Q.1 Who is eligible to acquire Immovable Property (IP) in India?

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) can acquire IP in India.

An NRI is a citizen of India resident outside India.

A PIO means an individual (not being a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal or Bhutan) who:

• At any time held the Indian passport or
• Either of whose parents or grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

Q.2 Citizens of which countries are prohibited from purchasing an IP in India?

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are not allowed to acquire IP in India.

Q.3 Which type of IP can be purchased?

Any IP but other than Agricultural land, Plantation property or Farm House can be purchased.

Q.4 Is repatriation on sale proceeds of such IP allowed?

Yes, the repatriation of sale proceeds is allowed provided:

• The property was acquired in accordance with the Foreign Exchange law prevailing at the time of such acquisition;
• The amount to be repatriated does not exceed the amount paid for such acquisition through inward remittance of foreign exchange by normal banking channel or Foreign Currency Non Resident Account or Non Resident External Account;
• In case of residential property, the repatriation of sale proceeds is restricted to two such properties.

In addition to the above the repatriation can also be done through US $ 1 million scheme available to Non-Resident Indians.

Q.5 Can a Subsidiary or a Joint Venture Indian Company or a Branch office of a foreign Holding Company purchase an IP?

A Subsidiary or a Joint Venture Indian Company or a Branch office of a foreign Holding company can purchase IP in India if it is necessary to and incidental to carrying on their business activity in India.

However, a Liaison office cannot acquire an IP in India. It can only take IP on lease for a period less than 5 years.

Q.6 Is there any reporting to The RBI at the time of Purchase of IP in India?

No reporting to the RBI is required to be done at the time of purchase of IP except in case of a Branch office, which is required to report to the RBI within 90 days of purchase of such IP in the Form IPI.

Q.7 Can foreign nationals of non-Indian origin resident outside India purchase IP in India?

Foreign nationals of non Indian origin are not allowed to purchase IP in India.

However, foreign nationals of non Indian origin, other than from the countries as specified above, can purchase IP in India on becoming resident in India in terms of Foreign Exchange Management Act and duly satisfying the condition of period of stay and intention of to stay in India for uncertain period of time.

Q.1 Who is eligible to acquire Immovable Property (IP) in India?

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) can acquire IP in India.

An NRI is a citizen of India resident outside India.

A PIO means an individual (not being a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal or Bhutan) who:

• At any time held the Indian passport or
• Either of whose parents or grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

Q.2 What is the procedure of receiving FDI in India?

FDI is regulated by FDI Policy of The Department of Industrial Policy and Promotion (DIPP). The FDI can be received under two routes:

A. Automatic Route:

FDI is allowed under Automatic Route without obtaining any permission from any Government body in respect of all the sectors as specified in the FDI Policy and subject to the sectoral cap on the percentage of shareholding in such sectors.

B. Approval Route:

FDI not covered under automatic route, can be allowed only after obtaining prior permission from the Government which are considered by the Foreign Investment Promotion Board (FIPB) under Finance Ministry.

However, in both the cases, the reporting requirements of the RBI have to be complied with.

Q.3 What are the instruments of receiving FDI in India?

FDI can be made through subscription to Equity Share Capital, Fully and Mandatorily Convertible Preference Shares or Fully and Mandatorily Convertible Debentures with the conversion price decided upfront as a figure or based on a formula.

Q.4 Which are the sectors in which FDI is not allowed in India?

FDI is not allowed in the following sectors:

• Atomic Energy;
• Lottery, gambling and betting;
• Business of chit fund and nidhi Company;
• Agriculture and Plantation activities (Other than tea plantation);
• Housing and Real Estate business (except to the extent specified in notification on development of township, construction of Residential/Commercial premises, roads or bridges;
• Trading in Transferable Development Rights (TDR);
• Manufacture of cigars, cheroots, tobacco etc.

Q.5 Are the investments and profits earned in India are repatriable?

Dividend declared by the Indian Company is fully repatriable subject to payment of Dividend Distribution Tax by the Company.

Investment made in India is also fully repatriable subject to payment of all the taxes.

NRIs that specifically choose to invest under non-repatriable schemes cannot repatriate their investments.

Q.1 Can foreign tourists open a bank account during their short visit to India?

Yes, foreign tourist can open a Non-Resident (Ordinary) Account (NRO Account) during their short visit to India. Such account can be opened for a maximum period of 6 months only.

Q. 2 What documents are required to open such bank account?

Passport and other identification proof is necessary for the bank to open such bank account. The Bank will also follow Know Your Customer (KYC) norms before opening such bank account.

Q. 3 What are permissible deposits and withdrawals in such accounts?

Permissible deposits:

• Inward remittance from outside India through normal banking channel;
• Rupee obtained by sale of foreign exchange brought by the tourist in India;
• Bank interest earned on the account.

Permissible withdrawals:

• All local payments through cheques;
• Cash withdrawal from the account.

Q. 4 Can foreign tourist repatriate the balance held in NRO account at the time of departure from India?

Yes, provided that the NRO account has been maintained for a period less than 6 months and the account has not been credited by any local funds, other than bank interest thereon.

Q.1 Can NRI invest in shares and debentures issued by Indian company?

Yes, NRIs are eligible to purchase shares and convertible debentures of Indian Company under PIS subject to obtaining permission from any AD category I bank.

Q.2 In which type of Companies, NRIs are prohibited from investing in?

NRIs are not allowed to invest in any Indian Company which is engaged in the business of chit fund, Nidhi Company, Agriculture or Plantation activities, real estate business (does not include township development, construction of residential/commercial premises, roads or bridges, educational institutions, recreation facilities, city and regional level infrastructure), construction of farm houses, manufacture of cigars, cheroots, tobacco products etc. and trading in Transferable Development Rights (TDRs).

Q.3 Is there any limit on investment by NRI in Indian Company?

Yes, purchase of equity shares by an NRI in Indian Company, on repatriable and non-repatriable basis shall not exceed 5% of paid up capital of the Company subject to an overall ceiling of 10% of total paid up capital of the Company by all NRIs taken together.

Q.4 Can NRI operate PIS through multiple banks?

No, NRIs must carry out all their dealings under PIS through single designated branch of the AD bank. AD bank shall open a separate bank account of NRE/NRO account for the exclusive purpose of routing all the transactions of the NRI under the PIS.

Q.5 Which are the types of bank accounts NRI can operate with?

All the investments on ?Repatriable basis? can be operated through NRE account and all the investments made on ?Non-Repatriable basis? can be operated through NRO account.

Q.6 What are permissible credits and debits in these accounts for routing PIS transactions?

NRE Account

Permissible Credits:

• Inward Remittance through normal banking channel;
• Transfer from other NRE or FCNR (B) account;
• Net sale proceeds of shares and convertible debentures acquired under repatriable basis, after payment of taxes;
• Dividend or income earned on investment under PIS.

Permissible Debits:

• Outward remittance of dividend and income earned, after payment of taxes;
• Amounts paid for investment on repatriation basis on stock exchange through registered broker;
• Any other charges on account of PIS investment.

NRO Account

Permissible Credits:

• Inward Remittance through normal banking channel;
• Transfer from other NRE or FCNR (B) or NRO account;
• Net sale proceeds of shares and convertible debentures acquired under repatriable basis (At the option of the NRI) and under non-repatriable basis under PIS on stock exchange through registered broker , after payment of taxes;
• Dividend or income earned on investment under PIS.

Permissible Debits:

• Outward remittance of dividend and income earned, after payment of taxes;
• Amounts paid for investment on non-repatriation basis on stock exchange through registered broker;
• Any other charges on account of PIS investment.

Q.7 Is there any lock-in-period on investment by NRI?

No, there is no lock-in-period on investment by NRI.

Q.8 Is there any reporting requirement by NRI up on PIS investment?

No, there is no reporting requirement by the NRI. It is the AD bank who is responsible for reporting the PIS transactions to the RBI

Borrowing by Non Resident Indian (NRI):

Q.1 Can an NRI borrow money from an Indian bank?

An NRI is permitted to borrow money from an Indian bank against security of:

• Shares or other securities;
• Immovable property (other than agricultural or plantation property).

Q. 2 What are the conditions for such borrowing?

Such borrowing is subject to the following conditions:

• The funds should not be utilised for “prohibitory sectors”;
• The funds should be utilised for NRI’s personal requirement or his own business purposes;
• The funds should get credited to his NRO account in India;
• The loan amount shall not be remitted outside India;

Q. 3 How can repayment of this loan be made?

The repayment of this loan may be made by sale of shares or securities or immovable property against which the borrowing was made. The repayment may be made from NRO or NRE or FCNR account in India or remittance from out of India through normal banking channel.

Q. 4 Can an NRI borrow money for acquiring a house property in India?

Yes, an NRI can borrow money from any bank or housing financial institution in India for the purpose of acquiring or renovating a house property in India.

Q. 5 Can NRI borrow money from his friends and relatives?

n NRI cannot borrow money from his friends.

However, an NRI can borrow money from his “close relatives”. (Close relative as defined under the Companies’ Act.) Such borrowing shall be subject to following conditions:

• The loan should be interest free;
• The maturity period of loan should be more than ONE year;
• The loan amount should be within overall limit under the Liberalised Remittance Scheme (LRS) of the resident lender;
• The loan should not be utilised for prohibitory sectors;
• The funds should get credited to his NRO account in India;
• The loan amount shall not be remitted outside India;
• The repayment may be made from NRO or NRE or FCNR account in India or remittance from out of India through normal banking channel.

Borrowing by Indian Resident from NRI:

Corporate Resident:

Q. 1 Can an Indian Company borrow from a non resident?

RBI has prohibited borrowing by any corporate from a non resident. A corporate may however borrow from a NRI or a PIO subject to the following conditions:

• Investment through issue of Non – Convertible Debentures (NCD);
• Issue of NCD should be made by public offer;
• The period of redemption of NCD is more than 3 years;
• The borrowing Company is not carrying on activities which are covered under prohibitory sectors;
• Restriction on the rate of interest;
• The borrowing is on non repatriable basis.

Q. 2 Can an Indian Company accept Deposit from a non resident?

Any Indian proprietorship concern, partnership firm or a Company can accept deposit from an NRI subject to the following conditions:

• The period of maturity of the deposit should be less than 3 years;
• The deposit should be received by way of debit to NRO account only. The amount of deposit should not represent inward remittance or transfer of funds from NRE or FCNR account into the NRO account; (This implies that it should be local funds)
• The deposit amount should not be utilised for undertaking activities covered under prohibitory sectors;
• The amount of deposit accepted should not be allowed to be repatriated outside India.

Resident Individual:

Q. 1 Can a Resident Indian borrow money from any NRI?

A Resident Indian is allowed to borrow from an NRI subject to following conditions:

• The period of loan is less than 3 years;
• Restriction on rate of interest;
• Payment of interest and repayment of loan should be credited only to NRO account;
• The amount borrowed would not be allowed to be repatriated outside India.

In all the cases of borrowing by a Resident, the borrowed funds cannot be utilised for any of the following activities:

• Business of chit fund;
• As Nidhi Company;
• Agricultural or plantation activities;
• Real estate business;
• Trading in TDRs;
• Investments by way of Capital or otherwise, in any Company or Partnership firm or proprietorship concern or any entity;
• Re-lending.