Money Transfer Rules for NRI

For facilitating International trade and to ensure the stability of the foreign exchange rates, a country needs to maintain adequate foreign exchange reserves. Foreign exchange reserves are the currency of foreign countries held by a central bank (R.B.I. in India).Non-Resident Indian play an important role in generating foreign exchange reserves. As per the World Bank report, India was the world’s top recipient remittance totaling USD 79 billion.

MONEY TRANSFER RULES FOR NRI

Non-Residential Indian (NRI):

As per the definition in Regulation 2 of Notification No.  FEMA 5(R)/2016- RBI/GSR 389(E) dated April 1, 2016, NRI can be defined as a person resident outside India who is a citizen of India.

As per section 2(w) of FEMA Act, 1999, a person resident outside India” means a person who is not resident in India.

NRI’s can be categorized as:

  • a person residing in India for less than one hundred and eighty-two days during the course of the preceding financial year
  • a person who went abroad or who stays outside India, for or on taking up employment outside India
  • a person who has gone out of India or who stays outside India, for carrying on outside India a business or vocation outside India
  • a person who has gone out of India or who stays outside India, for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.

As per FEMA act, NRI can hold and maintain a Bank account in India which must fall in the below categories: 

  1. NRE
  2. NRO
  3. FCNR (B)

NRE (Non-Resident External Rupee Account):

NRE account is a repatriable account denominated in Indian rupees, which can be maintained in the form of savings, current, recurring, fixed deposit account.

The account is mainly opened to deposit or remit earnings made from outside India.

Permissible credits are:

  • Inward remittance from outside India
  • Interest accruing on the account and on investment
  • If investments are made from this account or inward remittance, then the proceeds of such investments
  • Transfer from other NRE/ FCNR(B) accounts
  • All current income like rent, interest, dividend, etc.. arising from the investments made from this account.

Average monthly balance of ₹10,000/- is required to be maintained in the NRE savings account

It can freely debit without any limit and charges for:

  • Local disbursements
  • Remittance outside India
  • Transfer to other NRE/ FCNR (B) accounts 
  • For Investments in India.

Interest earned and balances in the account are exempt from income tax and wealth tax.

NRO(Non-resident Ordinary Rupee Account):

NRO account is a Non-repatriable (except for all current income)denominated in Indian rupees which can be maintained in the form of savings, current, recurring, fixed deposit. Balances in NRO account are repatriable by NRIs/PIOs up to USD 1 million per financial year along with their other eligible assets.

The account is mainly opened to deposit or remit earnings made in India.

Permissible credits are: 

  • Inward remittance from outside India
  • Legitimate dues in India
  • Transfers from Other NRO accounts
  • Rupee Gift or Loan from resident relative not exceeding the limit prescribed under Liberalised Remittance Scheme (i.e., USD 2,50,000 per financial year )

Average monthly balance of ₹10,000/- is required to be maintained in the NRO savings account

Permissible debits are:

  • Local payments
  • Transfer to Other NRO accounts
  • Remittance of current income like rent, dividend, pension, interest,etc..to outside India after deduction of tax.

Interest earned in the NRO account is subject to taxation as per the Income Tax Act.

Foreign Currency Non-Resident (Bank) account(FCNR (B):

FCNR(B) Account is a repatriable account denominated in any permitted currencies which are freely convertible and are maintained in the form of Term Deposit only. The maturity period of the term deposit can be between 1 year to 5 years.

Permissible credits are: 

  • Inward remittance from outside India.
  • Interest accruing on the account and on investment.
  • If investments are made from this account or inward remittance, then the proceeds of such investments.
  • Transfer from other NRE/ FCNR(B) accounts.
  • Transfer from other NRO (subject to limits). 
  • All current incomes like rent, interest, dividend, etc.

Permissible Debits are:

  • Local disbursements.
  • Remittance outside India.
  • Transfer to other NRE/ FCNR(B) accounts.
  • For Investments in India.

As per FEMA regulations, both the interest and principal amount earned on FCNR (B) account are Tax-free (exempt from tax).

Guidelines, Rules/Regulations:

  • A resident including minor can freely remit up to USD 2,50,000 per financial year for any permissible transactions of current a/c or capital a/c or of both under Liberalised Remittance Scheme (LRS).
  • Permanent Account Number (PAN) should be mandatorily quoted /mentioned for all transactions under LRS.
  • To comply with the requirement of tax laws Authorised Dealers (Banks) require Form A2, Form 15ca & Form 15cb (signed by a Chartered Accountant or Assessing Officer) to remit the Funds to Overseas.

Points to be noted:

  • When a resident becomes an NRI as per the applicable laws it is illegal to maintain normal savings account in India as per FEMA act, hence the savings account should be converted to NRI accounts or existing savings account should be closed and new NRI account should be opened.
  • An NRI cannot Invest in Public Provident Fund (PPF).
  • An NRI can purchase any kind of Commercial & Real Estate Property in India except Agriculture Land, Plantation & Farm House.

 NRI TDS CERTIFICATE

FAQs:

1. Can NRI remit money to his family to their saving account in India?

Ans: Yes, NRI can remit money to his family to their savings account. There would be no tax implications in the hands of his respective family member assuming it to be as a Gift.

2. Does NRI really need to have an NRE/NRO account to send money to India?

Ans: As per the FEMA act, it is illegal to hold resident savings account by NRI. 

NRI can send money to India without opening NRE/NRO account to any account other than his own Bank Account in India. This can be done through different money transfer agencies and upon payment of a requisite fee for the transfer.

If NRI is making an investment in his own name, NRI can directly transfer the funds to the seller through normal banking channels (wire transfer, etc.)

If NRI wants to transfer his funds to his own account, he shall need a Bank Account. As per FEMA, NRI can hold three types of account in India i.e.., NRE or NRO or FCNR (B) account.

3. Can the NRO, NRE, FCNR (B) Account be a Joint Account?

Ans: Yes, the NRO, NRE, FCNR (B) Account can be a Joint Account, provided all the account holders are either NRIs or PIOs or any combination of the two. 

4. What type of NRI account is permitted to open jointly with another person who is a resident in India?

Ans: NRO account.

5. Can the NRO, NRE, FCNR (B) Account be operated on behalf of the NRI/PIO?

Ans: Yes, NRE and FCNR account can be operated by a resident relative as a “Power of Attorney” on behalf of the NRI/PIO. Such operations of the account by the “Power of Attorney “ will be restricted to the extent of withdrawals for local payments or remittance to the account holder himself through banking channels. NRO account can be jointly operated by the NRI/PIO and the resident joint account holder.

6. What type of account can be maintained under FCNR (B) account?

Ans: Term Deposit  Only.

7. What type of account can be maintained under NRO, NRE account?

Ans:  Savings, Current, Recurring, Fixed deposit account

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