NRI investment in real estate is
rising in India.

3. MODE OF PAYMENT

The payment for the purchased property needs to be in Indian currency

and as per the Indian Government Regulations.
Consult the financial experts to know if this investment is taxable or not.
One factor to keep in mind is that NRIs cannot use a traveller's cheque or
foreign currency for the purchase. These modes of payment do not come
from permitted channels; hence, they cannot be used as a payment
method.

4. HOME LOAN

One advantage that even NRIs have is the availability of home loans. The
procedure of NRI investment in Indian real estate has become simplified
with this feature.

However, the payment of 20% of the property value should be with their
own money. For the remaining 80%, you can avail loan from a financial
institution.

Banks and financial institutions registered with the National Housing Bank
can extend home loans to NRI for residential property, as per RBI
guidelines.

5. RESEARCH
Before delving into the paperwork and the payment procedure, every NRI
should thoroughly research the property and its developer. You should
perform a strict backcheck on the property. A few things you can probe
into are the property's location, quality of the infrastructure, goodwill of
the developers and their reputation, the history of the developers, their
testimonials, the social media presence, etc. A wise method for NRI
investment in India is to make absolute use of the internet. You can also
use the internet to enrich your knowledge of Indian real estate and the
laws surrounding it.

6.TAX IMPLICATIONS AND BENEFITS

As an NRI, it is difficult for individuals to acquire residential or commercial

property in India without abiding by tax laws. If the sales consideration of
the property exceeds 150 lakhs, a TDS of 1% is deducted from the
income. If you sell the acquired property within 3 years of purchase, it is
charged as short-term capital gains. When an NRI investment in Indian
real estate exceeds 24 months, and they sell off the property, it is a long-
term capital gain applicable for 30% TDS.

NRIs enjoy multiple tax benefits relating to an investment in residential or

commercial property in India. They also enjoy similar perks as an Indian
citizen. NRIs claim a deduction of Rs. 1 Lakh under section 80 C of the
Income Tax Act,1961

7. POWER OF ATTORNEY

Since NRIs investing in Indian real estate reside abroad, it is not always
possible for them to transit to and fro.
In such cases, someone from the family, a relative or a friend can work as
the representative. It is known as hiring power of attorney. Power of
attorney legally binds a person to act on behalf of the buyer. The only
factor to consider before appointing a power of attorney is to sign a
contract with the person for law purposes.

8. LEGAL CLEARANCES

Legal procedures can look hectic but are essential as well. It will include
but will not be limited to only specific factors. It is crucial to establish the
originality of the ownership deed, verification of property papers,
clearance of outstanding bills, municipality clearances or any other dues.

Legal backing and authorization will save you from future problems. For
example, in case the residential or commercial property is put under
construction in future, and any issue emerges related to ownership, legal
backing can help in proving your point.

Types of Accounts - NRI / PIO in India

If a person is NRI or PIO, she/he can, without the permission from the
Reserve Bank, open, hold and maintain the different types of accounts
given below with an Authorised Dealer in India, i.e. a bank authorised to
deal in foreign exchange.

NRO Savings accounts can also be maintained with the Post Offices in
India.

Individuals/ entities of Bangladesh and Pakistan require prior approval of

the Reserve Bank.

A. Non-Resident Ordinary Rupee Account (NRO

Account)
NRO accounts may be opened / maintained in the form of current,
savings, recurring or fixed deposit accounts.

• Savings Account - Normally maintained for crediting legitimate dues

/earnings / income such as dividends, interest etc. Banks are free to
determine the interest rates.

• Term Deposits - Banks are free to determine the interest rates.

Interest rates offered by banks on NRO deposits cannot be higher
than those offered by them on comparable domestic rupee deposits.

• Account should be denominated in Indian Rupees.

• Permissible credits to NRO account are

*transfers from rupee accounts of non-resident banks,

*remittances received in permitted currency from outside India

through normal banking channels,

*permitted currency tendered by account holder during his

temporary visit to India,

* legitimate dues in India of the account holder like current income

like rent, dividend, pension, interest, etc.,

*sale proceeds of assets including immovable property acquired out

of rupee/foreign currency funds or by way of legacy/ inheritance.

• Eligible debits such as all local payments in rupees including

payments for investments as specified by the Reserve Bank and
remittance outside India of current income like rent, dividend,
pension, interest, etc., net of applicable taxes, of the account
holder.

• NRI/PIO may remit from the balances held in NRO account an

amount not exceeding USD one million per financial year, subject to
payment of applicable taxes.

• The limit of USD 1 million per financial year includes sale proceeds
of immovable properties held by NRIs/PIOs.
 • The accounts may be held jointly with residents and / or with non-
resident Indian.

• The NRO account holder may opt for nomination facility.

• NRO (current/savings) account can also be opened by a foreign

national of non-Indian origin visiting India, with funds remitted from
outside India through banking channel or by sale of foreign
exchange brought by him to India.

• Loans to non-resident account holders and to third parties may be

granted in Rupees by Authorized Dealer / bank against the security
of fixed deposits subject to certain terms and conditions.

B. Non-Resident (External) Rupee Account (NRE

Account)
• NRE account may be in the form of savings, current, recurring or
fixed deposit accounts. Such accounts can be opened only by the
non-resident himself and not through the holder of the power of
attorney.

• NRIs as defined in Notification No. FEMA 5/2000-RB dated May 3,

2000 may be permitted to open NRE account with their resident
close relatives (relative as defined in Section 6 of the Companies
Act, 1956) on 'former or survivor ' basis. The resident close relative
shall be eligible to operate the account as a Power of Attorney
holder in accordance with the extant instructions during the life time
of the NRI/PIO account holder.

• Account will be maintained in Indian Rupees.

• Balances held in the NRE account are freely repatriable.

• Accrued interest income and balances held in NRE accounts are

exempt from Income tax and Wealth tax, respectively.
• Authorised dealers/authorised banks may at their
discretion/commercial judgement allow for a period of not more
than two weeks, overdrawings in NRE savings bank accounts, up to
a limit of Rs.50,000 subject to the condition that such overdrawings
together with the interest payable thereon are cleared/repaid within
a period of two weeks, out of inward remittances through normal
banking channels or by transfer of funds from other NRE/FCNR
accounts.

* Savings - Banks are free to determine the interest rates.

*Term deposits - Banks are free to determine the interest rates of

term deposits of maturity of one year and above. Interest rates
offered by banks on NRE deposits cannot be higher than those
offered by them on comparable domestic rupee deposits.

• Permissible credits to NRE account are

* Inward remittance to India in permitted currency, proceeds of

account payee cheques,

*Demand drafts / bankers' cheques, issued against encashment of

foreign currency, where the instruments issued to the NRE account
holder are supported by encashment certificate issued by AD
Category-1 / Category Il,

*Transfers from other NRE / FCNR accounts,

*Sale proceeds of FDI investments,

*Interest accruing on the funds held in such accounts,

*Interest on Government securities/dividends on units of mutual

fund purchased by debit to the NRE/FCNR(B) account of the holder,
certain types of refunds, etc.

• Eligible debits are:

*local disbursements

• When an account holder becomes a person resident in India,

deposits may be allowed to continue till maturity at the contracted
rate of interest, if so desired by him.
 • Terms and conditions as applicable to NRE accounts in respect of
joint accounts, repatriation of funds, opening account during
temporary visit, operation by power of attorney, loans/overdrafts
against security of funds held in accounts, shall apply mutatis
mutandis to FCNR (B). NRI can open joint account with a resident
close relative (relative as defined in Section 6 of the Companies Act,
1956) on former or survivor basis. The resident close relative will be
eligible to operate the account as a Power of Attorney holder in
accordance with extant instructions during the life time of the NRI/
PIO account holder.

Can an individual resident Indian borrow money from his close

relatives outside India?

Yes, an individual resident Indian can borrow sum not exceeding USD
250,000 or its equivalent from his close relatives staying outside India,
subject to the conditions that:

i. The minimum maturity period of the loan is one year;

ii. The loan is free of interest; and

iii. The amount of loan is received by inward remittance in free foreign

exchange through normal banking channels or by debit to the
NRE/FCNR(B) account of the NRI.

AN INDIVIDUAL RESIDENT INDIAN CAN BORROW

SUM NOT EXCEEDING

USD 250,000 OR ITS EQUIVALENT FROM

HIS CLOSE RELATIVES STAYING OUTSIDE INDIA ,

Can an individual resident lend money to his close relative NRI /

PIO?

Yes, an individual resident can lend money by way of crossed cheque

/electronic transfer within the overall limit of USD 200,000 per financial
year under the Liberalised Remittance Scheme, to meet the borrower's
personal or business requirements in India, subject to conditions. The
loan should be interest free and have a maturity of minimum one year
and cannot be remitted outside India.

Can an individual resident repay loans of close relative NRIs to

banks in India?

Yes, where an authorised dealer in India has granted loan to a non-

resident Indian such loans may also be repaid by resident close relative
(relative as defined in Section 6 of the Companies Act, 1956), of the Non-
Resident Indian by crediting the borrower's loan account through the bank
account of such relative.

Banks may sanction Rupee loans in India or foreign currency loans

outside India to either the account holder or a third party to the extent of
the balance in the NRE/FCNR (B) account subject to margin requirements.

Loan against Rupee loans to be

NRE/FCNR(B)FIXE allowed to
D DEPOSITS depositor/third
party without any
ceiling subject to
usual margin
requirements**

Loan against Foreign Currency

NRE/FCNR(B) loans to be allowed
FIXED DEPOSITS to depositor/third
party without any
ceiling subject to
usual margin
requirements **

• The term 'loan' shall include all types of fund

based/non-fund based facilities.
• In case of FCNR deposits, the margin requirement shall
be notionally calculated on the rupee equivalent of the
deposits in accordance with para 9(2) of Schedule-2 of
Foreign Exchange Management (Deposit) Regulations,
2000.
What are the other facilities available to NRIs/PIO?

A. Investment facilities for NRIs

NRI may, without limit, purchase on repatriation basis:

Investment Facilities
To NRIs
• Government dated securities / Treasury bills
• Units of Money Market Mutual Funds
• Exchange traded derivative contracts approved by the SEBI, from
time to time, out of INR funds held in India on non--repatriable
basis, subject to the limits prescribed by the SEBI.
• Shares and convertible debentures of Indian companies through
stock exchange under Portfolio Investment Scheme, subject to the
terms and conditions specified in Schedules 3 and 4 to the FEMA
Notification No. 20/2000- RB dated May 3, 2000, as amended from
time to time.
• National Plan/Savings Certificates
• Units of domestic mutual funds
• Non-convertible debentures of a company incorporated in
• India
Note: NRIs are not permitted to invest in small savings or Public Provident
Fund (PPF).

B. Investment in Immovable Property

• NRI / PIO* / Foreign National who is a person resident in India

(citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China,
Iran, Nepal and Bhutan would require prior approval of the Reserve
Bank) may acquire immovable property in India other than
 agricultural land/ plantation property or a farm house out of
repatriable and / or non-repatriable funds.
• The payment of purchase price, if any, should be made out of

* funds received in India through normal banking channels by way

of inward remittance from any place outside India or
* funds held in any non-resident account maintained in
accordancewith the provisions of the Act and the regulations made
by the Reserve Bank.

Note: No payment of purchase price for acquisition of immovable

property shall be made either by traveller's cheque or by foreign currency
notes or by other mode other than those specifically permitted as above.

• NRI may acquire any immovable property in India other than

agricultural land / farm house plantation property, by way of gift
from a person resident in India or from a person residentoutside
India who is a citizen of India or from a person of Indian origin
resident outside India

• NRI may acquire any immovable property in India by way of

inheritance from a person resident outside India who had acquired
such property in accordance with the provisions of the foreign
exchange law in force at the time of acquisition by him or the
provisions of these Regulations or from a person resident in India

• An NRI may transfer any immovable property in India to a person

resident in India.

• NRI may transfer any immovable property other than agricultural or

plantation property or farm house to a person resident outside India
who is a citizen of India or to a person of Indian origin resident
outside India.

In respect of such investments, NRIs are eligible to repatriate:

• The sale proceeds of immovable property in India if the property

was acquired out of foreign exchange sources i.e. remitted through
 normal banking channels / by debit to
NRE / FCNR (B) account.
• The amount to be repatriated should not exceed the amount paid
for the property in foreign exchange received through normal
banking channel or by debit to NRE account (foreign currency
equivalent, as on the date of payment) or debit to FCNR (B)
account.
• In the event of sale of immovable property, other than agricultural
land / farm house / plantation property in India, by a person
resident outside India who is a citizen of India / PIO, the
repatriation of sale proceeds is restricted to not more than two
residential properties subject to certain conditions.
• If the property was acquired out of Rupee sources, NRI or PIO may
remit an amount up to USD one million per financial year out of the
balances held in the NRO account (inclusive of sale proceeds of
assets acquired by way of inheritance or settlement), for all the
bonafide purposes to the satisfaction of the Authorized Dealer bank
and subject to tax compliance.
• Refund of (a) application / earnest money / purchase consideration
made by house-building agencies/seller on account of non-allotment
of flats / plots and (b) cancellation of booking/deals for purchase of
residential/commercial properties, together with interest, net of
taxes, provided original payment is made out of NRE/FCNR (B)
account/inward remittances.

Repayment of Housing Loan of NRI / PIOs by close relatives of the

borrower in India

Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing

Financial Institutions in India can be repaid by the close relatives in India
of the borrower.

Facilities to returning NRIs/PIOs

• Returning NRIs/PIOs may continue to 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 when resident outside
India
• The income and sale proceeds of assets held abroad need not
be repatriated.

Foreign Currency Account

 • A person resident in India who has gone abroad for studies or
who is on a visit to a foreign country may open, hold and
maintain a Foreign Currency Account with a bank outside
India during his stay outside India, provided that on his return
to India, the balance in the account is repatriated to India.
However, short visits to India by the student who has gone
abroad for studies, before completion of his studies, shall not
be treated as his return to India.
• A person resident in India who has gone out of India to
participate in an exhibition/trade fair outside India may open,
hold and maintain a Foreign Currency Account with a bank
outside India for crediting the sale proceeds of goods on
display in the exhibition/trade fair. However, the balance in
the account is repatriated to India through normal banking
channels within a period of one month from the date of
closure of the exhibition/trade fair.

Resident Foreign Currency Account

• Returning NRIs /PIOs may open, hold and maintain with an

authorised dealer in India a Resident Foreign Currency (RFC)
Account to transfer balances held in NRE/FCNR(B) accounts.
• Proceeds of assets held outside India at the time of return can
be credited to RFC account.
• The funds in RFC accounts are free from all restrictions
regarding utilisation of foreign currency balances including
any restriction on investment in any form outside India.
• RFC accounts can be maintained in the form of current or
savings or term deposit accounts, where the account holder is
an individual and in the form of current or term deposits in all
other cases.

RFC accounts are permitted to be held jointly with the resident close
relative(s) as defined in the Companies Act, 1956 as joint holder (s) in
their RFC bank account on 'former or survivor basis'.

However, such resident Indian close relative, now being made eligible to
become joint account holder shall not be eligible to operate the account
during the life time of the resident account holder.

General facilities
Can Exchange Earners Foreign Currency (EEFC) accounts be held
jointly with a -resident Indian?

Yes, EEFC account of a resident individual can be held jointly with a

resident close relative on a"former or survivor basis.

However, such resident Indian close relative will not be eligible to operate
the account during the life time of the resident account holder.

Can a resident individual holding a savings bank account include

nonresident close relative as a joint account holder?

Yes, individuals resident in India are permitted to include non-resident

close relatives) as a joint holder(s) in their resident bank accounts on
'former or survivor' basis. However, such nonresident Indian close
relatives shall not be eligible to operate the account during the life time of
the resident account holder.

Can a resident individual gift shares/securities/convertible

debentures ete to NRI close relative?

Yes, a resident individual is permitted to gift shares/securities/convertible

debentures etc to NRI close relative up to USD 50,000 per financial year
subject to certain conditions.

Can a resident individual give rupee gifts to his visiting NRI/PIO

close relatives?

Yes, a resident individual can give rupee gifts to his visiting NRI/PIO close
relatives by way of crossed cheque/electronic transfer within the overall
limit of USD 200,000 per financial year for the resident individual and the
gifted amount should be credited to the beneficiary's NRO account.

What types of services can be provided by a resident individual to

his / her nonresident close relatives?

A resident may make payment in rupees towards meeting expenses on

account of boarding, lodging and services related thereto or travel to and
from and within India of a person resident outside India who is on a visit
to India. Further, where the medical expenses in respect of NRI close
relative are paid by a resident individual, such a payment being in the
nature of a resident to resident transaction may also be covered under
the term "services".

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