MASTER CIRCULAR ON REMITTANCE FACILITIES FOR NON RESIDENT INDIANS/PERSONS OF INDIAN ORIGIN/FOREIGN NATIONALS

[Mr. M. GOVINDARAJAN]

Section 6 (1) of Foreign Exchange Management Act, 1999 ('FEMA' for short) provides that subject to the provisions of sub section (2) any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction.   Sub section (2) provides that the Reserve Bank may, in consultation with the Central Government, specify:

> Any class or classes of capital account transactions which are permissible;

> The limit up to which foreign exchange shall be admissible for such transactions.

Remittance facilities for non residents/persons of Indian origin/foreign nationals are being governed by sub section (1) and (2) of Section 6 of Foreign Exchange Management Act, 1999 read with FEMA Notification No.13/2000-RB and FEMA Notification No. 21/2000-RB dated 3rd May 2000 amended from time to time. A master circular consolidating the existing instructions on the above subject is issued by Reserve Bank of India vide No. 4/2009-10, dated 1st July 2009, with a sun set clause of one year. This circular will stand withdrawn on 1st July 2010 and be replaced by an updated Master Circular on the subject.

The master circular defines the term 'Non Resident Indian' ('NRI' for short) and 'Person of Indian Origin' ('PIO' for short).   'Non Resident Indian' is defined as a person resident outside India who is a citizen of India.   'Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan who had-

(a) at any time held Indian passport; or

(b) he or either of his parents or any of his grandparents was  a citizen by virtue of the Constitution of India or the Citizenship Act, 1955; or

(c) the person is a spouse of an Indian citizen or a person referred to in (a) or (b).

The master circular dealt with the following:

> Remittance of  capital assets in India;

> Remittance of current income;

> Remittance of assets by a foreign national of non Indian origin;

> Remittance of assets by NRI/PIO;

> Repatriation of sale proceeds of residential property purchased by NRIs/PIO out of foreign exchange;

> Facilities for students;

> Income tax clearance;

> International credit cards.

Remittance of capital assets in India:

Remittance of capital assets in India held by a person, whether resident in or outside India, would require approval of the Reserve Bank of India except to the extent provided in FEMA or Rules or Regulations made there under.

Remittance of current income:

Remittance outside India of current income like rent, dividend, pension, interest etc., in India of the account holder is permissible debit to the Non Resident (Ordinary) Rupee Account ('NRO Account' for short). Authorized dealer banks may allow repatriation of current income of NRIs who do not maintain an NRO account in India based on appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.  NRIs/PIO are having the option to credit the current income to their Non Resident (External) Rupee Account, provided the authorized dealer is satisfied that the credit represents current income of the non resident account holder and income tax there on has been deducted/provided for.

Remittance of assets by a foreign national of non Indian origin:

The limit for remittance is prescribed.   A foreign national of Indian origin who-

> has retired from an employment in India; or

> has inherited assets from a person resident in India; or

> is a widow of an Indian citizen who was resident in India may remit an amount not exceeding US$ one million per financial year-

> on production of documentary evidence in support of acquisition/inheritance of assets;

> an undertaking by the remitter; and

> certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, vide their circular No.10/2002 dated 9th October, 2002.

Remittance of assets by NRI/PIO:

The limit for remittance is prescribed and also the conditions for the same. A NRI or PIO may remit an amount up to US$ one million, per financial year out of the NRO account/sale proceeds of assets, inclusive of assets acquired by way of inheritance or settlement, for all bona fide purposes, subject to-

> the satisfaction of the authorized bank; and

> on production of an undertaking by the remitter; and

> certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their circular No. 10/2002 dated 9th October, 2002.

The said remittance may be without any lock-in period.  In such cases NRI/PIO may submit to the authorized dealer documentary evidence in support of inheritance or legacy of assets, an undertaking by the remitter and certificate by the Chartered Accountant.

In case settlement is done without retaining any life interest in property, i.e., during the lifetime of the owner/parent, it would be tantamount to regular transfer by way of gift.   The remittance of sale proceeds of such property would be guided by the extant instructions on remittance of balance in the NRO account.

Repatriation of sale proceeds of residential property purchased by NRIs/PIO out of foreign exchange:

The following are the procedure for repatriation of sale proceeds of residential property purchased by NRI/PIO:

> permission is to the extent of amount paid for acquisition of immoveable property in foreign exchange received through banking channels;

> restricted to not more than two such properties;

> balance amount can be credited to NRO account and can be remitted under US$ one million facility;

Authorized dealer banks may permit repatriation of amounts representing-

> the refund of application;

> earnest money;

> purchase consideration made by the house building agencies;

> seller on account of non allotment of flat/plot;

> cancellation of bookings;

> deals for purchase of residential/commercial property

together with interest, if any provided the original payment was made out of NRE/FCNR (B) account of the account holder, or remittance made from outside India through normal banking channels and the authorized bank is satisfied about the genuineness of the transaction. Such funds may also be credited to the NRE/FCNR (B) account of the NRI/PIO, if they so desire.

Authorized dealer banks may allow repatriation of sale proceeds of residential accommodation purchased by NRIs/PIO out of funds raised by them by way of loans from the authorized dealer banks/housing finance institutions to the extent of such loan/s repaid by them out of foreign inward remittances received through normal banking channel or by debit to their NRE/FCNR (B) accounts.

Facilities for Students:

Students going abroad for studies are treated as NRIs and are eligible for all the facilities available to NRIs under FEMA.  Students are eligible to receive remittance from India-

> up to US$ 100,000 from close relatives in India, on self declaration towards maintenance which could include remittance towards their studies also; and

> up to US$ one million per financial year, out of sale proceeds of assets/balances in their NRO account maintained with an authorized dealer bank in India;

Educational and other loans availed of by them as residents in India will continue to be available as per FEMA Regulations.

Income Tax Clearance:

It is the authorized dealer bank is to allow remittance on production of an undertaking by the remitter and a certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, in their circular No. 10/2002 dt. 9th October, 2002.

International Credit Cards:

The Master circular permits the authorized dealer banks to issue international credit cards to NRIs/PIO without prior approval of the Reserve Bank.   Such transactions are to be settled by inward remittance or out of the balances held in the cardholder's FCNR (B)/NRE/NRO accounts.

The Master Circular provides opportunities to Chartered Accountants in giving necessary certificates.  The remittance facility of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.  The facility of remittance of sale proceeds of other financial asset is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.