In one of my earlier posts, I had discussed about the Liberalised Remittance Scheme (LRS) Link which is available only to residents under the FEMA law.
However, a question may arise that what about NRI or expats? Are they allowed to remit the proceeds of their Indian investments outside India? What are the conditions around it?
This and more, I will discuss in today’s post.
Applicable Regulations
Before moving forward, let us proceed by listing out the Regulations and relevant Master Directions which cover this topic. This will help you in case the Authorised Dealer (AD) bank asks you any questions.
- FEM (Deposit) Regulations, 2016 Link
- Master Direction on Deposits and Accounts – 2016 Link
- FEM (Remittance of Assets) Regulations, 2016 Link
- Master Direction on Other Remittance Facilities Link
- RBI FAQ on Remittance of Assets Link
Remittance of Assets – Meaning
FEM (Remittance of Assets) Regulations, 2016 defines remittance of asset as a remittance outside India ONLY of following assets:
- Deposit with a bank or a firm or a company,
- Provident fund balance or superannuation benefits,
- Amount of claim or maturity proceeds of Insurance policy,
- Sale proceeds of shares, securities, immovable property, or
- Any other asset held in India in accordance with the provisions of the Act or rules or regulations made there under
Remittance of Assets: Certain Basic principles
- The transaction of remittance has to be either a permitted capital account transaction or a transaction which is not a prohibited current account transaction – for clarity on this, please check my post: Capital and Current Account Transaction as per FEMA
- Even if a transaction is not specifically allowed by any of the above regulations or exceeding the USD 1 MN limit (as we’ll discuss further in this post), you are allowed to seek a specific approval from RBI.
- Many a times, the AD banks are themselves not clear on the legal position on this point. In case of confusion on whether the remittance is allowed or not, it is a good option to seek a specific clarification from RBI.
Remittance facilities: Foreign nationals (other than PIO)
#1: Retirement Benefits/Inheritance/Legacy
If the following conditions are satisfied, person can remit upto USD 1,000,000 (US Dollar One million only) per financial year:
- Person is a citizen of foreign state not being a Person of Indian origin (PIO) or a citizen of Nepal or Bhutan, who has retired from an employment in India, or who has inherited the assets from a person resident in India, or
- Person is a widow/ widower resident outside India and has inherited assets of the deceased spouse who was an Indian citizen resident in India
#2: Foreign visitors to India
As per FEM Deposit Regulations, NRO (current/ savings) account can 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.
The balance in the NRO account may be paid to the account holder at the time of his departure from India provided:
- Account has been maintained for a period not exceeding six months, and;
- Account has not been credited with any local funds, other than interest accrued thereon.
#3: Salaries
A person who is resident but not permanently resident in India and
a. is a citizen of a foreign State other than Pakistan; or
b. is a citizen of India, who is on deputation to the office or branch of a foreign company or subsidiary or joint venture in India of such foreign company,
may make remittance up to his net salary (after deduction of taxes, contribution to provident fund and other deductions).
Meaning of “resident but not permanently resident in India”: A person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which does not exceed three years
#4: Overseas students studying in India
If you are a foreign national who have come to India for studies/ training and have completed your studies/ training, you are allowed to remit the balance available in your NRO account, provided:
- Such balance represents inward remittances from abroad through normal banking channels or rupee proceeds of foreign exchange brought by such person or
- Out of stipend/ scholarship received from the Government or any Organisation in India.
It may be noted that though there is no limit of remittance prescribed by RBI in such a case, however if the amount is unduly large, AD bank can ask for the proof of original inward remittance and stipend details – thus, you should keep the relevant bank statements and stipend receipts ready in case those details are asked.
Other points:
- You will have to produce documentary evidence in support of acquisition, inheritance or legacy of assets to the satisfaction of the AD bank e.g. a sale deed, will, succession certificate etc.
- If remittance is made in more than one instalment, all instalments need to be remitted through the same AD Bank.
- Sale proceeds of shares purchased in compliance of applicable FEMA regulations on repatriable basis will not be counted in the USD 1 MN limit.
- AD bank may also require you to provide Form 15CA CB in compliance with Income Tax Act.
- In case remittance sought in a financial year for inheritance, legacy etc. > USD 10 MN, you have to split it in two financial years – If you think there are genuine reasons, you can definitely send a letter to RBI stating the facts and seek a specific approval for your case.
Remittance facilities: NRI/PIO
An NRI/PIO can remit following upto USD 1,000,000 (US Dollar One million only) per financial year:
(i) out of the balances held in the NRO account/ sale proceeds of assets/ the assets acquired by him by way of inheritance/ legacy on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter;
(ii) Under a deed of settlement made by either of his parents or a relative (relative as defined in Section 2(77) of the Companies Act, 2013) and the settlement taking effect on the death of the settler, on production of the original deed of settlement;
Other points:
- If remittance is made in more than one instalment, all instalments need to be remitted through the same AD Bank.
- Where remittance is to be made from NRO, you need to furnish an undertaking to the AD bank that the said remittance is sought to be made out of your legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account. So, effectively, you cannot borrow from other NRI in rupees and remit that money outside India.
- Remittance from balances standing to the credit of NRE/FCNR account and of current income credited to NRO account can be made freely without any restrictions or compliances.
- Remittance from NRE/FCNR will not count towards the USD 1 MN limit
- Form A-2 is not applicable for remittance by foreign nationals/ NRI/ PIO – it is only applicable for remittance by resident individuals under the LRS scheme
- AD bank shall ask you for documentary proof in terms of sale deed, settlement deed, will, succession certificate etc. as applicable to prove genuineness of transaction.
- AD bank will also ask you to provide Form 15CA CB in compliance with Income Tax Act.
Sources: Various RBI regulations available on www.rbi.org.in
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