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FEMA(Foreign Exchange Management Act) Compliance

What we offer?
  • Study Report on FEMA Rules
  • Study Report on FEMA Applicability
  • Advise on Tax implications of FEMA rules
  • Assistance in Compounding procedures with the RBI(Reserve Bank of India)

Acquisition and Transfer of Immovable Property in India by a person resident outside India

  • Acquisition of immovable property in India by person resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in the Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time. Section 2 (v) and Section 2 (w) of FEMA, 1999 defines `person resident in India' and a `person resident outside India', respectively. Person resident outside India is categorized as Non- Resident Indian (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. The Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.
  • In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.
  • The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open a Branch or Project Office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. Such dispensation is however not available to entities which are permitted to open liaison offices in India.

Renting of a Property

NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO(Non Resident Ordinary) / NRE(Non Resident External) account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO 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.

Availing Housing Loan in Rupees from Employer in India by NRI

  • The loan shall be granted only for personal purposes including purchase of housing property in India;
  • The loan shall be granted in accordance with the lender’s Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India;
  • The lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No.FEMA.4/2000-RB dated May 3, 2000.
  • The lender shall credit the loan amount to the borrower’s NRO account in India or shall ensure credit to such account by specific indication on the payment instrument;
  • The loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR(Foreign Currency Non-Repatriable) Account of the borrower and the lender shall not accept repayment by any other means.

A. Investment facilities for NRIs

NRI may, without limit, purchase on repatriation basis:
  • Government dated securities / Treasury bills
  • Units of domestic mutual funds;
  • Bonds issued by a public sector undertaking (PSU) in India.
  • Non-convertible debentures of a company incorporated in India
  • Perpetual debt instruments and debt capital instruments issued by banks in India.
  • Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.
  • Shares and convertible debentures of Indian companies under the FDI(Foreign Direct Investment) scheme (including automatic route & FIPB( Foreign Investment Promotion Board)), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
  • Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
NRI may, without limit, purchase on non-repatriation basis :
  • Government dated securities / Treasury bills
  • Units of domestic mutual funds
  • Units of Money Market Mutual Funds
  • National Plan/Savings Certificates
  • Non-convertible debentures of a company incorporated in India
  • Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
  • Exchange traded derivative contracts approved by the SEBI( Securities and Exchange Board of India ), from time to time, out of INR funds held in India on non-¬repatriable basis, subject to the limits prescribed by the SEBI.
Note : NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).