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Investments with repatriation benefits
100% scheme
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Industries
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Equity in new industries/expansion/diversification
of existing industries listed as high priority industries;
Indian company to obtain RBI approval
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Investment in trading companies primarily
engaged in exports (registered with Directorate General of
Foreign Trade as Export/ Trading House/ Star Trading House/
Super Star Trading House); Dividend balancing from export
earnings in specified industries; Indian company to obtain
RBI approval
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Equity in 100% Export Oriented Units (EOUs),
units in free trade zone/ export processing zones, software
technology parks (STPs) and Electronic Hardware Technology
Parks (EHTPs); permission required from development commissioner
of the Free Trade Zone/ EPZ/ Chief Executive of the STP/ EHTP
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New issues of equity in Indian companies
engaged in development of serviced plots, construction of
residential and commercial premises, townships, building materials
and financing of housing development.
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Lock in of three years; repatriation of net
profits for OCBs. No lock-in for repatriation of dividend/
interest/ convertible debentures of OCBs.
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Domestic air transport services
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Lock in of 5 years; repatriation and remittance
of dividends out of accumulated Net Foreign Exchange; approval
required from Foreign Investment Promotion Board
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Equity of sick industrial units ; no lock-in
for the investment
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Indian company to obtain RBI approval
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40% scheme
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Industries
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Subscription to new issue of equity/ convertible
debentures of new or existing companies (both private and
public limited) in industrial/ manufacturing projects (including
expansion and diversification), hospitals/ diagnostic centres,
hotels, shipping, software development and oil exploration
services; Indian company to file with the RBI
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Private banks (inclusive of 20% allowed to
other foreign investors)
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24% scheme
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Industries
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Subscription to new issue of equity/ convertible
debentures of new or existing companies (both private and
public limited) in finance, hire purchase, leasing, trading
or other services (except agriculture/ plantation activities)
and establishment of schools/ colleges; Indian company to
file with RBI. Investment upto 24% is also allowed for investment
in case of items reserved for the small scale sector
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Other than the lock-in periods specified above,
dividend/ interest income earned can be freely remitted.
Other investments with repatriation benefits
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Investments
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Domestic, private or public sector mutual
funds; the mutual fund is required to obtain RBI permission
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Bonds issued by Public Sector Undertakings
(PSUs); the PSU is required to obtain the permission of Government
of India (GoI)/ RBI
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Shares disinvested by GoI in PSUs; the shareholding
by a single NRI not to exceed 1% of the paid-up capital of
the PSU
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Fixed deposits with public limited companies
for a minimum period of three years; the company to obtain
RBI approval
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Government securities through (not in bearer
securities like Indira Vikas Patra/ Kisan Vikas Patra), units
of the Unit Trust of India though authorised dealers (units
can be purchased directly from UTI) and in National Savings
Certificates.
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Portfolio investment scheme
NRIs can acquire shares/ debentures of Indian
companies or units of domestic mutual funds through the stock exchanges
in India. There is an overall ceiling of 5% of paid-up equity share
capital of the company/ paid-up value of each series of convertible
debentures for purchase by NRIs/ OCBs.
An application for this has to be submitted to
the Reserve Bank though a designated branch. These designated branches
are the main branches of major commercial banks located close to
the stock exchange(s). An NRI can operate through only one selected
branch for this purpose. The Reserve Bank approval is valid for
a period of five years after which it may be renewed by a letter.
This scheme also allows for
- sale of shares/ bonds/ debentures by NRIs to residents
- ii. transfer of rupee securities by non-residents as gifts
- iii. transfer of rupee securities to non-residents as gifts
- loans abroad against securities provided in India
- loans in India to NRIs against shares/ securities/ properties
held by them in India
- loans in India to NRIs against security of NRI Bonds issued
by State Bank of India
- loans in India against guarantees by non-residents
- loans to residents against shares/ securities/ properties in
India from non-resident relatives.
Procedure for sale/ transfer
In case of shares/ debentures/ bonds acquired
by NRIs through the portfolio investment scheme, a general exemption
is provided by RBI if the sale is arranged through the same designated
branch through which they were purchased. In other cases, necessary
permission has to be obtained from RBI.
For sale/ transfer of shares/ debentures to residents
by private arrangements, permission has to be obtained from RBI.
General permission from the RBI is also available for transfer of
shares, bonds and debentures by way of gifts to resident close relative(s).
For sale/ transfer of shares/ debentures of Indian companies to
other NRIs, no permission is required from RBI. The transferee NRI
would need permission for purchase of the shares.
Government securities/ units can be transferred
through an authorised dealer while the units can also be repurchased
directly by UTI. Repatriation possible if the remittances were made
from abroad of from NRE/ FCNR accounts; sale proceeds from securities
purchased out of NRO accounts can only be credited to the NRO account.
Interest earned after the financial year 1994-95 onwards can be
remitted as permitted by Reserve Bank.
Investments without repatriation benefits
Upto 100%
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Investments
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Capital contribution upto 100% in any proprietary
or partnership concern engaged in industrial/ trading/ commercial
activity except agricultural/ plantation or real estate business
(not open to OCBs). The principal amount is non-repatriable.
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Subscription to shares/ convertible debentures
of Indian companies not engaged in agricultural/ plantation
or real estate business or is not a nidhi company or a chit
fund; this subscription is by way of new/ rights/ bonus issue
of shares. Payment shall be by inward remittances of from
RE/ FCNR/ NRO accounts
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Other investments
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Investments
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Investments in Non-convertible debentures
of Indian companies; approved by the RBI on a case-by-case
basis for the companies; NRIs can purchase shares/ debentures
of existing companies (application to be made by NRIs) on
an undertaking of non-repatriation
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Money market mutual funds floated by commercial
banks/ financial institutions (not open for OCBs)
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Deposits with companies (depositor has to
obtain RBI approval and is not open for OCBs)
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Commercial paper issued by Indian companies
(not open for OCBs)
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Remittance of income
on non-repatriable investments
Income/ interest accruing during the financial
year 1994-95 and onwards on bank deposits and investments held on
non-repatriation basis can be remitted in the following manner.
i. Upto US $ 1,000 or its equivalent in full and
one-third of the balance income earned during the financial year
1994-95
ii. Upto US $ 1,000 or its equivalent in full
and two-third of the balance income earned during the financial
year 1995-96
iii. Entire income earned during the financial
year 1996-97 and onwards
iv. Entire income earned during the financial
year 1996-97 and onwards
The NRI will designate a branch of an authorised
dealer; the designated branch will allow the remittance of the funds
to the NRE/ FCNR account.
General permission is available on transfer of
shares/ debentures/ bonds held on non-repatriation basis to residents;
sale proceeds are credited to an NRO account.
Investment in immovable
property
Non resident Indians
can acquire/ hold/ transfer/ dispose of immovable property. No permission
is required for this purpose. They cannot purchase agricultural
land, farm houses and plantation property. However, on acquiring
foreign citizenship, permission from RBI is required.
RBI has also granted general permission to Persons
of Indian Origin to acquire immovable property in India. The general
permission is also applicable for transfer/ disposal of the properties
(other than agricultural land, farm houses, plantation property).
Under this, Persons of Indian origin can acquire
immovable properties in India:
i. on non-repatriation basis for residential purposes
- The purchase consideration has to be made by way of remittance
from abroad or NRE/ FCNR account. The sale proceeds cannot be repatriated.
ii. on repatriation basis for residential purposes
as well as commercial properties - The purchase consideration has
to be made by way of remittance from abroad or NRE/ FCNR account.
Repatriation facility is limited to sale proceeds of two residential
properties; there is no such restriction in respect of commercial
properties.
iii. by way of gift/ inheritance - The gift should
have been received from a relative who may be an Indian citizen
or person of Indian origin; general permission is available only
in respect of two houses.
iv. out of rupee funds - Prior permission of the
Reserve Bank of India is required
Residential or commercial properties can be let
out for rent if not for immediate use, The rental proceeds or proceeds
of any investment of such income has to be credited to the NRO account.
Repatriation of sale proceeds
The general permission is also available
in case of disposal of the immovable properties. Sale proceeds equivalent
to the original amount of purchase consideration remitted can be
repatriated after a lock-in period of three years. The balance amount
has to be credited to the NRO account of the seller. The period
of lock-in is applicable from the date of final purchase deed or
from the date of payment of final instalment of consideration amount,
whichever is later.
Procedure
Persons of Indian Origin
are required to file a declaration in form IPI 7 with the Central
Office of the Reserve Bank. This must be filed within 90 days from
the date of purchase of immovable property or final payment of purchase
consideration. A certified copy of the documents evidencing the
transaction and bank certificate regarding the consideration paid
is to be filed alongwith the form. Application for permission for
remittance is to be filed in form IPI 8 within 90 days of the sale
of the property.
Can
NRIs obtain housing finance?
Certain financial institutions grant housing
loans to NRIs for acquisition of houses/ flats for self-occupation.
Authorised dealers can grant loans to NRIs for acquisition of house/
flat for self-occupation on their return to India. Repayment of
the loan should be made within a period not exceeding 15 years out
of inward remittance through banking channels or from funds in NRE/
FCNR accounts. Indian companies can grant housing loans to their
employees deputed abroad and holding Indian passport. All these
loans are subject to specific loan covenants; details can be obtained
from banks/ institutions.
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