H. NRI, PIO, NRE,
NRO, FCNR
1. Section 2 (v) and Section 2 (w) of Foreign Exchange Management Act (FEMA),1999
defines `person resident in India' and a `person resident outside India',
respectively.
2. Person resident outside India is categorized as Non- Resident Indian
(NRI) or a foreign national of Indian Origin (PIO) or a foreign national of
non-Indian origin.
3. Fema further clarifies that a PIO is a foreign citizen of Indian
origin residing outside India, other than Pakistan and Bangladesh, (a) who has
held an Indian passport at any time or (b) who himself or his parents or
grandparents were citizens of India or (c) who is a spouse of an Indian citizen
or (d) who is a spouse of a person covered under (a) or (b).
4. Under FEMA, residential status is determined by operation of law.
5. The onus is on an individual to prove his / her residential status,
if questioned by any authority.
6. A person resident in India who is not a citizen of India is also
covered by the relevant Notifications.
7. In terms of the provisions of Section 6(5) of FEMA 1999, a person
resident outside India can hold, own, transfer or invest in Indian currency,
security or any immovable property situated in India if such currency, security
or property was acquired, held or owned by such person when he was a resident
in India or inherited from a person who was a resident in India.
8. The regulations under Notification No. FEMA 21/2000-RB dated May 3,
2000, as amended from time to time, permit a NRI or a PIO to acquire immovable
property in India, other than agricultural land or, plantation property or farm
house.
9. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of FEMA Regulations, 2000, as amended from time to time.
9. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of FEMA Regulations, 2000, as amended from time to time.
10. The Reserve Bank of India does not determine the residential status
of a person, but all investments made by NRIs have to be in local currency,
that is, the rupee.
11. There are three basic types of bank
accounts for NRIs.
a) Go for a Non-Resident External (NRE)
rupee account if you are looking to remit overseas earnings to India and hold
them in rupees, as also to repatriate the proceeds of your investments back to
your current (home) country of residence without any restrictions.
b) An NRE account can be opened with money from abroad or local funds, is completely tax-free and no tax is payable on the
interest earned on the balance.
c) But you cannot put income from rent,
salary and dividends in the NRE account.
d) For that you need a Non-Resident Ordinary
(NRO) account, which is
a non-repatriable rupee account, and the interest
earned is taxed at the marginal rate of 30% plus surcharge and cess.
e) The advantage is that NRO accounts
can be jointly opened with a Resident Indian (RI).
f) If you do not wish to be exposed to exchange rate risk, you
can instead open a Foreign Currency Non-Resident (FCNR) account, where your
funds are held in the foreign currency, and not converted to rupees.
g) The FCNR account is similar to the NRE account, except for the fact
that the funds are held in a foreign currency.
h) The amount that is to be invested can be directly debited from an
NRE/NRO account or received by inward remittances through normal banking
channels.
12. Choose
NRE account if
o
You want to have your
overseas earnings remitted to India converted into rupees.
o
You want your rupee
savings to be freely repatriable to your current (home) country.
o
You want to make a
joint account with another NRI.
13. Choose NRO account if
o
You want to park your
rupee earnings in India.
o
You have other income
earned in India such as rent and dividends.
o
You want to open a
joint account with a Resident Indian.