Investment Avenues for NRIs (PART 2)
Investments without repatriation benefits.
Capital contribution upto 100% in any proprietary or partnership concern engaged in industrial/ trading/ commercial activity except agricultural/ plantation or real estate business (not open to OCBs). The principal amount is non-repatriable.
Subscription to shares/ convertible debentures of Indian companies not engaged in agricultural/ plantation or real estate business or is not a nidhi company or a chit fund; this subscription is by way of new/ rights/ bonus issue of shares. Payment shall be by inward remittances of from RE/ FCNR/ NRO accounts
Investments in Non-convertible debentures of Indian companies; approved by the RBI on a case-by-case basis for the companies; NRIs can purchase shares/ debentures of existing companies (application to be made by NRIs) on an undertaking of non-repatriation.
Money market mutual funds floated by commercial banks/ financial institutions (not open for OCBs).
Deposits with companies (depositor has to obtain RBI approval and is not open for OCBs).
Commercial paper issued by Indian companies (not open for OCBs).
Remittance of income on non-repatriable investments.
Income/ interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held on non-repatriation basis can be remitted in the following manner.
i. Upto US $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95
ii. Upto US $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96
iii. Entire income earned during the financial year 1996-97 and onwards
iv. Entire income earned during the financial year 1996-97 and onwards
The NRI will designate a branch of an authorised dealer; the designated branch will allow the remittance of the funds to the NRE/ FCNR account.
General permission is available on transfer of shares/ debentures/ bonds held on non-repatriation basis to residents; sale proceeds are credited to an NRO account.
Investment in immovable property.
Non resident Indians can acquire/ hold/ transfer/ dispose of immovable property. No permission is required for this purpose. They cannot purchase agricultural land, farm houses and plantation property. However, on acquiring foreign citizenship, permission from RBI is required.
RBI has also granted general permission to Persons of Indian Origin to acquire immovable property in India. The general permission is also applicable for transfer/ disposal of the properties (other than agricultural land, farm houses, plantation property).
Under this, Persons of Indian origin can acquire immovable properties in India:
i. on non-repatriation basis for residential purposes – The purchase consideration has to be made by way of remittance from abroad or NRE/ FCNR account. The sale proceeds cannot be repatriated.
ii. on repatriation basis for residential purposes as well as commercial properties – The purchase consideration has to be made by way of remittance from abroad or NRE/ FCNR account. Repatriation facility is limited to sale proceeds of two residential properties; there is no such restriction in respect of commercial properties.
iii. by way of gift/ inheritance – The gift should have been received from a relative who may be an Indian citizen or person of Indian origin; general permission is available only in respect of two houses.
iv. out of rupee funds – Prior permission of the Reserve Bank of India is required
Residential or commercial properties can be let out for rent if not for immediate use, The rental proceeds or proceeds of any investment of such income has to be credited to the NRO account.
Repatriation of sale proceeds.
The general permission is also available in case of disposal of the immovable properties. Sale proceeds equivalent to the original amount of purchase consideration remitted can be repatriated after a lock-in period of three years. The balance amount has to be credited to the NRO account of the seller. The period of lock-in is applicable from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.
Persons of Indian Origin (PIO) are required to file a declaration in form IPI 7 with the Central Office of the Reserve Bank. This must be filed within 90 days from the date of purchase of immovable property or final payment of purchase consideration. A certified copy of the documents evidencing the transaction and bank certificate regarding the consideration paid is to be filed alongwith the form. Application for permission for remittance is to be filed in form IPI 8 within 90 days of the sale of the property.
Can NRIs obtain housing finance?
Certain financial institutions grant housing loans to NRIs for acquisition of houses/ flats for self-occupation. Authorised dealers can grant loans to NRIs for acquisition of house/ flat for self-occupation on their return to India. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or from funds in NRE/ FCNR accounts. Indian companies can grant housing loans to their employees deputed abroad and holding Indian passport. All these loans are subject to specific loan covenants; details can be obtained from banks/ institutions.