Foreign Exchange

Remittance,

Investment and Accounts

Facilities Available To

Resident and

Non-Resident Indians

(Individuals)

June 2018

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Contents
Part 1

Foreign Exchange Facilities for Resident Indians

A. Remittance facilities for individuals under LRS ... 5
1. Permissible capital account transactions ... 5
2. Permissible current account transactions ... 6
i. Private visits ... 7
ii. Gift/donation ... 7
iii. Going abroad for employment ... 7
iv. Emigration ... 7
v. Maintenance of close relatives abroad ... 7
vi. Business trip ... 8
vii. Medical treatment abroad ... 8
viii. Study abroad ... 9
3. General guidelines for undertaking LRS ... 9
transactions
4. Loan to NRI in rupees ... 11
5. Gift to NRI ... 13
6. Operational instructions to banks ... 13
7. Remittance of salary ... 17
8. Meeting of medical exps of NRI close relatives ... 17
9. Loan from NRI ... 18

B. Other facilities
1. Release of foreign currency notes ... 18
2. Period of release of foreign exchange ... 19
3. Period of surrender of foreign exchange ... 19
4. Unspent foreign exchange ... 20
5. Export and import of Indian currency ... 20
6. Use of international Debit, Credit and ... 21
Charged Cards

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7. Income tax clearance ... 24
8. Booking of forward contracts ... 24
9. Export of Gift and Parcel ... 25

C. Foreign currency accounts and deposit ... 26

facilities
1. Exchange Earners' Foreign Currency Account ... 26
2. Resident Foreign Currency Account ... 28
3. Resident Foreign Currency (D) Account ... 29
4. Foreign Currency Account abroad ... 31

Part B
Foreign Exchange Facilities for Non-Resident Indians
A. Accounts facilities ... 32
1. Non Resident External Rupee account ... 33
2. FCNR (B) Accounts ... 37
3. NRO account ... 37
4. Special Non-Resident rupee account ... 41
5. Deposits in companies by NRIs on ... 41
repatriation basis
6. Deposits in proprietorship/firm by NRIs on ... 42
non-repatriation basis
7. Nomination facility in accounts ... 42

B. Investment facilities ... 42

1. Investment in listed Indian companies ... 42
2. Investments in other securities ... 43
i. On repatriation basis ... 43
ii. On non-repatriation basis ... 44
3. Prohibited investments ... 45
4. Investments in immovable properties ... 45

***

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FOREIGN EXCHANGE REMITTANCE AND
ACCOUNTS FACILITIES FOR RESIDENT INDIANS

A. REMITTANCE FACILITIES FOR INDIVIDUALS

On account of introducing the concepts of
Liberalization, Privatization and Globalization in the
Indain economy from the year 1991 onwards foreign
exchange sector witnessed many change. It resulted
in offering liberal remittance and accounts facilities to
Resident Indians, which were not/few available earlier.
Presently Under the Liberalised Remittance Scheme,
Authorised Dealers may freely allow remittances by
resident individuals up to USD 2,50,000 per Financial
Year (April-March) for any permitted current or capital
account transaction or a combination of both. The
Scheme is not available to corporates, partnership firms,
HUF, Trusts, etc.

PERMISSIBLE CAPITAL ACCOUNT

TRANSACTIONS FOR INDIVIDUALS UNDER LRS
Capital account transaction refers to transaction which
alters the asset/liability outside India of a Person
Resident in India.LRS facility can be used by resident
individuals for the following capital account transactions.
1. Opening of foreign currency account abroad with a
bank;
2. Purchase of property abroad;
3. Making investments abroad- acquisition and holding
shares of both listed and unlisted overseas company
or debt instruments; acquisition of qualification
shares of an overseas company for holding the post
of Director; acquisition of shares of a foreign
company towards professional services rendered
or in lieu of Director's remuneration; investment in
units of Mutual Funds, Venture Capital Funds,
unrated debt securities, promissory notes;
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4. Setting up Wholly Owned Subsidiaries and Joint
Ventures (with effect from August 05, 2013) outside
India for bonafide business subject to the terms &
conditions stipulated in Notification No FEMA.263/
RB-2013 dated March 5, 2013;

5. Extending loans including loans in Indian Rupees to

Non-resident Indians (NRIs) who are relatives as
defined in Sec 2(77) Companies Act, 2013.

PERMISSIBLE CURRENT ACCOUNT

TRANSACTIONS FOR INDIVIDUALS UNDER
LRS
The limit of USD250000 per Financial Year (FY) under
the Scheme also includes/subsumes remittances for
current account transactions available to resident
individuals under Para 1 of Schedule III to Foreign
Exchange Management (Current Account Transactions)
Amendment Rules, 2015 dated May 26, 2015. Release
of foreign exchange exceeding USD 250000, requires
prior permission from the Reserve Bank of India.

a. Private visits
For private visits abroad, other than to Nepal and Bhutan,
any resident individual can obtain foreign exchange up
to an aggregate amount of USD 250000, from an
Authorised Dealer or FFMC, in any one financial year,
irrespective of the number of visits undertaken during
the year.

Further, all tour related expenses including cost of rail/

road/water transportation; cost of Euro Rail; passes/
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tickets, etc. outside India; and overseas hotel/lodging
expenses shall be subsumed under the LRS limit. The
tour operator can collect this amount either in Indian
rupees or in foreign currency from the resident traveler.

b. Gift/donation
Any resident individual may remit up-to USD 2,50,000
in one FY as gift to a person residing outside India or as
donation to an organization outside India.

c. Going abroad on employment

A person going abroad for employment can draw foreign
exchange up to USD 2,50,000 per FY from any
Authorised Dealer in India.

d. Emigration
A person wanting to emigrate can draw foreign exchange
from AD Category I bank and AD Category II up to the
amount prescribed by the country of emigration or USD
250,000. Remittance of any amount of foreign exchange
outside India in excess of this limit may be allowed only
towards meeting incidental expenses in the country of
immigration and not for earning points or credits to
become eligible for immigration by way of overseas
investments in government bonds; land; commercial
enterprise; etc.

e. Maintenance of close relatives abroad

A resident individual can remit up-to USD 2,50,000 per
FY towards maintenance of close relatives ['relative' as
defined in Section 2 (77) of the Companies Act, 2013]
abroad.

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f. Business trip
Visits by individuals in connection with attending of an
international conference, seminar, specialised training,
apprentice training, etc., are treated as business visits.
For business trips to foreign countries, resident
individuals can avail of foreign exchange up to USD
2,50,000 in a FY irrespective of the number of visits
undertaken during the year.

However, if an employee is being deputed by an entity

for any of the above and the expenses are borne by the
latter, such expenses shall be treated as residual current
account transactions outside LRS and may be permitted
by the AD without any limit, subject to verifying the
bonafides of the transaction.

g. Medical treatment abroad

Authorised Dealers may release foreign exchange up
to an amount of USD 2,50,000 or its equivalent per FY
without insisting on any estimate from a hospital/doctor.
For amount exceeding the above limit, Authorised
Dealers may release foreign exchange under general
permission based on the estimate from the doctor in
India or hospital/ doctor abroad. A person who has fallen
sick after proceeding abroad may also be released
foreign exchange by an Authorised Dealer (without
seeking prior approval of the Reserve Bank of India) for
medical treatment outside India.

In addition to the above, an amount up to USD

250,000 per financial year is allowed to a person for
accompanying as attendant to a patient going abroad
for medical treatment/check-up.
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h. Facilities available to students for pursuing their
studies abroad.
AD Category I banks and AD Category II, may release
foreign exchange up to USD 2,50,000 or its equivalent
to resident individuals for studies abroad without
insisting on any estimate from the foreign University.
However, AD Category I bank and AD Category II may
allow remittances (without seeking prior approval of the
Reserve Bank of India) exceeding USD 2,50,000 based
on the estimate received from the institution abroad.

GENERAL GUIDE LINES FOR UNDERTAKING

TRANSACTIONS UNDER LRS BY BANKS
1. Remittances under the Scheme can be used for
purchasing objects of art subject to the provisions
of other applicable laws such as the extant Foreign
Trade Policy of the Government of India.
2. The Scheme can be used for outward remittance in
the form of a DD either in the resident individual's
own name or in the name of beneficiary with whom
he intends putting through the permissible
transactions at the time of private visit abroad,
against self-declaration of the remitter in the format
prescribed.
3. Individuals can also open, maintain and hold foreign
currency accounts with a bank outside India for
making remittances under the Scheme without prior
approval of the Reserve Bank. The foreign currency
accounts may be used for putting through all
transactions connected with or arising from
remittances eligible under this Scheme.
4. Banks should not extend any kind of credit facilities
to resident individuals to facilitate capital account
remittances under the Scheme.
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5. The Scheme is not available for remittances for any
purpose specifically prohibited under Schedule I or
any item restricted under Schedule II of Foreign
Exchange Management (Current Account
Transaction) Rules, 2000, dated May 3, 2000, as
amended from time to time.
6. The Scheme is not available for capital account
remittances to countries identified by Financial Action
Task Force (FATF) as non-co-operative countries
and territories as available on FATF website www.fatf-
gafi.org or as notified by the Reserve Bank.
Remittances directly or indirectly to those individuals
and entities identified as posing significant risk of
committing acts of terrorism as advised separately
by the Reserve Bank to the banks is also not
permitted.
7. The Scheme is available to all resident individuals
including minors. In case of remitter being a minor,
the Form A2 must be countersigned by the minor's
natural guardian.
8. Remittances under the Scheme can be consolidated
in respect of family members subject to individual
family members complying with its terms and
conditions. However, clubbing is not permitted by
other family members for capital account
transactions such as opening a bank account/
investment/purchase of property, if they are not the
co-owners/co-partners of the overseas bank
account/ investment/property. Further, a resident
cannot gift to another resident, in foreign currency,
for the credit of the latter's foreign currency account
held abroad under LRS.
9. All other transactions which are otherwise not
permissible under FEMA and those in the nature of
remittance for margins or margin calls to overseas
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 exchanges/ overseas counterparty are not allowed
under the Scheme.
10. The individual will have to designate a branch of an
AD through which all the remittances under the
Scheme will be made.The resident individual seeking
to make the remittance should furnish Form A2 for
purchase of foreign exchange under LRS.
11. It is mandatory to have PAN card to make
remittances under the Scheme for all transactions.
12. Investor, who has remitted funds under LRS can
retain, reinvest the income earned on the
investments. At present, the resident individual is not
required to repatriate the funds or income generated
out of investments made under the Scheme.
However, a resident individual who has made
overseas direct investment in the equity shares;
compulsorily convertible preference shares of a JV/
WoS outside India or ESOPs, within the LRS limit,
shall have to comply with the terms and conditions
prescribed by the overseas investment guidelines
under Notification No. FEMA 263/ RB-2013 dated
March 5, 2013.
13. In order to improve monitoring and ensure
compliance with the LRS limits, RBI vide its AP(DIR)
Circular No.23 dt. April 12, 2018 instructed AD banks
to report daily, transaction-wise information for all
transactions undertaken by individuals under LRS,
which will be accessible to all the other ADs.

FACILITY TO GRANT LOAN IN RUPEES TO NRI/

PIO CLOSE RELATIVE UNDER THE LRS
Resident individual is permitted to lend to a Non-resident
Indian (NRI)/ Person of Indian Origin (PIO) close relative
['relative' as defined in Section 2 (77) of the Companies
Act, 2013] by way of crossed cheque/ electronic transfer
subject to the following conditions:
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(i) the loan is free of interest and the minimum maturity
of the loan is one year;
(ii) the loan amount should be within the overall limit
under the Liberalised Remittance Scheme of USD
2,50,000 per financial year available for a resident
individual. It would be the responsibility of the resident
individual to ensure that the amount of loan granted
by him is within the LRS limit and all the remittances
made by the resident individual during a given
financial year including the loan together have not
exceeded the limit prescribed under LRS;
(iii) the loan shall be utilized for meeting the borrower's
personal requirements or for his own business
purposes in India.
(iv) the loan shall not be utilized, either singly or in
association with other person for any of the activities
in which investment by persons resident outside
India is prohibited, namely:
a. The business of chit fund, or
b. Nidhi Company, or
c. Agricultural or plantation activities or in real estate
business, or construction of farm houses, or
d. Trading in Transferable Development Rights
(TDRs).
Explanation: For the purpose of item (c) above, real
estate business shall not include development of
townships, construction of residential/ commercial
premises, roads or bridges.
(v) the loan amount should be credited to the NRO a/c
of the NRI / PIO. Credit of such loan amount may be
treated as an eligible credit to NRO a/c;

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(vi) the loan amount shall not be remitted outside India;
and
(vii) repayment of loan shall be made by way of inward
remittances through normal banking channels or
by debit to the Non-resident Ordinary (NRO) / Non-
resident External (NRE) / Foreign Currency Non-
resident (FCNR) account of the borrower or out of
the sale proceeds of the shares or securities or
immovable property against which such loan was
granted.

FACILITY TO MAKE RUPEE GIFT TO A NRI/PIO

CLOSE RELATIVE UNDER LRS
A resident individual can make a rupee gift to a NRI/PIO
who is a relative of the resident individual ['relative' as
defined in Section 2 (77) of the Companies Act, 2013]
by way of crossed cheque /electronic transfer. The
amount should be credited to the Non-Resident
(Ordinary) Rupee Account (NRO) a/c of the NRI / PIO
and credit of such gift amount may be treated as an
eligible credit to NRO a/c. The gift amount would be
within the overall limit of USD 250,000 per FY as
permitted under the LRS for a resident individual. It would
be the responsibility of the resident donor to ensure that
the gift amount is within the LRS limit and all the
remittances made by the donor during the financial year
including the gift amount have not exceeded the limit
prescribed under the LRS.

OPERATIONAL INSTRUCTIONS TO BANKS

1. Authorized Persons may carefully study the provisions
of the Act / Regulations / Notifications issued under
Foreign Exchange Management Act, 1999.
2. The Reserve Bank will not, generally, prescribe the
documents which should be verified by the
Authorised Persons while releasing foreign
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 exchange for current account transactions. In this
connection, attention of authorized persons is drawn
to sub-section (5) of Section 10 of the FEMA, 1999
which provides that an authorised person shall
require any person desiring to transact in foreign
exchange to make such a declaration and to give
such information as will reasonably satisfy him that
the transaction will not involve and is not designed
for the purpose of any contravention or evasion of
the provisions of the FEMA or any rule, regulation,
notification, direction or order issued there under.
3. With a view to maintaining uniform practices,
Authorized Dealers may consider requirements or
documents to be obtained by their branches to
ensure compliance with provisions of sub-section
(5) of section 10 of the Act.
4. Authorised Dealers are also required to keep on
record any information / documentation, on the
basis of which the transaction was undertaken for
verification by the Reserve Bank. In case the
applicant refuses to comply with any such
requirement or makes unsatisfactory compliance
therewith, the Authorised Dealer shall refuse, in
writing, to undertake the transaction and shall, if he
has reasons to believe that any contravention /
evasion is contemplated by the person, report the
matter to the Reserve Bank.
5. Reserve Bank of India will not issue any instructions
under the FEMA, regarding the procedure to be
followed in respect of deduction of tax at source
while allowing remittances to the non-residents. It
shall be mandatory on the part of Authorised Dealers
to comply with the requirement of the tax laws, as
applicable.
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6. While allowing the facility to resident individuals,
Authorised Dealers are required to ensure that
"Know Your Customer" guidelines have been
implemented in respect of bank accounts. They
should also comply with the Anti-Money Laundering
Rules in force while allowing the facility.
7. The applicants should have maintained the bank
account with the bank for a minimum period of one
year prior to the remittances for capital account
transactions. If the applicant seeking to make the
remittances is a new customer of the bank,
Authorised Dealers should carry out due diligence
on the opening, operation and maintenance of the
account. Further, the Authorised Dealers should
obtain bank statement for the previous year from
the applicant to satisfy themselves regarding the
source of funds. If such a bank statement is not
available, copies of the latest Income Tax
Assessment Order or Return filed by the applicant
may be obtained.
8. The Authorised Dealer should ensure that the
payment is received out of funds belonging to the
person seeking to make the remittances, by a
cheque drawn on the applicant's bank account or
by debit to his account or by Demand Draft / Pay
Order. Authorised Dealer may also accept the
payment through credit /debit/prepaid card of the
card holder.
9. The Authorised Dealer should certify that the
remittance is not being made directly or indirectly
by /or to ineligible entities and that the remittances
are made in accordance with the instructions
contained herein.

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10. AD bank should not extend any kind of credit facilities
to resident individuals to facilitate remittances for
capital account transactions under the Scheme.
11. Authorised Dealer may keep a record of the
countries identified by FATF as non-co-operative
countries and territories and accordingly update the
list from time to time for necessary action by their
branches handling the transactions under the
Liberalised Remittance Scheme. For this purpose,
they may access the website www.fatf-gafi.org to
obtain the latest list of non-co-operative countries
notified by FATF.
12. The remittances made under this Scheme will be
reported in the R-Return in the normal course. The
Authorised Dealers may also prepare and keep on
record dummy Form A2, in respect of remittances
less than USD 25,000. In addition, AD banks would
also furnish information on the number of applicants
and total amount remitted under the Scheme, on a
monthly basis, to the Reserve Bank of India, through
the Online Return Filing System (ORFS).
13. A number of foreign banks operating in India as well
as Indian banks have been soliciting (through
advertisements) foreign currency deposits (from
residents under LRS) [on behalf of overseas mutual
funds] or for placing at their overseas branches.
These advertisements may not always contain
appropriate disclosures to guide potential depositors
giving rise to concerns from the point of view of
protecting the interest of the resident individuals.
Further, marketing in India of schemes soliciting
foreign currency deposits by foreign entities, not
having operational presence in India, also raises
supervisory concerns. Therefore, all banks, both
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 Indian and foreign, including those not having an
operational presence in India, should seek prior
approval from RBI for the schemes being marketed
by them in India to residents either for soliciting
foreign currency deposits for their foreign/overseas
branches or for acting as agents for overseas
mutual funds or any other foreign financial services
company. The applications in this regard may be
addressed to the Chief General Manager-in-Charge,
Department of Banking Regulations, Reserve Bank
of India, Central Office, 12th Floor, Fort, Mumbai -
400001.

OTHER FACILITIES
REMITTANCE OF SALARY
A person who is resident but not permanently resident
in India and
a. is a citizen of a foreign State other than Pakistan; or
b. is a citizen of India, who is on deputation to the office
or branch of a foreign company or subsidiary or joint
venture in India of such foreign company, may make
remittance up to his net salary (after deduction of
taxes, contribution to provident fund and other
deductions).
Explanation: For the purpose of this item, a person
resident in India on account of his employment or
deputation of a specified duration (irrespective of length
thereof) or for a specific job or assignments, the duration
of which does not exceed three years, is a resident but
not permanently resident.

MEETING OF MEDICAL EXPENSES OF NRI

CLOSE RELATIVES BY RESIDENT INDIVIDUALS
Where the medical expenses in respect of NRI close
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relative (relative as defined in Section 2(77) of the
Companies Act, 2013) are paid by a resident individual,
such a payment being in the nature of a resident to
resident transaction may be covered under the term
"services related thereto" under Regulation 2(i) of
Notification No. FEMA 16 /2000- RB dated May 3, 2000.

LENDING BY NRI TO RESIDENT INDIAN

NRI can lend to an individual resident Indian who is his
close relative (as defined under Section 2(77) of
Companies Act, 2013) an amount not exceeding USD
250,000 or its equivalent subject to following conditions:
a. Minimum maturity period of the loan should be one
year
b. Loan is free of interest and
c. Amount of loan is received by inward remittance in
free foreign exchange through normal banking
channel or by debit to the NRE/FCNR (B) account
of NRI

B. OTHER FACILITIES
1. RELEASE OF FOREIGN CURRENCY NOTES
Out of the overall foreign exchange (USD 250, 000 per
financial year) being sold to a traveller, exchange in the
form of foreign currency notes and coins may be sold
up to the limit indicated below:
a. Travellers proceeding to countries other than Iraq,
Libya, Islamic Republic of Iran, Russian Federation
and other Republics of Commonwealth of
Independent States - not exceeding USD 3000 per
visit or its equivalent.
b. Travellers proceeding to Iraq or Libya - not exceeding
USD 5000 per visit or its equivalent.

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c. Travellers proceeding to Islamic Republic of Iran,
Russian Federation and other Republics of
Commonwealth of Independent States - full
exchange may be released.
d. Travellers proceeding for Haj/Umrah pilgrimage- full
amount of entitlement in cash or up to the cash limit
as specified by the Haj Committee of India, may be
released.
Authorised Dealers may remit foreign exchange up to a
reasonable limit, at the request of a traveller towards
his hotel accommodation, tour arrangements, etc., in
the countries proposed to be visited by him. Further, all
tour related expenses including cost of rail/road/water
transportation charges outside India and remittances
relating towards cost of Euro Rail; passes/tickets, etc.
for Indian travellers, and overseas hotel/flight charges
have been subsumed under the new enhanced LRS
limit of USD 250,000.

2. PERIOD OF RELEASE OF FOREIGN EXCHANGE

Resident individuals can get issued/released foreign
currency notes/cards before 180 days of departure out
of India. However issue of foreign currency is not
permissible for visiting to NEPAL and BHUTAN.

3. PERIOD OF SURRENDER OF FOREIGN

EXCHANGE
(i) In case the foreign exchange purchased for a
specific purpose is not utilized for that purpose, it
could be utilized for any other eligible purpose for
which drawal of foreign exchange is permitted under
the relevant Rules / Regulation.
(ii) General permission is available to any resident
individual to surrender received / realised / unspent
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 / unused foreign exchange to an Authorised Person
within a period of 180 days from the date of receipt /
realisation / purchase / acquisition / date of return of
the traveller, as the case may be.
Note: Where a person approaches an Authorised
Person for surrender of unspent/ unutilized foreign
exchange after the prescribed period of 180 days,
Authorised Person should not refuse to purchase the
foreign exchange merely on the ground that the
prescribed period has expired.
(iii) The liberalised uniform time limit of 180 days is
applicable only to resident individuals and in areas
other than export of goods and services. In all other
cases, the regulations / directions on surrender
requirement shall remain unchanged. (Notification
No. FEMA 9/2000-RB dated May 3, 2000, as
amended from time to time).

4. UNSPENT FOREIGN EXCHANGE

A returning traveller is permitted to retain with him,
foreign currency, travellers' cheques and currency notes
up to an aggregate amount of USD 2000 and foreign
coins without any ceiling beyond 180 days. Foreign
exchange so retained, can be utilized by the traveller
for his subsequent visit abroad.

5. EXPORT AND IMPORT OF INDIAN CURRENCY

Resident is permitted to take outside India (other than
to Nepal and Bhutan) Indian currency amount not
exceeding Rs.25,000 per person. Similarly a resident
of India who has gone out of India on a temporary visit
may bring into India at the time of his return (other than
Nepal and Bhutan), Indian currency amount not
exceeding Rs.25,000 per person. (w.e.f. 19 June 2014)
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6. USE OF INTERNATIONAL DEBIT CARDS,
CREDIT CARDS AND CHARGED CARDS
Use of information technology is increasing in every
sector of economy and banking sector too is not the
exception of it. Banks are focusing much on use of
technology driven alternate delivery channels which
result in increasing use of credit, debit and prepaid cards
for domestic and international transactions. Procedure
for use of these cards while undertaking international
transactions are summerised as below:

International Credit Cards (ICC)

i. The restrictions contained in Rule 5 of the Foreign
Exchange Management (Current Account
Transactions) Rules, 2000 will not be applicable for
use of International Credit Cards (ICCs) by residents
for making payment towards expenses, while on a
visit outside India.
ii. Residents can use ICCs on internet for any purpose
for which exchange can be purchased from an
Authorised Dealer in India, e.g. for import of books,
purchase of downloadable software or import of any
other item permissible under Foreign Trade Policy
(FTP).
iii. ICCs cannot be used on internet or otherwise for
purchase of prohibited items, like lottery tickets,
banned or proscribed magazines, participation in
sweepstakes, payment for call-back services,
margin money etc., since no drawal of foreign
exchange is permitted for such items/activities.
iv. There is no aggregate monetary ceiling separately
prescribed for use of ICCs through internet.
v. Resident individuals maintaining foreign currency
21
 accounts with an Authorised Dealer in India or a bank
abroad, as permissible under extant Foreign
Exchange Regulations, are free to obtain ICCs
issued by overseas banks and other reputed
agencies. The charges incurred against the card
either in India or abroad, can be met out of funds
held in such foreign currency account/s of the card
holder or through remittances, if any, from India only
through a bank where the card holder has a current
or savings account. The remittance for this purpose
should also be made directly to the card issuing
agency abroad, and not to a third party. The
applicable limit will be the credit limit fixed by the
card issuing banks. There is no monetary ceiling
fixed by the Reserve Bank for remittances, if any,
under this facility.
vi. Use of ICC for payment in foreign exchange in Nepal
and Bhutan is not permitted.
vii. ADs may issue ICCs to NRIs/PIOs, without prior
approval of the Reserve Bank, subject to the
condition that charges on the use of ICCs should
be settled by the concerned NRIs/PIOs only out of
inward remittances or balances held in their Non-
Resident External (NRE) Accounts/ Foreign
Currency Non-Resident (FCNR) Accounts.

International Debit Cards (IDC)

i. Banks authorised to deal in foreign exchange may
issue International Debit Cards (IDCs) which can
be used by a resident for drawing cash or making
payment to a merchant establishment overseas
during his visit abroad. IDCs can be used only for
permissible current account transactions and the
limits as mentioned in the Schedules to the Rules,
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 as amended from time to time, are equally applicable
to payments made through use of these cards.
ii. The IDCs cannot be used on internet for purchase
of prohibited items like lottery tickets, banned or
proscribed magazines, participation in sweepstakes,
payment for call-back services, margin money, etc.,
i.e. for such items/activities for which drawal of
foreign exchange is not permitted.

Store Value Cards/ Charge Cards/ Smart Cards, etc.

Authorised Dealer banks may issue Store Value Card/
Charge Card/ Smart Card to residents traveling on
private/business visit abroad which are used for making
payments at overseas merchant establishments and
also for drawing cash from ATM terminals. No prior
permission from the Reserve Bank is required for issue
of such cards. However, the use of such cards is limited
to permissible current account transactions and subject
to the prescribed limits under the FEM (CAT) Rules,
2000, as amended from time to time.

Redemption of unutilized balance on prepaid travel

cards:
i. Resident Indians who purchase their travel cards,
are permitted refund of the unutilized foreign
exchange balance only after 10 days from the date
of last transaction and accordingly, this condition is
stated in the "user guide". Since these cards are
expected to act as substitutes for cash/ Travellers
Cheques, the facilities available to the user will have
to be similar. Accordingly, all such Authorised
Persons shall redeem the unutilized balance
outstanding in the cards immediately upon request
by the resident Indians to whom the cards are issued
subject to retention of:
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ii. Amounts that are authorized and remain unclaimed/
not settled by the acquirers as of the date of
redemption till the completion of the respective
settlement cycle;
iii. A small balance not exceeding US$ 100, for meeting
any pipeline transactions till the completion of the
respective settlement cycle; and
iv. Transaction fees / service tax payable in India in
Rupees.
v. For the amount that are authorized but unclaimed/
not settled by the acquirer, the issuer of such cards
can hold such amounts until such transactions are
processed/ settled by the acquirers within the
prescribed settlement timeframe.

7. INCOME- TAX CLEARANCE

Reserve Bank of India will not issue any instructions
under the FEMA, regarding the procedure to be followed
in respect of deduction of tax at source while allowing
remittances to the non-residents. It shall be mandatory
on the part of Authorised Dealers to comply with the
requirement of the tax laws, as applicable.

8. BOOKING OF FORWARD CONTRACTS

Resident individuals are allowed to book forward
contracts for meeting out their genuine requirements.
To hedge their foreign exchange exposures arising out
of actual or anticipated remittances, both inward and
outward, can book forward contracts, without production
of underlying documents, up to a limit of USD 1,000,000
(USD one million), based on self declaration.

Product
Forward foreign exchange contracts and FCY-INR
options
24
Operational Guidelines, Terms and Conditions
a. While the contracts booked under this facility would
normally be on a deliverable basis, cancellation and
rebooking of contracts are permitted. Based on the
track record of the entity, the concerned AD Cat-I
bank may, however, call for underlying documents,
if considered necessary, at the time of rebooking of
cancelled contracts. The notional value of the
outstanding contracts should not exceed USD
1,000,000 at any time.

b. The contracts may be permitted to be booked up to

tenors of one year only.

c. Such contracts may be booked through AD Category

I banks with whom the resident individual / firm /
company has banking relationship, on the basis of
an application-cum-declaration in prescribed format
given in Annex XV. The AD Category I banks should
satisfy themselves that the hedging entities
understand the nature of risk inherent in booking of
forward contracts or FCY-INR options and should
carry out due diligence regarding "user
appropriateness" and"suitability" of the forward
contracts / FCY-INR options to such customer.

9. EXPORT OF GIFT & PARCEL

A person resident in India is free to export any gift articles
of value not exceeding Rs.5 lakhs (Provided export of
that item is not prohibited). Import Export Code no. is
not required in this case.

25
C. FOREIGN CURRENCY ACCOUNTS AND
DEPOSIT FACILITIES FOR RESIDENT INDIANS
After opening up economy in 1991, financial sector in
India witnessed dramatic changes. Foreign exchange
sector is also not the exception of it. Indian economy
moved from regulation and conservative era to
deregulated environment. This resulted in introducing
many facilities to resident Indians in undertaking foreign
exchange transactions. Presently resident Indians can
open and maintain foreign currency accounts for
different bonafide purposes in Indian and out of India.

Foreign Currency Accounts that can be held in India

1 Exchange Earner's Foreign Currency (EEFC)
Account - EEFC Account
A person resident in India may open an EEFC account
with an AD in India as per the conditions stipulated in
Schedule I to FEMA 10(R). The salient features of the
scheme are:

i. Credits: The credits permitted to this account are:

a 100 percent of the foreign exchange earnings by way
of inward remittance through normal banking
channel, (other than loans or investments);
b. payments received for the purpose of counter trade;
c. advance remittance received by an exporter towards
export of goods or services;
d. professional earnings including director's fees,
consultancy fees, lecture fees, honorarium and
similar other earnings received by a professional
by rendering services in his individual capacity;
e. Re-credit of unutilized foreign currency earlier
withdrawn from the account;
26
f. repayment of trade related loans/ advances (which
were granted to the account holder's importer
customer out of balances held in the EEFC
accounts);
g. disinvestment proceeds received by the resident
account holder on conversion of shares held by him
to ADRs/ GDRs under the DR Scheme, 2014; and

ii. Debits: The debits allowed in these accounts are:

a. Payment outside India towards capital or current
account transactions in accordance with the
provisions of Foreign Exchange Management
(Permissible Capital Account Transactions)
Regulations, 2000 or Foreign Exchange
Management (Current Account Transactions) Rules,
2000, respectively;
b. payment in foreign exchange towards cost of goods
purchased from a hundred percent Export Oriented
Unit or a Unit in an Export Processing Zone/ Software
Technology Park/ Electronic Hardware Technology
Park;
c. payment of customs duty in accordance with the
provisions of Export Import Policy;
d. trade related loans/ advances, by an exporter
account holder to his importer customer outside
India, subject to complying the provisions of FEMA
and the rules/ regulations made thereunder;
e. payment in foreign exchange to a person resident in
India for supply of goods/ services including
payments for air fare and hotel expenditure
iii. Withdrawal in rupees are permitted from this
account, provided the amount so withdrawn cannot
be re-credited to the account.
27
iv. The account will be in the form of a non-interest
bearing account.
v. The claims settled in rupees by ECGC/ insurance
companies should not be construed as export
realisation in foreign exchange and the claim amount
will not be an eligible credit to the EEFC account.
vi. The sum total of the accruals in the account during
a calendar month should be converted into Rupees
on or before the last day of the succeeding calendar
month after adjusting for utilization of the balances
for approved purposes or forward commitments.
vii. Fund-based/ non-fund based credit facilities should
not be granted against the balances held in EEFC
Accounts.
viii. Exporters can repay packing credit advances,
whether availed of in Rupee or in foreign currency,
from balances in their EEFC account to the extent
exports have actually taken place.
ix. Balances held in the account may be credited to
NRE/ FCNR (B) Accounts, at the option/ request of
the account holders consequent upon change of
their residential status from resident to non-resident.

2 Resident Foreign Currency (RFC) Account - RFC

Account
1) A person resident in India is permitted to open a
RFC account with an AD bank in India out of foreign
exchange received or acquired by him:
a. as pension or superannuation benefits or other
monetary benefits from his overseas employer;
by converting assets which were acquired by him
when he was a non-resident or inherited from or
gifted by a person resident outside India and
repatriated to India;
28
 b. before July 8, 1947 or any income arising or
accruing thereon which is held outside India in
pursuance of a general or special permission
granted by the Reserve Bank;
c. received as proceeds of Insurance claims/
maturity/ surrendered value settled in forex from
an Indian insurance company permitted to
undertake life insurance business by the
Insurance Regulatory and Development
Authority.
2) The balances in the RFC account are free from all
restrictions regarding utilisation of foreign currency
balances outside India.
3) Such accounts can be held jointly with resident
relative as joint holder on 'former or survivor' basis.
However, such resident Indian relative joint account
holder cannot operate the account during the life time
of the resident account holder.
4) The balances in the Non-Resident External (NRE)
Account and Foreign Currency Bank [FCNR (B)]
Account can be credited to the RFC account when
the residential status of the non-resident Indian (NRI)
or person of Indian origin (PIO) changes to that of a
Resident.

3 Resident Foreign Currency (Domestic) Account -

RFC (D) Account
1) A resident individual may open an RFC(D) account
to retain in a bank account in India the foreign
exchange acquired in the form of currency notes,
bank notes and travellers cheques from overseas
sources such as:
a. payment while on a visit abroad for services not
arising from any business or anything done in
India;
29
 b. honorarium or gift or for services rendered or in
settlement of any lawful obligation from any
person not resident in India and who is on a visit
to India;
c. honorarium or gift while on a visit to any place
outside India;
d. gift from a relative;
e. unspent foreign exchange acquired from an
authorised person for travel abroad;
f. representing the disinvestment proceeds
received by the resident account holder on
conversion of shares held by him to ADRs/ GDRs
under the DR Scheme, 2014;
g. by way of earnings received as the proceeds of
life insurance policy claims/ maturity/ surrender
values settled in foreign currency from an
insurance company in India permitted to
undertake life insurance business by the
Insurance Regulatory and Development Authority
2) This facility is in addition to that provided under RBI
Notification No.FEMA.11(R)/ 2015-RB dated
December 29, 2015, as amended from time to time.
3) The sum total of the accruals in the account during
a calendar month should be converted into Rupees
on or before the last day of the succeeding calendar
month after adjusting for utilization of the balances
for approved purposes or forward commitments.
4) Balances in the account can be used for any current
or capital account transactions in accordance with
the provisions of the Foreign Exchange Management
(Current Account Transactions) Rules, 2000 or the
30
 Foreign Exchange Management (Permissible
Capital Account Transactions) Regulations, 2000,
respectively.
5) Balances may be credited to NRE/ FCNR (B)
Accounts, at the option/ request of the account
holders consequent upon change of their residential
status from resident to non-resident.

Foreign Currency Accounts that can be held

outside India
The following persons can open a foreign currency
account with a bank outside India for carrying on normal
business and incidental transactions.
1. A person resident in India who has gone abroad for
studies may open a foreign currency account with a
bank outside India during his stay abroad. All credits
to the account from India should be made in
accordance with FEMA and the rules and regulations
made thereunder. On the student's return to India
after completion of studies, the account will be
deemed to have been opened under the Liberalised
Remittance Scheme.
2. A person resident in India who is on a visit to a foreign
country may open a foreign currency account with
a bank outside India during his stay abroad. The
balance in the account should be repatriated to India
on return of the account holder to India.
3. A person going abroad to participate in an exhibition/
trade fair may open a foreign currency account with
a bank outside India for crediting the sale proceeds
of goods. The balance should be repatriated to India
within one month from the date of closure of the
exhibition/ trade fair.

31
4. The following persons can open a foreign currency
account outside India for remitting/ receiving their
entire salary payable to him in India.
a) A foreign citizen resident in India,being an
employee of a foreign company, on deputation
to the office/ branch/ subsidiary/ joint venture/
group company in India;
b) An Indian citizen, being an employee of a foreign
company, on deputation to the office/ branch/
subsidiary/ joint venture/ group company in India
c) A foreign citizen resident in India employed with
an Indian company;
5. A resident individual can open a foreign currency
account with a bank outside India for the purpose of
sending remittances under the Liberalized
Remittance Scheme.

Part B
ACCOUNTS , DEPOSIT AND INVESTMENT
FACILITIES FOR RESIDENT OUTSIDE INDIA
A person resident outside India may be foreign citizen
or nonresident Indian/person of Indian origin. Non
resident Indians and person of Indian origin can open
and maintain different types of accounts with the banks.
It is better to recall who NRI/PIO as per FEMA 1999 is.
A 'Non-resident Indian' (NRI) is a person resident outside
India who is a citizen of India.
A 'Person of Indian Origin (PIO)' is a person resident
outside India who is a citizen of any country other than
Bangladesh or Pakistan or such other country as may
be specified by the Central Government, satisfying the
following conditions:
a. Who was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57
of 1955); or
32
b. Who belonged to a territory that became part of India
after the 15th day of August, 1947; or
c. Who is a child or a grandchild or a great grandchild
of a citizen of India or of a person referred to in clause
(a) or (b); or
d. Who is a spouse of foreign origin of a citizen of India
or spouse of foreign origin of a person referred to in
clause (a) or (b) or (c)
Explanation: PIO will include an 'Overseas Citizen of
India' cardholder within the meaning of Section 7(A) of
the Citizenship Act, 1955.

Accounts Facilities
1. Non-Resident (External) Rupee Account Scheme
- (NRE Account):
Eligibility:
Non-resident Indians (NRIs) and Person of Indian Origin
(PIOs) are permitted to open and maintain these
accounts with authorised dealers and with banks
(including cooperative banks) authorized by the Reserve
Bank to maintain such accounts.

Types of accounts:
The accounts may be maintained in any form, e.g.
savings, current, recurring or fixed deposit account etc.

Joint account:
Joint accounts can be opened by two or more NRIs and/
or PIOs or by an NRI/PIO with a resident relative(s) on
'former or survivor' basis. However, during the life time
of the NRI/PIO account holder, the resident relative can
operate the account only as a Power of Attorney holder.

Permissible credits
Inward remittances to the account and remittances
outside India from NRE account are permitted.
33
Credits permitted to this account as inward remittance
are interest accruing on the account, interest on
Investment, transfer from other NRE/ FCNR(B)
accounts, maturity proceeds if such investments were
made from this account or through inward remittance.
Current income like rent, dividend, pension, interest etc.
will be construed as a permissible credit to the NRE
account provided the Authorised Dealer is satisfied that
the credit represents current income of the NRI/PIO
account holder and income tax thereon has been
deducted/ paid/ provided for, as the case may be.

Permissible debit
The debits allowed from this account are local
disbursements, transfer to other NRE/ FCNR(B) and
investments in India.

Loan procedure
Authorised Dealers/ banks in India can grant loans
against the security of the funds held in NRE accounts
to the account holder/ third party in India, without any
limits, subject to the usual margin requirements. The
loan cannot be repatriated outside India and shall be
used for the following purposes:
a. personal purposes or for carrying on business
activities except for the purpose of relending or
carrying on agricultural/ plantation activities or for
investment in real estate business;
b. making direct investment in India on non-repatriation
basis by way of contribution to the capital of Indian
firms/ companies subject to the provisions of the
relevant Regulations made under the Act;
c. acquiring flat/ house in India for his own residential
use subject to the provisions of the relevant
Regulations made under the Act.
34
In case of loans sanctioned to a third party, there should
be no direct or indirect foreign exchange consideration
for the non-resident depositor agreeing to pledge his
deposits to enable the resident individual/ firm/ company
to obtain such facilities.
In case of the loan sanctioned to the account holder, it
can be repaid either by adjusting the deposits or through
inward remittances from outside India through banking
channels or out of balances held in the NRO account of
the account holder.
Authorised Dealers may allow their branches/
correspondents outside India to grant loans to or in
favour of non-resident depositor or to third parties at the
request of depositor for bona fide purpose against the
security of funds held in the NRE accounts in India and
also agree for remittance of the funds from India, if
necessary, for liquidation of the outstanding.
The facility for premature withdrawal of deposits will not
be available where loans against such deposits are
availed of.
The term "loan" shall include all types of fund based/
non-fund based facilities.

Change of status
NRE accounts should be designated as resident
accounts or the funds held in these accounts may be
transferred to the RFC accounts, at the option of the
account holder, immediately upon the return of the
account holder to India for taking up employment or on
change in the residential status.
In the event of the demise of an account holder, balances
in the account can be transferred to the non-resident
nominee of the deceased account holder. However,
35
request from a resident nominee for remittance of funds
outside India for meeting the liabilities, if any, of the
deceased account holder or for similar other purposes,
should be forwarded to the Reserve Bank for
consideration.

Operations by power of attorney

Operations on an NRE account may be allowed in terms
of Power of Attorney or other authority granted in favour
of a resident by the non-resident account holder, provided
such operations are restricted to withdrawals for local
payments or remittance to the account holder himself
through banking channels. In cases where the account
holder or a bank designated by him is eligible to make
investments in India, the Power of Attorney holder may
be permitted to operate the account to facilitate such
investment. The resident Power of Attorney holder is
not allowed to (a) open a NRE account; (b) repatriate
outside India funds held in the account other than to the
account holder himself; (c) make payment by way of
gift to a resident on behalf of the account holder; (d)
transfer funds from the account to another NRE account.

Tax exemption
Income from interest on balances standing to the credit
of NRE Accounts is exempt from Income Tax. Likewise
balances held in such accounts are exempt from wealth
tax.

Interest rate
The rate of interest and tenor applicable to these
accounts will be in accordance with the directions/
instructions issued by the Department of Banking
Regulations, Reserve Bank of India.

36
2. Foreign Currency (Non-resident) Account
(Banks) Scheme - FCNR (B) Account

Eligibility
Non-resident Indians (NRIs) and Persons of Indian
Origin (PIOs) are permitted to open and maintain these
accounts with authorised dealers and banks authorised
by the Reserve Bank to maintain such accounts.
Deposits may be accepted in any permissible currency.

Currency
Any freely convertible currency

Type of account
The accounts can be maintained only in the form of fixed
deposit.

Period of deposit
Minimum twelve months and maximum five years.

Other conditions
such as credits/debits, joint accounts, loans / overdrafts,
operation by power of attorney etc., as applicable to an
NRE account will be applicable to FCNR (B) account
as well.

Rate of interest
The rate of interest applicable to these accounts will be
in accordance with the directions/ instructions issued
by the Department of Banking Regulation, Reserve Bank
of India.
3. Non-Resident (Ordinary) Account Scheme -
NRO account
Eligibility
Any person resident outside India (as per Section 2 (w)
of FEMA), may open and maintain NRO account with
37
an Authorised Dealer or an Authorised Bank for the
purpose of putting through bona fide transactions
denominated in Indian Rupees.
NRO (current/ savings) account can be opened by a
foreign national of non-Indian origin visiting India, with
funds remitted from outside India through banking
channel or by sale of foreign exchange brought by him
to India. The balance in the NRO account may be paid
to the account holder at the time of his departure from
India provided the account has been maintained for a
period not exceeding six months and the account has
not been credited with any local funds, other than interest
accrued thereon.
Opening of accounts by individuals/ entities of Pakistan
nationality/ ownership and entities of Bangladesh
ownership requires prior approval of the Reserve Bank.
However, individuals of Bangladesh nationality may be
allowed to open these accounts subject to the individual/
s holding a valid visa and valid residential permit issued
by Foreigner Registration Office (FRO)/ Foreigner
Regional Registration Office (FRRO) concerned.

Types of account
The accounts may be maintained in any form, e.g.
savings, current, recurring or fixed deposit account.

Joint operation
The accounts may be held jointly with residents on
'former or survivor' basis. NRIs and PIOs may hold an
NRO account jointly with other NRIs and PIOs.

Permissible credit
Inward remittances from outside India, legitimate dues
in India and transfers from other NRO accounts are
permissible credits to NRO account. Rupee gift/ loan

38
made by a resident to a NRI/PIO relative within the limits
prescribed under the Liberalised Remittance Scheme
may be credited to the latter's NRO account.

Permissible debit
The account can be debited for the purpose of local
payments, transfers to other NRO accounts or
remittance of current income abroad. Apart from these,
balances in the NRO account cannot be repatriated
abroad except by NRIs and PIOs up to USD 1 million,
subject to conditions specified in Foreign Exchange
Management (Remittance of Assets) Regulations, 2016.
Funds can be transferred to NRE account within this
USD 1 Million facility. Capital receipts, loans and transfer
from other NRO accounts are not eligible for repatriation
under the US$ 1 million facility.

Loan procedure
Loans against the deposits can be granted in India to
the account holder or third party subject to usual norms
and margin requirement. The loan amount shall not be
used for relending, carrying on agricultural/plantation
activities or investment in real estate.

Change of status
NRO accounts may be designated as resident accounts
on the return of the account holder to India for any
purpose indicating his intention to stay in India for an
uncertain period. Likewise, when a resident Indian
becomes a person resident outside India, his existing
resident account should be designated as NRO account.

Power of attorney
Powers have been delegated to the Authorized Dealers/
Authorised banks to allow operations on an NRO

39
account in terms of a Power of Attorney granted in favour
of a resident by the non-resident individual account
holder provided such operations are restricted to local
payments and remittances to non-residents.

Collection of dues
To facilitate the foreign nationals to collect their pending
dues in India, AD Category-I banks may permit such
foreign nationals to re-designate their resident account
maintained in India as NRO account on leaving the
country after their employment to enable them to receive
their pending bona fide dues, subject to the bank
satisfying itself that the credit of amounts are bona fide
dues of the account holder when she/ he was a resident
in India. The funds credited to the NRO account should
be repatriated abroad immediately, subject to payment
of the applicable income tax and other taxes in India.
The amount repatriated abroad should not exceed USD
one million per financial year. The debit to the account
should be only for the purpose of repatriation to the
account holder's account maintained abroad. The
account should be closed immediately after all the dues
have been received and repatriated as per the
declaration made by the account holder when the
account was designated as an NRO account.

Credit card facility

International Credit Cards - Authorised Dealer banks
have been permitted to issue International Credit Cards
to NRIs/PIOs, without prior approval of Reserve Bank.
Such transactions may be settled by inward remittance
or out of balances held in the cardholder's FCNR (B) /
NRE / NRO Accounts.

Taxation
The remittances (net of applicable taxes) will be allowed
40
to be made by the Authorised Dealer banks on
production of requisite information in the formats
prescribed by the Central Board of Direct Taxes, Ministry
of Finance, Government of India from time to time.
Reserve Bank of India will not issue any instructions
under FEMA, clarifying tax issues. It shall be mandatory
on the part of Authorised Dealers to comply with the
requirement of tax laws, as applicable.

4. Special Non-Resident Rupee Account - SNRR

account
Any person resident outside India, having a business
interest in India, may open a Special Non-Resident
Rupee Account (SNRR account) with an authorised
dealer for the purpose of putting through bona fide
transactions in rupees, not involving any violation of the
provisions of the Act, rules and regulations made
thereunder.

5. Acceptance of deposit by a company in India from

NRIs/PIOs on repatriation basis
A company incorporated in India including NBFC
registered with the Reserve Bank cannot accept
deposits on repatriation basis. It can, however, renew
the deposits it had accepted in accordance with
Schedule 6 of Foreign Exchange Management (Deposit)
Regulations), 2016, as amended from time to time.
Acceptance of deposits by Indian proprietorship
concern/ firm or a company from NRIs or PIOs on non-
repatriation basis
An Indian proprietorship concern/ firm or a company
(including Non-Banking Finance Company) registered
with Reserve Bank can accept deposits from NRIsor
PIOs on non-repatriation basis subject to the terms and
conditions specified in Schedule 7 to Foreign Exchange

41
Management (Deposit) Regulations, 2016, as amended
from time to time.
Indian companies can accept deposits from NRIs or
PIOs by issue of a commercial paper subject to terms
and conditions specified in sub-Regulation (3) of
Regulation 6 of Notification No FEMA 5(R)/ 2016-RB
dated April 1, 2016.

6. Acceptance of deposits by Indian companies from

a person resident outside India for nomination as
Director
Keeping deposits with an Indian company by persons
resident outside India, in accordance with section 160
of the Companies Act, 2013, is a current account
(payment) transaction and, as such, does not require
any approval from Reserve Bank. All refunds of such
deposits, arising in the event of selection of the person
as director or getting more than twenty five percent
votes, shall be treated similarly.

7. Nomination
Authorised dealers may provide nomination facility in
respect of the deposits/ accounts in these regulations
maintained by individual account holders.

B. INVESTMENT FACILITIES FOR NRI/PIO

1. Investments in listed Indian companies
(a) NRIs are allowed to invest in shares of listed Indian
companies in recognised Stock Exchanges under
the PIS.
(b) NRIs can invest through designated ADs, on
repatriation and non-repatriation basis under PIS
route up to 5 per cent of the paid- up capital / paid-
up value of each series of debentures of listed Indian
companies.

42
(c) The aggregate paid-up value of shares / convertible
debentures purchased by all NRIs cannot exceed
10 per cent of the paid-up capital of the company /
paid-up value of each series of debentures of the
company. The aggregate ceiling of 10 per cent can
be raised to 24 per cent by passing of a resolution
by its Board of Directors followed by a special
resolution to that effect by its General Body which
should necessarily be intimated to the Reserve Bank
of India immediately as hitherto, along with Certificate
from the Company Secretary stating that all the
relevant provisions of the extant Foreign Exchange
Management Act, 1999 regulations and the Foreign
Direct Investment Policy, as amended from time to
time have been complied with.

2. Investments in other securities

A) Investments on Repatriation basis:
(a) A NRI can purchase on repatriation basis, without
limit, Government dated securities (other than
bearer securities) or treasury bills or units of
domestic mutual funds; bonds issued by a public
sector undertaking (PSU) in India and shares in
Public Sector Enterprises being disinvested by
the Government of India, provided the purchase
is in accordance with the terms and conditions
stipulated in the notice inviting bids.
(b) An NRI can subscribe to National Pension
System governed and administered by Pension
Fund Regulatory and Development Authority
(PFRDA), provided the person is eligible to invest
as per the provisions of the PFRDA Act. The
annuity/ accumulated saving will be repatriable.
Payment for such subscriptions shall be made
either by inward remittance through normal
banking channels or out of funds held in his NRE/
FCNR/ NRO account.
43
B) Investments on Non-Repatriation basis:
(a) NRIs can purchase shares, convertible
debentures and warrants issued by an Indian
company on non-repatriation basis without any
limit. Amount of consideration for such purchase
shall be paid by way of inward remittance through
normal banking channels from abroad or out of
funds held in NRE / FCNR (B) / NRO account
maintained with the AD Category - I bank.
(b) NRIs can also, without any limit, purchase on
non-repatriation basis dated Government
securities, treasury bills, units of domestic mutual
funds, units of Money Market Mutual Funds.
Government of India has notified that NRIs are
not permitted to make Investments in Small
Savings Schemes including PPF. In case of
investment on non-repatriation basis, the sale
proceeds shall be credited to NRO account. The
amount invested under the scheme and the
capital appreciation thereon will not be allowed
to be repatriated abroad.
NRIs can also invest in non-convertible debentures
issued by an Indian Company, both on repatriation basis
and on non-repatriation basis, subject to the other terms
and conditions stated under Notification No FEMA 4/
2000-RB dated May 3, 2000 (as amended from time to
time).
NRIs may also invest, both on repatriation and non-
repatriation basis, in non-convertible/redeemable
preference shares or debentures issued in compliance
with Regulation 7 (2) of FEMA Notification No. 20.

44
3. Prohibited Investments:
NRIs are not allowed to invest in any company which
is engaged or proposes to engage in the following
activities:
Business of chit fund*, or
i. Nidhi company, or
ii. Agricultural or plantation activities, or
iii. Real estate business** or construction of farm
houses, or
iv. Trading in Transferable Development Rights
(TDRs).
* NRIs are eligible to subscribe to the chit funds on non-
repatriation basis
**Real estate business" does not include construction
of housing / commercial premises, educational
institutions, recreational facilities, city and regional level
infrastructure, townships

4. Investment in Immovable Property:

NRI/PIO can acquire immovable property in India other
than agricultural land/plantation property or a farm
house, out of repatriable and/or non-repatriable funds.
Citizens of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal, Bhutan, Macau & Hong
Kong require prior approval of Reserve Bank for
acquiring immovable property in India. Payment for
purchase of immovable property can be made out of
funds received in India through normal banking channels
by way of inward remittance or out of funds held in any
non-resident account. Payment of purchase price for
45
acquisition of immovable property cannot be made either
by traveler's cheque or by foreign currency notes.
NRI/PIO can acquire immovable property in India other
than agricultural land/plantation property or a farm
house, by way of gift or inheritance or settlement.
NRI can transfer any immovable property in India to a
person resident in India. However, NRI can transfer any
immovable property other than agricultural or plantation
property or farm house to a person resident outside India
who is a citizen of India or to a person of Indian origin
resident outside India.
NRIs are eligible to repatriate the sale proceeds of
immovable property, not exceeding the amount paid for
the property in foreign exchange received through
normal banking channel or by debit to his NRE/FCNR(B)
account. NRI/PIO is permitted to repatriate the sale
proceeds of not more than two residential properties
during his life time.
If the property was acquired out of Rupee sources or by
way of gift / inheritance / settlement, NRI/PIO can remit
an amount up to USD one million per financial year out
of the balances held in the NRO account, subject to tax
compliances.
NRIs/PIOs are eligible to repatriate refund of (a)
application/earnest money/purchase consideration
made by house-building agencies/seller on account of
non-allotment of flats/plots and (b) cancellation of
booking/deals for purchase of residential/commercial
properties, together with interest, net of taxes provided
original payment is made out of NRE/FCNR (B) account/
inward remittances.
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Housing loans in Rupees availed of by NRIs/PIOs from
Ads/Housing Financial Institutions in India can be repaid
by the close relatives of the borrower in India.

Close relative/s mentioned in this booklet means

the close relative/s as defined in Section 2(77) of
Companies Act, 2013.
Definition of close relative is as per company act 2013
which includes the following as close relative.

a. The member of a HUF

b. They are husband and wife or the following
c. Father including step father
d. Mother including step mother
e. Son including step son
f. Daughter
g. Son’s wife
h. Daughter’s husband
i. Brother including step brother
j. Sister including step sister

For facilitating the existing monthly reporting of LRS

transactions under ORFS, AD banks may use the
following purpose codes only:
Sr. Items under LRS Corresponding FETERS
No. purpose codes, if
transaction is identified
under LRS
1 Opening of foreign currency account S0023
abroad with a bank under LRS
2 Purchase of immovable property S0005

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 3 Investment in equity, debt, JV, WoS, S0001, S0002, S0003,
ESOPs, IDRs S0004, S0021, S0022
4 Gift S1302
5 Donations S1303

6 Travel (business, pilgrimage, S0301, S0303, S0304,

medical treatment, education, S0305 & S0306
employment, personal)

7 Maintenance of close relatives S1301

8 Medical Treatment S1108

9 Studies abroad S1107

10 Emigration S1307

11 'Others' such as loan to NRI close S0011, S0603

relatives and health insurance

ii. AD banks should also ensure that the data pertaining

to LRS transactions reported by them in FETERS
tallies with that reported by them in ORFS.
iii. The Form A2 is also being revised (as per Annex)
by introducing a check-box for LRS transactions in
the relevant block as follows:
Sr. No. Whether under LRS (Yes/No) Purpose Code Description

As per the Annex

iv. Further, the 'Application cum Declaration for

purchase of foreign exchange under the Liberalised
Remittance Scheme of USD 250,000' has been
clubbed with Form A2 inorder to reduce multiplicity
of forms to be filled in by the customers.

***

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