|
Reserve Bank of India, under series of circulars issued by it recently, has liberalized various regulations pertaining to various types of transactions including maintenance of banks accounts, borrowings by and gifts to NRIs which is certainly a welcome step.
Summary of the said circulars is as follows:
I. NRI/PIO can open NRE account jointly with their Indian Resident Close relative
Earlier Indian residents were not allowed to be joint holder in the FCNR (B) /NRE accounts held by NRI/ PIO. However under the relaxed regulations, NRI/ PIO may be permitted to open FCNR (B) /NRE account with their resident Close relative on “former or survivor” basis. Such Indian Resident close relative (as defined section 6 of the Companies Act, 1956) shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instruction during the life time of the NRI/PIO account holder.
II. Exchange Earners Foreign Currency (EEFC) Account and Resident Foreign Currency (RFC) account – Joint holder
EEFC and RFC accounts which are foreign currency accounts allowed to be opened by specified Resident Individuals shall under the relaxed regulations are now permitted to be opened jointly with a resident close relative (as defined in the Companies Act,1956) on "former or survivor" basis.
However, such resident Indian close relative, now being made eligible to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder.
III. Savings Bank account maintained by residents in India – Joint holder:
It has also been decided that individuals in India may be permitted to include non- resident relative as a Joint account holder in their resident bank accounts on “former or survivor” basis.
However, such non-resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder
IV.Gift in Rupees by Resident Individuals to NRI close relatives
Previously Indian Residents could not gift in Indian rupees, even to their Non resident relatives. However under the relaxed regulations permission is now granted to residents making gifts to NRIs/PIOs.
Ø Resident individual is permitted to make a rupee gift to a NRI/PIO who is Close relative (as defined in the Companies Act, 1956) of Resident individual by way of crossed cheque/ electronic transfer.
Ø The gift amount should be credited to Non-Resident Rupee a/c (NRO) of the NRI/PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c.
Ø The gift is permissible under the Liberalized Remittance Scheme (LRS) for a Resident Individual and will be considered for the overall remittance limit of USD 2,00,000 per financial year as permitted under the LRS.
Ø It will be the responsibility of resident donor to ensure that all the remittances including the gift amount during the year has not exceeded the limit prescribed under the LRS.
Ø As per the Companies Act, 1956 a person shall be deemed to be a relative of another if, and only if,-
· they are members of a Hindu undivided family; or
· they are husband and wife; or
· the one is related to the other in the manner indicated in Schedule IA.
IV. Loans in Rupees by resident individuals to NRI close relatives
Previously resident individuals could give a loan to NRI/ PIO only with prior approval of Reserve Bank of India. However under the relaxed regulations, Resident Individual is granted general permission to lend in Rupees to his /her non-resident close relative (as defined under Companies Act, 1956) for any personal purpose or business activities. The said loan cannot be used for following business activities:
Ø Chit fund business
Ø Nidhi company
Ø Agriculture /plantation /real estate business /construction of farm houses
Ø Trading in TDR Other than agricultural/plantation activities or real estate or relending business.
The loan is free of interest and the minimum maturity of the loan is one year. The loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 200,000 per financial year available for a resident individual. The loan shall be utilized for meeting the borrower's personal requirements or for his own business purposes in India other than those prohibited activities as mentioned above. 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; The loan amount shall not be remitted outside India; and 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.
V. Foreign Investments in India - Transfer of security by way of gift – Liberalisation
A person resident in India who proposes to transfer, by way of gift, to a person resident outside India any security including shares/convertible debentures is presently required to obtain prior approval of the Reserve Bank.
However, the upper limit on value of security to be transferred together with any security transferred by the transferor, as gift, to any person residing outside India which was rupee equivalent of USD 25,000 during a calendar year has been enhanced to USD 50,000 per financial year.
VI. Credit of sale proceeds of Foreign Direct Investments in India to NRE/FCNR (B) accounts.
Sale proceeds of Foreign Investments in India shall be treated as eligible credit to NRE/FCNR (B) accounts, where the purchase consideration was paid by the Non-resident Indians / Persons of Indian Origin out of inward remittance or funds held in their NRE/FCNR (B) accounts and subject to applicable taxes, if any. Previously such clear permission was not available in the then provisions.
Disclaimer : The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. We recommend that professional advice is sought before taking any action on specific issues.
| 
