Currently, remittances to non-residents are allowed by banks if the person making the remittance furnishes an undertaking, accompanied by a certificate from a Chartered Accountant (“CA”) certifying the rate for withholding tax as per section 195 of the Act. The banks then forward the certificates to the Reserve Bank of India (“RBI”), which in-turn forwards it to the Income tax department.
Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009.
steps-
step-1-Obtain C.A.Certificate in form 15CB
Step 2:Furnish the information in Form No15CA
Step 3:Electronically upload Form 15CA on the designated website
Step 4:Take Print out of Form 15CA and file a signed copy
Step 5:Remit money to the Non Resident
Please note that all the above steps have to be undertaken before remittance of money to the non-resident.
Notification no. 30/2009 is as below:-
In exercise of the powers conferred by section 295 read with sub-section (6) of section 195 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (Seventh Amendment) Rules, 2009.
(2) They shall come into force with effect from 1st July, 2009.
2. In the Income-tax Rules, 1962, after rule 37BA, the following rule shall be inserted, namely:-
“Furnishing of information under sub-section (6) of section 195.
37BB. (1) The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificatefrom an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961.
(2) The information to be furnished under sub-section (6) of section 195 shall be in Form No. 15CA and shall be verified in the manner indicated therein and the certificate from an accountant referred to in sub-rule (1) shall be obtained in Form No. 15CB.
(3) The information in Form No. 15CA shall be furnished electronically to the website designated by the Income-tax Department and thereafter signed printout of the said form shall be submitted prior to remitting the payment.
(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture, transmission of data and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner specified.
Non-Resident Ordinary Rupee (NRO) Account
Master Circular No. 2/2012-13, dated 2-7-2012
The acceptance of deposits by an Authorised Dealer/Authorised bank from persons resident outside India are regulated by the provisions of sub-sections (1) and (2) of section 6 of the Foreign Exchange Management Act, 1999 read with FEMA Notification No.5/2000 RB, dated May 3, 2000, as amended from time to time.
2. This Master Circular consolidates the existing instructionson the subject of “Non-Resident Ordinary Rupee (NRO) Account” at one place. The list of underlyingcirculars/notifications consolidated in this Master Circular is furnished in the Appendix.
3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2013 and be replaced with an updated Master Circular on the subject.
1. Definitions
Non-Resident Indian (NRI)
NRI for this purpose is defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000. In terms of thisNotification, an NRI is a person resident outside India, who is a citizen of India or is a person of Indian origin.
Person of Indian Origin (PIO)
PIO for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of hisgrand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).
2. Eligibility
(a) Any person resident outside India (as per Section 2 of FEMA), may open and maintain NRO account with an Authorised Dealer or an Authorised bank for the purpose of putting through bonafide transactions denominated in Indian Rupees, not involving any violation of the provisions of FEMA, Rules and Regulations made thereunder.
(b) Opening of accounts by individuals/entities of Bangladesh/Pakistan nationality/ownership require prior approval of the Reserve Bank.
3. Types of Accounts
NRO accounts may be opened/maintained in the form of current, savings, recurring or fixed deposit accounts. Rate of interest applicable to these accounts and guidelines for opening, operating and maintenance of such accounts shall be in accordance with directives/instructions issued by the Reserve Bank from time to time.
4. Joint Accounts with Residents/Non- Residents
The accounts may be held jointly with residents and/or with non-residents.
5. Permissible Credits/Debits
A. Credits
(i) Proceeds of remittances from outside India through normal banking channels received in foreign currency which is freely convertible.
(ii) Any foreign currency, which is freely convertible, tendered by the account holder during his temporary visit to India. Foreign currency exceeding USD 5000 or its equivalent in the form of cash should be supported by currency declaration form. Rupee funds should be supported by encashment certificate, if they represent funds brought from outside India.
(iii) Transfers from rupee accounts of non-resident banks.
(iv) Legitimate dues in India of the account holder. This includes current income like rent, dividend, pension, interest, etc.
(v) Sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/inheritance.
(vi) Resident individual may make a rupee gift to a NRI/PIO who is a close relative of the resident individual [close relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer. The amount shall 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 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for a residentindividual.
(vii) Resident individual to lend to a Non resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [means relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer, subject to conditions within the overall limit under the Liberalised Remittance Scheme of USD 200,000 per financial year available for a resident individual. 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;
B. Debits
(i) All local payments in rupees including payments for investments in India subject to compliance with the relevant regulations made by the Reserve Bank.
(ii) Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder.
(iii) Remittance up to USD one million, per financial year (April- March), for all bonafide purposes, to the satisfaction of the Authorised Dealer bank.
(iv) Transfer to NRE account of NRI within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable
6. Remittance of Assets
6.1 Remittance of Assets by a Foreign National of Non- Indian Origin
A citizen of a foreign state, not being a citizen of Nepal or Bhutan or a Person of Indian Origin (PIO), who has retired from an employment in India, or has inherited assets from a person referred to in sub-section (5) of Section 6 of the FEMA; or is a widow resident outside India and has inherited assets of her deceased husband who was an Indian citizen resident in India, may remit an amount, not exceeding USD one million per financial year out of the balances in the account, on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their circular No.10/2002, dated October 9, 2002.
6.2 Remittance of assets by an NRI/PIO
(a) NRI/PIO may remit an amount, not exceeding USD one million per financial year, out of the balances held in NRO accounts/sale proceeds of assets/the assets in India acquired by him by way of inheritance/legacy, on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their circular No.10/2002 dated October 9, 2002.
(b) NRI/PIO may also, within the overall limit of USD one million, as stated above, remit sale proceeds of assets acquired under a deed of settlement made by either of his parents or a close relative (as defined in Section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler, on production of the original deed of settlement and an undertaking by the remitter and a certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their circular No.10/2002 dated October 9, 2002.
6.3 Assets acquired in India out of Rupee funds
NRI/PIO may remit sale proceeds of immovable property purchased by him as a resident or out of Rupee funds as NRI/PIO, without any lock-in-period, subject to the above limit of USD 1 million, per financial year.
6.4 Restrictions
(a) The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.
A person or his successor who has acquired immovable property in accordance with Section 6(5) of FEMA, 1999 cannot repatriate sale proceeds of such property outside India except with prior permission of the Reserve Bank.
(b) The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.
7. Foreign nationals of non-Indian origin on a visit to India
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 converted by the Authorised Dealer bank into foreign currency for payment 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. In case the account has been maintained for a period more than six months, applications for repatriation of balance will have to be made by the account holder concerned on plain paper to the Regional Office concerned of the Reserve Bank.
8. Grant of loans/overdrafts by the Authorised Bank to account holders and third parties
(a) Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer/bank against the security of fixed deposits subject to the following terms and conditions:
(i) The loans shall be utilised only for meeting borrower’s personal requirements and/or business purpose and not for carrying on agricultural/plantation activities or real estate business or for re-lending.
(ii) Regulations relating to margin and rate of interest, as stipulated by Reserve Bank, from time to time, shall be complied with.
(iii) The usual norms and considerations as applicable in the case of advances to trade/industry shall be applicable for such loans/facilities granted to third parties.
(b) Authorised Dealer/bank may permit overdraft in the account of the account holder subject to their commercial judgement and in compliance with the interest rate etc. directives.
9. Change of resident status of account holder
(a) From Resident to Non-resident
(i) When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non-Resident (Ordinary) Account. When a person resident in India leaves for Nepal or Bhutan for taking up employment or for carrying on business or vocation or for any other purposes indicating his intention to stay in Nepal or Bhutan for an uncertain period, his existing account will continue as a resident account. Such account should not be designated as Non-Resident (Ordinary) Account (NRO).
(ii) Foreign nationals who come to India on employment and become residents in terms of section 2(v) of FEMA, 1999 and are eligible to open/hold a resident savings bank account are permitted 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 legitimate dues subject to certain conditions.
(b) From Non- resident to Resident
NRO accounts may be re-designated as resident Rupee accounts on return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.
10. Treatment of loans /overdrafts in the event of change in the resident status of the borrower
In case of a person who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a person resident outside India, the Authorised Dealer/bank may at their discretion and commercial judgement allow continuance of the loan/overdraft facilities. In such cases, payment of interest and repayment of loan may be made by inward remittance or out of legitimate resources in India of the person concerned.
11. Payment of funds to Non-resident/Resident nominee
The amount due/payable to non-resident nominee from the NRO account of a deceased account holder shall be credited to NRO account of the nominee with an Authorised dealer/bank in India. The amount payable to resident nominee from the NRO account of a deceased account holder shall be credited to resident account of the nominee with a bank in India.
12. Operation of NRO account by Power of Attorney holder
Powers have been delegated to the authorized dealers/banks to allow operations on an NRO account by Power of Attorney granted in favour of a resident by the non-resident individual account holder provided such operations are restricted to:
(i) All local payments in Rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and
(ii) Remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes;
(iii) The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder nor to make payment by way of gift to a resident on behalf of the non-resident account holder or transfer funds from the account to another NRO account.
13. Facilities to a person going abroad for studies
Persons going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities available to NRIs. Educational and other loans availed of by them as residents in India will continue to be available to them as per FEMA Regulations.
14. International Credit Cards
Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, 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.
15. Income-Tax
The remittances (net of applicable taxes) will be allowed to be made by the Authorised Dealer banks on production of an undertaking by the remitter and a certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India vide their Circular No. 10/2002 dated October 9, 2002 [cf. A.P. (DIR Series) Circular No. 56 dated November 26, 2002].
Annex-1
Statement/returns to be submitted to the Reserve Bank
Particulars of statement
Facilities to NRIs/PIO and Foreign Nationals – Liberalisation – Remittance from NRO account.
Periodicity
Quarterly
Relevant instructions
A.P. (DIR Series) Circular No. 12 dated November 16, 2006
Annex-2
Operational Instructions for Authorised Dealer Banks
1. General
Authorised Dealer banks may carefully study the provisions of the Act/Regulations/Notifications issued under Foreign Exchange Management Act, 1999 (the Act).
Reserve Bank will not prescribe the documents which should be verified by the Authorised Dealer banks while permitting remittances for various transactions.
In terms of the provisions contained in sub-section 5 of Section 10 of the Act, before undertaking any transaction in foreign exchange on behalf of any person, Authorised Dealer is required to obtain a declaration and such other information from the person (applicant) on whose behalf the transaction is being undertaken that will reasonably satisfy him that the transaction is not designed to contravene or evade the provisions of the Act or any of the Rules or Regulations made or Notifications or directions or orders issued under the Act. Authorised Dealer banks should preserve the information/documents obtained by them from the applicant before undertaking the transactions for verification by the Reserve Bank.
In case the person on whose behalf the transaction is being undertaken refuses or does not give satisfactory compliance of the requirements of an Authorised Dealer bank, he shall refuse in writing to undertake the transactions. Where an Authorised Dealer bank has reasons to believe that a contravention or evasion of the Act or the Rules or Regulations made or Notifications issued thereunder was contemplated in the transaction that he has refused to undertake, he shall report the matter to the Reserve Bank. With a view to maintaining uniform practices, Authorised Dealer banks may consider requirements or documents to be obtained by their branches to ensure compliance with the provisions of sub-section (5) of Section 10 of the Act.
2. Opening of accounts by Bangladesh/Pakistan individuals/entities.
Opening of accounts by individuals/entities of Bangladesh/Pakistan nationality/ownership requires prior approval of the Reserve Bank. All such requests may be referred to the Chief General Manager-in-Charge, Foreign Exchange Department, (Foreign Investment Division), Reserve Bank of India, Central Office, Mumbai-400 001.
3. Remittance of current income
Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is a permissible debit to the NRO account.
Authorised Dealer banks may allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a chartered accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
4. Restrictions
(a) The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.
(b) The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.
5. Tax Compliance
Authorised Dealer banks can allow remittances to non-residents only on production of an undertaking by the remitter and a certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India vide their Circular No. 10/2002, dated October 9, 2002. [cf. A.P. (Dir Series) Circular No. 56, dated November 26, 2002].
REMITTANCE FACILITIES FOR NON-RESIDENT INDIANS/PERSONS OF INDIAN ORIGIN/FOREIGN NATIONALS
MASTER CIRCULAR NO. 8/2012-13, DATED 2-7-2012
Remittance facilities for Non-Residents /Persons of Indian Origin /Foreign Nationals are being governed by sub-section (1) and (2) of section 6 of the Foreign Exchange ManagementAct, 1999 read with FEMA Notification No.13/2000-RB and FEMA Notification No. 21/2000-RB dated May 3, 2000, as amended from time to time.
2. This Master Circular consolidates the existing instructionson the subject of “Remittance facilities for Non-Resident Indians / Persons of Indian Origin / Foreign Nationals” at one place. The list of underlying circulars/notifications consolidated in this Master Circular is furnished in Appendix.
3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2013 and be replaced with an updated Master Circular on the subject.
1. Remittance facilities for Non Resident Indians (NRIs) / Persons of Indian Origin (PIO) and Foreign Nationals
The Regulations for transfer of assets outside India by a person, whether resident in India or not, are given in the Notification Nos. FEMA 13/2000-RB and FEMA 21/2000- RB dated May 3, 2000 and the related amendments to these Notifications. Accordingly, remittance of funds from the sale of capital assets in India held by a person, whether resident in or outside India, requires approval of the Reserve Bank except to the extent provided in FEMA or Rules or Regulations made there under.
2. Definition of NRI/PIO
In terms of Regulation 2 of FEMA Notification No.13 dated May 3, 2000, Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India. Person of Indian Origin (PIO) means a citizen of any country other than Bangladesh or Pakistan who had (a) at any time held Indian passport or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the CitizenshipAct, 1955 or (c) the person is a spouse of an Indian citizen or a person referred to in (a) or (b).
3. Remittance of current income
3.1 Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is a permissible debit to the NRO account. Authorised Dealer banks may also allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
3.2 NRIs/PIO have the option to credit the current income to their Non-Resident (External) Rupee account, provided the Authorized Dealer bank is satisfied that the credit represents current income of the non-resident account holder and income tax thereon has been deducted / provided for.
3.3 Foreign nationals who come to India on employment and become residents in terms of section 2(v) of FEMA, 1999, and are eligible to open/hold a resident savings bank account, are permitted 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 legitimate dues subject to certain conditions.
4. Remittance of assets by a foreign national of non-Indian origin
4.1 A foreign national of non-Indian origin who has retired from an employment in India or who has inherited assets from a person resident in India or who is a widow of an Indian citizen who was resident in India, may remit an amount not exceeding USD one million, per financial year (April-March), subject to the satisfaction of the Authorised Dealer bank, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October 9, 2002.
4.2 These remittance facilities are not available to citizens of Nepal and Bhutan.
4.3. When a person resident in India leaves India for a country (other than Nepal or Bhutan) for employment / business / vocation outside India or for with an intention to stay outside India for an uncertain period, his / her existing account should be designated as a Non-Resident (Ordinary) [NRO] Account. The extant instructions have been reviewed so as to facilitate the foreign nationals to collect their pending dues in India. AD Category-I banks may, therefore, 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 bonafide dues, subject to the following conditions
a. AD Category-I bank should obtain the full details from the account holder about his legitimate dues expected to be received into his account.
b. AD Category-I bank has to satisfy itself as regards the credit of amounts which have to be bonafide dues of the account holder when she / he was a resident in India.
c. The funds credited to the NRO account should be repatriated abroad immediately, subject to the AD Category-I bank satisfying itself regarding the payment of the applicable Income tax and other taxes in India.
d. The amount repatriated abroad should not exceed USD one million per financial year.
e. The debit to the account should be only for the purpose of repatriation to the account holder’s account maintained abroad.
f. There should not be any other inflow/credit to this account other than that mentioned at point (a) above.
g. AD Category-I bank should put in place proper internal control mechanism to monitor the credits and debits to this account.
h. The account should be closed immediately after all the dues have been received and repatriated as per thedeclaration made by the account holder mentioned at point (a) above.
5. Remittance of assets by NRI/PIO
5.1 A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit an amount up to USD one million, per financial year, out of the balances held in his Non- Resident (Ordinary) Rupee (NRO) account/sale proceeds of assets (inclusive of assets acquired by way of inheritance or settlement), for all bonafide purposes, subject to the satisfaction of the Authorized Dealer bank, and on production of an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October 9, 2002.
5.2 NRI/PIO may remit sale proceeds of immovable property purchased by him out of Rupee funds (or as a person resident in India) as indicated in paragraph 5.1 above without any lock-in-period.
5.3 In respect of remittance of sale proceeds of assets acquired by way of inheritance or legacy or settlement for which there is no lock-in period, NRI/PIO may submit to the Authorised Dealer documentary evidence in support of inheritance or legacy of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the prescribed formats. Settlement is also a mode of inheritance from the parent, the only difference being that the property under the settlement passes to the beneficiary on the death of the owner/parent without any legal procedures/hassles and helps in avoiding delay and inconvenience in applying for probate, etc. In case settlement is done without retaining any life interest in the property i.e. during the lifetime of the owner/parent, it would be tantamount to regular transfer by way of gift. Therefore, if the property is received by NRI/PIO by way of settlement without the settler retaining life interest, it may be reckoned as transfer by way of gift and the remittance of sale proceeds of such property would be guided by the extant instructions on remittance of balance in the NRO account.
5.4 (a) The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. A person or his successor who has acquired immovable property in accordance with Section 6(5) of FEMA, 1999 cannot repatriate sale proceeds of such property outside India except with prior permission of the Reserve Bank.
(b) The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.
6. Remittance of Salary
6.1 A citizen of a foreign state resident in India, being an employee of a foreign company and on deputation to the office/ branch/ subsidiary/ joint venture in India of such foreign company or being an employee of a company incorporated in India, may open, hold and maintain a foreign currency account with a bank outside India and receive/ remit the whole salary payable to him for the services rendered, by credit to such account, provided that income tax chargeable under the Income Tax Act, 1961 is paid on the entire salary as accrued in India.
6.2 A citizen of India, employed by a foreign company outside India and on deputation to the office/ branch/ subsidiary/ joint venture in India of such foreign company, may open, hold and maintain a foreign currency account with a bank outside India and receive the whole salary payable to him for the services rendered to the office/ branch/ subsidiary/ joint venture in India of such foreign company, by credit to such account, provided that income tax chargeable under the Income Tax Act, 1961 is paid on the entire salary as accrued in India.
[The above provisions on remittance of Salary should be read with Schedule III (7) of FEM (Current Account Transactions) Rules, 2000]
7. Repatriation of sale proceeds of residential property purchased by NRIs / PIO out of foreign exchange
7.1 Repatriation of sale proceeds of residential property purchased by NRI / PIO is permitted to the extent of the amount paid for acquisition of immovable property in foreign exchange received through banking channels. The facility is restricted to not more than two such properties. The balance amount can be credited to the NRO account and can be remitted under USD one million facility as mentioned in paragraph 5.1.
7.2 Authorised Dealer banks may permit repatriation of amounts representing the refund of application / earnest money / purchase consideration made by the house building agencies / seller on account of non-allotment of flat / plot / cancellation of bookings / deals for purchase of residential / commercial property, together with interest, if any (net of income tax payable thereon), provided the original payment was made out of NRE / FCNR (B) account of the account holder, or remittance from outside India through normal banking channels and the Authorized Dealer bank is satisfied about the genuineness of the transaction. Such funds may also be credited to the NRE / FCNR (B) account of the NRI / PIO, if they so desire.
7.3 Authorised Dealer banks may allow repatriation of sale proceeds of residential accommodation purchased by NRIs/PIO out of funds raised by them by way of loans from the authorized dealer banks / housing finance institutions to the extent of such loan/s repaid by them out of foreign inward remittances received through normal banking channel or by debit to their NRE / FCNR(B) accounts.
8. Facilities for students
8.1 Students going abroad for studies are treated as Non- Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA.
8.2 As non-residents, they will be eligible to receive remittances from India (i) up to USD 100,000 from close relatives in India, on self declaration, towards maintenance, which could include remittances towards their studies also (ii) up to USD 1 million per financial year, out of sale proceeds of assets / balances in their NRO account maintained with an Authorised Dealer bank in India and (iii) upto USD 200,000 per financial year under the Liberalized Remittance Scheme.
8.3 All other facilities available to NRIs under FEMA are equally applicable to the students.
8.4 Educational and other loans availed of by them as residents in India will continue to be available as per FEMA regulations.
9. Income-tax clearance
The remittances will be allowed to be made by the Authorized Dealer banks on production of an undertaking by the remitter and a certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India in their Circular No.10/2002 dated October 9, 2002. [cf. A. P. (DIR Series) Circular] No.56 dated November 26, 2002].
10. International Credit Cards
Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, without prior approval of the Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the cardholder’s FCNR(B) / NRE / NRO accounts.
ANNEX-1
STATEMENT / RETURNS TO BE SUBMITTED TO THE RESERVE BANK
Master Circular on Remittance Facilities for Non-Resident Indians/Persons of Indian Origin / Foreign Nationals
Particulars of statement
Facilities to NRIs/PIO and Foreign Nationals – Liberalisation- Remittance from NRO account.
Periodicity
Quarterly
Relevant instructions
A.P. (DIR Series) Circular No. 12 dated November 16, 2006
ANNEX-2
OPERATIONAL INSTRUCTIONS FOR AUTHORISED DEALER BANKS
1. General
1.1 Authorised Dealer banks may carefully study the provisions of the Act / Regulations / Notifications issued under the Foreign Exchange Management Act, 1999 (the Act).
1.2 Reserve Bank will not prescribe the documents which should be verified by the Authorised Dealer banks while permitting remittances for various transactions. In this regard Authorised Dealer banks may refer to sub-section (5) of Section 10 of the Act.
1.3 In terms of the provisions contained in sub-section 5 of section 10 of the Act, before undertaking any transaction in foreign exchange on behalf of any person, Authorised Dealer bank is required to obtain a declaration and such other information from the person (applicant) on whose behalf the transaction is being undertaken that will reasonably satisfy him that the transaction is not designed to contravene or evade the provisions of the Act or any of the Rules or Regulations made or Notifications or directions or orders issued under the Act. Authorised Dealer banks should preserve the information/ documents obtained by them from the applicant before undertaking the transactions for verification by the Reserve Bank.
1.4 In case the person on whose behalf the transaction is being undertaken refuses or does not give satisfactory compliance of the requirements of an Authorised Dealer bank, he shall refuse in writing to undertake the transactions. Where an Authorised Dealer bank has reasons to believe that a contravention or evasion of the Act or the Rules or Regulations made or Notifications issued thereunder was contemplated in the transaction that he has refused to undertake, he shall report the matter to the Reserve Bank.
1.5 With a view to maintaining uniform practices, Authorized Dealer banks may consider requirements or documents to be obtained by their branches to ensure compliance with the provisions of sub-section (5) of section 10 of the Act.
2. Remittance of current income
2.1 Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is a permissible debit to the NRO account. Authorised Dealer banks may allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
2.2 NRIs/PIO have the option to credit the current income to their Non-Resident (External) Rupee account, provided the Authorised Dealer bank is satisfied that the credit represents current income of the non-resident account holder and income tax thereon has been deducted / provided for.
3. Restrictions
(a) The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.
(b) The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.
Till May 2012 as the interest rates of NRO deposits were 9% + per year as compared to meager 3.5% in NRE deposits NRIs / PIOs placed huge amounts of NRO deposits inspite of interest being taxable and liable for tax deduction [tds] of 30% which was reduced to 12.5% for tax residents of UAE under India UAE Double Tax Treaty on the basis of self declaration; for residents of Oman, Kuwait and Qatar @10% and for tax residents of USA, UK, Kenya and Belgium @ 15% as the case may be .
But now as tax free interest rates of NRE deposits are same as taxable interest on NRO deposits it would be gainful to even prematurely close the NRO deposits and place the amount as 3 years NRE deposits at 9%+ or Foreign Currency [ FCNR ] deposits of US$ , Euro or GBP earning higher tax free interest.
However in the last Budget a change is made whereby NRIs/ PIOs wishing to benefit from lower rate of 12.5% ;10% or 15% TDS as per Tax Treaty are required to provide Tax Residency certificate by the Government of the NRI's / PIO's country of residence i.e. UAE ; Middle East ; USA , UK , Kenya or Belgium Government as applicable.
The tax calculation herein shows that interest income of Rs 5,00,000 only on NRE account will save tax of Rs. 31,000 as compared to interest even when Tax Residency certificate is provided and this will also save the cost of availing Tax Residency certificate; filing of tax return in India and the hassles of getting the refund of excess amount of tax.
I. Remittance of Dividend/Interest on Shares/Bonds/Debentures held by NRIs/OCBs on repatriation basis
1. In cases where the dividend/interest is to be credited to the non-residents holder’s NRE account with a bank in India, it may be paid by issuing individual dividend/interest warrants to the shareholder’s mandate banks for credit to NRE account. The following particulars/documents should be furnished by Indian companies alongwith the dividend/interest warrant.
(a) Nationality and origin of the non-resident share/bond/debenture holder and place/country of permanent residence;
(b) A certified statement from the company, under the signature of an authorised official, showing the number of shares/bonds/debentures held by the non-resident, face value, number and date of Reserve Bank’s approval under Section 19(1)/ 29(1)(b)/29(4) (a) of the Act for issue/purchase holding of the shares/bonds/debentures, rate of dividend declared or interest payable, year/period to which it relates, gross dividend/interest, tax deducted at source and net remittable amount;
(c) A certified statement from the company, under the signature of an authorised official, that in terms of permission granted by Reserve Bank for acquisition of the shares/bonds/debentures there is no prohibition for the remittance of dividend/ interest.
On receipt of the above particulars/documents and after verifying documents evidence that the permission granted by Reserve Bank to the non-resident share/bond/debenture holder for purchase/holding/issue of shares/bonds/debentures under Section 29(1) (b)/29(4)(a)/19(1) of FERA 1973 does not prohibit the remittance of dividend/interest, authorised dealers may credit the amount of the dividend/interest warrant to the NRE account of the non-resident share/bond/debenture holder.
2. While granting permission to bank branches of authorised dealer to purchase shares/debentures on behalf of NRIs, under the Portfolio Investment Scheme, Reserve Bank also authorises the bank branch concerned to remit or to credit the dividend/interest to the non-resident investor’s NRO/NRE/FCNR account as the case may be. Dividend/interest due to the non-residents may accordingly by credited to the respective accounts for ensuring that the conditions laid down in this regard are satisfied.
Dividend/interest due to non-resident share/bond/debenture holders who are not eligible for having them remitted abroad should be paid to their mandate bankers in India for credit to their NRO accounts. Reserve Bank would permit repatriation of the net (i.e. after payment of tax) income/interest earned during the financial year 1994-95 and onwards on such investment in accordance with the procedure laid down.
4. Before allowing remittance of dividend/interest to an OCB, authorised dealers should ensure that it has submitted the required annual certificate in Form OAC Or Form OAC1 as the case may be, and that the ownership/beneficial interest of non-resident individuals of Indian nationality/origin had remained at or above the level of 60% upto the end of the period for which dividend is to be remitted.
II Remittance of Income on Investment on non repatriation basis
Non- resident of Indian/origin (NRIs) and overseas corporate bodies (OCBs) predominantly owned by NRIs have been permitted to make investment with Indian companies/ banks unit of Unit Trust of India, etc. on non-repatriation basis. NRIs are also permitted by Reserve Bank to grant loans to resident persons/firms/companies on non-repatriation basis. Further the investment/deposits held in India by Indian national who have become non-residents on account of their going abroad on employment/emigration, as well as income/interest earned on such investments/deposit/loan is also not allowed to be repatriated abroad. Investment made by NRIs out of rupee loans from banks in India against the security of NRE/FCNE account, sale proceeds of the house/flat acquired/ constructed out of loans obtained in India against the security of NRE/FCNR accounts, if sold, continue to be non-repatriable Authorised dealers may allow repatriation of net income/interest earned (i.e. after payment of tax) on these investments/deposits/loans as also of net income by way of rent earned on house/ flat acquired/constructed, in phased manner as under:
Income earned Amount eligible for repatriation During financial year 1995-95 Upto US $ 1,000 (U.S. dollars one thousand) in full and one third of the balance amount of income.
1995-96 Upto US $ 1,000( U.S. dollars one thousand) in full and two third of the balance amount of income.
1996-97 onwards Entire income.
Since the entire income will be repatriable from 1996-97 onwards, remittance.
Pertaining to the period 1996-97 and onwards will be permitted to be made either in One lumpsum or suitable instalments, if so desired by the applicants.
(ii) For the purpose of availing of this facility the concerned NRI/OCB Should designate a branch of an authorised dealer through whom the remittance on income is sought to be made and submit an application to it in Form RCI duly completed, together with the documents specified therein and details of income earned on investments/deposits as also any other income like pension earned. Authorised dealer on satisfying himself with reference to the particulars /documents and the Chartered Accountants certificate furnished that the income/interest etc. sought to be repatriated is eligible for remittance, may allow the remittance out of the relevant funds held in the applicants NRO account or credit the same to the NRE/FCNR account of the applicant after ensuring that the Income-Tax has been paid as per the provisions of Income-Tax Act and an undertaking/ certificate regarding payment of Income –Tax has been produced from the Income tax Authorities.
III. Repatriation of Interest/Dividend/Maturity Proceeds of Government Securities/National Plan and Savings Certificates/Units
Interest and maturity proceeds of Government securities including National Plan/Savings Certificate, sale proceeds of Government securities sold on Stock Exchange as well as dividend on Units of UTI and repurchase proceeds thereof may be credited by authorised dealers to the NRO accounts of non-resident investors without reference to Reserve Bank. As far as credits of such funds to NRE/FCNR accounts are concerned powers of authorised dealers are restricted to cases where the original investment was made by remittance from abroad or by debit to the NRE/FCNR account to make remittance to the investor abroad only if the payment is received from UTI with a confirmation that the investment in those units was made out of funds received from abroad in an approved manner or by debit to NRE/FCNR account of the unit holder. In all other cases, dividend/repurchase proceeds should be credited to NRO accounts.
Remittance regulations, a review
As part of its liberalization scheme, the Reserve Bank of India has over a period of time made it easier for NRIs to remit funds from India to abroad. As of today, balances in the NRE account are freely repatriable. That is, you do not need any permission for remittance abroad for any amount. Broadly, the funds in this account are usually funds deposited from abroad or in some cases, current income like interest or dividends on investments made through foreign funds.
Balances in the NRO account are not freely repatriable. But the RBI does allow NRIs to remit up to USD 1 million per financial year from the NRO account, provided you follow certain procedure. The funds in NRO account are usually from income earned locally, like rent on a property in India or certain capital account transactions like sale of property purchased prior to becoming an NRI.
Remittance procedure
In order to remit funds from the NRO account, you would need to submit two documents: Form 15 CA and Form 15 CB. The purpose of both these documents is to ensure that taxes are collected on the funds before they are remitted abroad as it becomes difficult to recover taxes at a later stage. Both these forms consist of more or less the same information. The only difference is that Form 15CA is an undertaking by the NRI to remit funds while Form 15 CB is a certification of the information by a chartered accountant. Here is the process:
Step 1: Submit Form 15 CA - Undertaking of information
You need to submit this form online on the website of the Tax Information Network www.tin-nsdl.com . This form will consist of the remitter's information such as name and address of the NRI, permanent account number, complete details of the overseas account to which funds are being remitted etc. It will also contain details of the accountant who will be certifying Form 15 CB.
"After you submit Form 15 CA online, you will get an acknowledgement. You would need to print the acknowledgment, sign it and submit it along with Form 15 CB to the bank,"
Access: Form 15 CA
Step 2: Submit Form 15 CB - chartered accountant's certificate
You need to get this certificate from a chartered accountant who will certify that you have paid all taxes due in India on the funds that you plan to remit abroad. The certificate will specify the nature of the amount to be remitted: that is, whether it is the remittance of dividends, interest, royalties received in India or any other income. Your chartered accountant may require you to submit copies of your Tax Residency Certificate, if any, in case you are availing a lower rate of TDS under the Double Taxation Avoidance Agreement.
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