Can An Indian Resident Gift Shares To A Non Resident?

Yes, an Indian resident can give gift of shares of a company to a non resident but only if he fulfills certain conditions laid down in . The Regulation 10 of the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 deals with requirement in case of transfer of security . Sub clause A(a) of Regulation deals with transfer of share by gift . This sub-clause was amended vide notification FEMA. 137/2005- RB Dated 22 July, 2005 . The conditions are

1. Application for approval to gift shares has to be made to RBI.
2. The Reserve Bank may grant such approval on being satisfied of the following conditions:

• a. The donee is eligible to hold such a security under Schedules 1, Schedule 4 and Schedule 5 of these Regulations.
  b. The gift does not exceed 5% of the paid up capital of the Indian company/each series of debentures/each mutual fund scheme.
  c. The applicable sectoral cap/foreign direct investment limit in the Indian company is not breached.
  d. The donor and the donee are relatives as defined in section 6 of the Companies Act, 1956.
  e. The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift in the calendar year does not exceed the rupee equivalent of USD 25,000.
  f. Such other conditions as considered necessary in public interest by the Reserve Bank.

Application Proforma?

• The same notification has prescribed that The application for approval referred to in sub clause (i) shall contain the following information/documents:
  a. Name and address of the donor and the donee.
  b. Relationship between the donor and the donee.
  c. Reasons for making the gift.
  d. In case of Government dated securities and treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such securities.
  e. In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.
  f. In case of shares and debentures, a certificate from a Chartered Account on the value of such securities according to the guidelines issued by the Securities & Exchange Board of India or the erstwhile CCI with regard to listed companies and unlisted companies respectively.
  g. Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible debentures, by way of gift, from resident to the non-resident shall not breach the applicable sectoral cap/FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5% of the paid up capital of the company.'

So, check every condition before you are trying to transfer the shares to a non resident and never do without prior permission of RBI.

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Do You Require Approval Of RBI For Selling Shares To Non Resident?

One of our client is an NRI . His father holds shares in an Indian Private Company which is trading in / Manufacture of Electronic items. Now my client wants to buy 90% of shares from his father and he wants to remit through banking channels the required money. Now I need a clarification on the following:
a. Whether Prior Permission of Reserve Bank of India is required ?
b. Whether sale proceeds of these shares in future are freely repatriable?
c. Whether there is any ceiling on % of shares to be acquired by NRI in Indian Company either by himself directly or as a group of NRI's A.RADHA SRI KRISHNA RAO

Is Permission of RBI required ?

Yes, the prior permission is required by a resident of India for selling shares to a resident outside India but only in certain specific conditions . This is as per Regulation 10 of Notification No. FEMA 20 /2000-RB dated 3rd May 2000 which was amended vide Notification No.FEMA.131/2005-RB dated March 17, 2005 as under

10. Prior permission of Reserve Bank in certain cases for transfer of security :-
A. Transfer by way of gift or sale by a person resident in India

A person resident in India who proposes to transfer to a person resident outside India: -

..................
(b) any share /convertible debenture of an Indian Company whose activities fall under Annexure B to Schedule 1, other than item nos.1 ,2 and 3 and subject to the Sectoral Limits specified therein, shall transfer such shares I debentures without prior approval of Government and RBI if the same is by way of sale subject to the following:
(i) that the Indian Company whose shares or convertible debentures are proposed to be transferred is not engaged in rendering any financial service;
(ii) that the transfer does not fall within the purview of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997; and
(iii) that the concerned parties adhere to pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by Reserve Bank from time to time.
Explanation: For the purpose of this Regulation, 'financial services', shall mean service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) and other companies regulated by any other financial regulator, as the case may be. '

Therefore for knowing whether prior permission required , one has to cheack whether all the aforesaid conditions(i) ,(ii) and (iii) are fulfilled.

Repatriation?

RBI has answerd this question in FAQ published on its website as under :

7. Are the investments and profits earned in India repatriable?
All foreign investments are freely repatriable except for the cases where NRIs choose to invest specifically under non-repatriable schemes. Dividends declared on foreign investments can be remitted freely through an Authorised Dealer.

Whether any ceiling of investment?

Yes, as stated above. The celiing is as per Annexure B to the Schedule 1 of the afoiresaid notification which can be found here. Check yourself . I find there are two entries relevant to your question - one is in sl no 9 which is for trading and another at sl no. 21 with heading Any other sector/activity (if not included in Annexure A) .

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How Much Money Can An Indian Gift In Foreign Exchange To A Person Resident Outside India?

How much money can an Indian mother gift to her son(British national now but Indian national previously) to be take to UK and what is the process of doing it. Does it require any special permissions or declaration.Amit Shah

Thanks to burgeoning foreign exchange kitty of India, Reserve Bank Of India introduced Liberalised Remittance Scheme under which now Indian resident can give gift or donation of US D 2,00,000 in one Financial Year to any one resident outside India which includes charitable/educational /religious trusts etc. Read below the FAQ given on RBI site

18. How much foreign exchange can a resident individual send as gift / donation to a person resident outside India?

Limit of USD 200,000 per financial year under the Liberalised Remittance Scheme would also include remittances towards gift and donation by a resident individual. Accordingly, under the Scheme, any resident individual, if he so desires, may remit the entire limit of USD 200,000 in one financial year as gift to a person residing outside India or as donation to a charitable/educational/ religious/cultural organization outside India. Remittances exceeding the limit will require prior permission from the Reserve Bank.

What should be the process?
As can be seen , no approval is required for gift of USD 2,00,000 in one financial year. However, as person giving gift should prepare a gift deed stating clearly

The name and address of the person whom gift is being given.

The mode of giving gift.

The deed should be signed by the person giving gift .

The person getting gift should sign the gift deed accepting the gift.

The gift deed should be notarized in the local court where the donor resides.

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What Are The Laws Regarding Repatriation Of Sale Proceeds of Property Purchased by NRI ?

The earlier FAQs were on following topics

On Acquisition of property in India.
On Sale or Gift or transfer of property.

Now the subject of repatriation of sale proceed of immovable property purchased by the non resident or person of Indian origin are being covered in this post .These are excerpts from the same "Frequently Asked Questions" answered by Reserve bank of India for the benefit of non residents and PIO .

1.Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what are the terms?

A.22. NRI / PIO may repatriate the sale proceeds of immovable property in India

(a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account
The amount to be repatriated should not exceed the amount paid for the property:
1. in foreign exchange received through normal banking channel or
2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties.
Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.

(b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

Q.2.Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?

A.23. From the NRO account, NRI/PIO may repatriate up to USD one million per financial year (April-March), which would also include the sale proceeds of immovable property.

Q.3.If a Rupee loan was taken by NRI/PIO from Authorised Dealer or housing finance institution for purchase of residential property can an NRI / PIO repatriate the sale proceeds of such property?

A.24. Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts (Please see A.P. (DIR) Series Circular No. 101 dated 5.5.2003)

Q.4If the property was purchased from foreign inward remittance or from NRE / FCNR (B) account, can the sale proceeds of property be repatriated immediately?

A.25. Yes.

Q.5 Is there any restriction on number of residential properties in respect of which sale proceeds can be repatriated by NRI / PIO?

A.26. Yes, sale proceeds of not more than two residential properties can be repatriated.

Q.6. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale?

A.27. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Q.7 If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?

A.28. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. NRIs/PIO may repatriate an amount not exceeding USD one million, per financial year, 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. [cf. A. P. (DIR Series) Circular No.56 dated November 26, 2002].

In case of a foreign national, sale proceeds can also be repatriated even if the property is inherited from a person resident outside India. But this is allowed only with prior approval of Reserve Bank. The foreign national has to approach Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate as mentioned above.
The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of Reserve Bank.
As FEMA specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.

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What Every NRI Would Like To Know About Sale or Rent or Gift Of Immovable Property?

Previously , the FAQs published by Reserve Bank Of India on the subject of acquisition of immovable property in India was published here. The second in series is the frequently asked question regarding "transfer of properties by various mode like sale,gift etc.

Q.1 Can an NRI/ PIO/foreign national sell his residential / commercial property?

A.1. (a) NRI can sell property in India to-

i) a person resident in India or
ii) an NRI or
iii) a PIO.

(b) PIO can sell property in India to

i) a person resident in India.
ii) an NRI or
iii) a PIO – with the prior approval of Reserve Bank

(c ) Foreign national of non-Indian origin including a citizen of Pakistan or Bangaladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of Reserve Bank to

i) a person resident in India
ii) an NRI
iii) a PIO

Q.2. Can an agricultural land / plantation property / farm house in India owned / held by a non-resident be sold?

A.2. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.
(b) Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property/ farm house in India

(ii) Transfer by gift

Q.3. Can a non-resident gift his residential / commercial property?

A.3. Yes.
(a) NRI / PIO may gift residential / commercial property to -

(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) foreign national of non-Indian origin needs prior approval of Reserve Bank.

Q.4. Can an NRI / PIO / Foreign national holding an agricultural land / plantation property / farm house in India gift the same?

A.4. (a) NRI / PIO can gift but only to a person resident in India who is a citizen of India.
(b) foreign national of non-Indian origin needs prior approval of Reserve Bank

(iii) Transfer through mortgage
Q.5. Can residential / commercial property be mortgaged?

A.5. i) NRI / PIO can mortgage to:

(a) an authorised dealer / housing finance institution in India –
without the approval of Reserve Bank.
(b) a party abroad - with prior approval of Reserve Bank.

ii) a foreign national of non-Indian origin can mortgage only with prior approval of Reserve Bank
iii) a foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an authorized dealer in India.

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11 FAQs Every NRI Should Know Before Acquiring Immovable Property In India!

The law regarding acquisition of immovable property are governed by Reserve Bank of India. It has put certain frequently asked question on its web site. Given below are the excerpt from those FAQs

Q.1 Who can purchase immovable property in India?
A.1 Under the general permission available, the following categories can freely purchase immovable property in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident outside India
ii) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

1. at any time, held Indian passport, or
2. who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land / plantation property / farm house in India.


Q.2. Whether NRI/PIO can acquire agricultural land/ plantation property / farm house in India?
A.2. No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.

Q.3. Do any documents need to be filed with Reserve Bank of India after purchase?

A.3. No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.

Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission?
A.4. There are no restrictions on the number of residential / commercial properties that can be purchased.

Q.5. Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?
A.5. No.

Q.6. Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?
A.6. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank

Q.7 Can a foreign national who is a person resident in India purchase immovable property in India?
A.7. Yes, but the person concerned would have to obtain the approvals, and fulfil the requirements if any, prescribed by other authorities, such as the concerned State Government, etc However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

Q.8 Can an office of a foreign company purchase immovable property in India?
A.8. A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.

Q.9 Whether immovable property in India can be acquired by way of gift ?
A.9. (a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
i) a person resident in India or
ii) an NRI or
iii) a PIO.
However, the property can only be commercial or residential. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Q.10. Whether a non-resident can inherit immovable property in India?
A.10. Yes, a person resident outside India i.e.
i) an NRI
ii) a PIO and
iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.

Q.11. From whom can the non-resident inherit immovable property?
A.11. A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from
(a) a person resident in India.
(b) a person resident outside India
However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.

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Can Non Residents Subscribe PPF?

I am an Overseas Citizen of India and also a Canadian Citizen. I had a PPF account in India which I opened before leaving India and I am still continuing to contribute. It is expiring and I want to extend it for next five years or so. Is it legal to continue such account.Raman,Toronto, Canada

NRIs are prohibited from opening a PPF account or investing in any of the Post office schemes as well as the RBI savings Bonds. Circular GSR 585(E) dt. 25.7.03 prohibits NRIs from opening a PPF account.

The wording in Public Provident Fund 1968 which is amended time to time, is as under with respect to issue of subscription by Non Resident

Non Resident Indians are not eligible to open an account under the

Public Provident Fund Scheme:-

Provided that if a resident who subsequently becomes Non Resident Indian

during the currency of the maturity period prescribed under Public Provident

Fund Scheme, may continue to subscribe to the Fund till its maturity on a Non

Repatriation Basis.

[MOF (DEA) Notification No GSR 585 (E) dated 25.7.2003]

Therefore, it is in my opinion you are not eligible for extrentding it to another five years. But then you can also make a case that since law provides you to continue with PPF , you can extend the PPF for another five years.

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How To Open A Liaison Office In India?

A liaison office  is often required by a foreign company for interacting with Indian company. India allows a liaison office following activities:

1. Representing the parent Company in India
2. Coordinating and communicating with Indian companies
3. Promoting export/ import from/ to India
4. Finding ways for enhanced technical / financial collaborations between the parent companies and companies in India.

How to Apply for Liaison office?

Following forms have to be submitted to Reserve Bank Of India.

1. Form FNC 1 – 3 Copies .
2. Letter from the Principal officer of the Parent Company to RBI
3. The latest audited Balance Sheet of the Parent Company.
4. Letter of Authority from the Parent Company in favour of local representative.
5. Two copies of the English version of the Memorandum and Articles of Association (Charter Documents) of the Parent Company attested by Indian Embassy/Notary Public in the country of registration.

Restriction on Liaison office 

1. No commercial operations  can be carried out by a liaison office in India.
2. It can neither borrow, nor lend money
3. It can not open any other bank account but a special account - QA22C account- that only allows inflows from abroad.
4. Office expense must be met from inward remittance in special account opened by liaison office.
5. It must file regular returns to the RBI. Such returns must
   include Audited Annual accounts and an activity report for the year.

Master circular of RBI can be found here .

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Can An NRI Invest In Firm?

Can an NRI become a partner in a partnership firm in India and invest in that firm? V S A PRASAD, Hyderabad

Any thing related to foreign investments or exchange , RBI is the authority for framing rules. The Master Circular on Foreign Investment in India date 2/7/2007 issued by RBI contains following provision regarding investment in firms . The facility is divided on repatriation basis and non repatriation basis .The excerpts of the circular which is very clear is given below

Investments with repatriation benefits

A non-resident Indian or a person of Indian origin resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided

i) Amount is invested by inward remittance or out of NRE / FCNR / NRO account maintained with AD bank.

ii) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income there from) or print media sector.

iii) Amount invested shall not be eligible for repatriation outside India.

Investments with repatriation benefits

NRIs / PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/ partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India.

Restrictions

An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom or engaged in Print Media.

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Can Indians Invest Abroad Without RBI Approval?

One of the American company is offering me some shares under ESOP. This company is not listed in India. It is listed New York Stock Exchange.My worry is how this transaction will took Place? If I want to sale these shares how I will Sale It. ? Please reply at the earliest.Parag

You have nothing to worry about. RBI had already allowed purchase of shares of foreign companies listed abroad under ESOP without any kind of restriction. The remittance of foreign exchange required for purchase of these shares by employees of the company which was issuing shares under ESOP was without any limit.

But the real good news for all Indian residents has come recently when the RBI under Liberalized Remittance Scheme allowed all resident Indians to invest abroad in whatever things like except prohibited items upto US Dollar 2,00,000 (increased from 1lakh Dollar to 2 Lakh Dollar recently ) in one financial year. So now an Indian resident can approach its bank for remitting US Dollar 2,00,000 for following types of investments

• Bank account abroad.
• Immovable property
• Shares ,Bonds and other financial instruments.
• Paintings and all other types of assets.
  

These Liberalised Remittance Scheme has been told in FAQ manner by Reserve Bank Of India on its site . The FAQ consist of 16 questions which has lucidly been explained by RBI are given as under :

Q1. Provide an illustrative list of capital account transactions permitted under the scheme?

The remittance under the Scheme is available to the resident individuals for any permitted current or capital account transactions or a combination of both. Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India. However, it was clarified that remittance from India for margins or margin calls to overseas exchanges / overseas counter party are not allowed under the Scheme.
The remittance facility under the Scheme is also not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.

iii) Remittances made directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories” from time to time.

iv) 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.

Q2. Whether this facility is in addition to existing facilities detailed in Schedule III under remittances?

The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can be also be used for these purposes. However, gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 100,000 per financial year under the Scheme. [Taxworry adds : read 1 lakh as 2 lakh now ]

Q3. Whether resident individuals under this Scheme have to repatriate the accrued yield on deposits/investments abroad, over and above the principal amount?

The investor can retain and reinvest the income earned on investments made under the Scheme. Currently, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.

Q4. Whether remittance under the Scheme is on gross basis or net basis (net of repatriation from abroad)?

Remittance under this scheme is on a gross basis.

Q5. Whether minors can also avail of the remittance facility?

The facility is available to all the resident individuals including minors.

Q6. Whether remittances under the facility can be consolidated in respect of family members?

Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.

Q7. Whether the Scheme can be used for purchase of objects of art (paintings etc) either directly or through auction house?

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.

Q8. Whether small value remittance of USD 5000/- (gifts, donation etc) is in addition to LRS of US $ 100,000/-?

Remittance against gifts and donations cannot be made separately and have to be made under the Scheme only and therefore no separate limits for gift and donation are available.

[ Note for readers by taxworry: You should read US $ 100,000 now as it has been increased to 2,00,000 recently .Click here.]

Q9. Whether the AD is required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

AD will be guided by the nature of transaction as declared by the remitter and will certify that the remittance is in conformity with the instructions issued by Reserve Bank.

Q10.Whether under this scheme a customer can remit funds for acquisition of ESOPs?

The Scheme can also be used for remittance of funds for acquisition of ESOPs.

Q11. Whether the scheme is in addition to acquisition of ESOPs linked to ADR/GDR (i.e USD 50,000/- for a block of 5 calendar years)?

The remittance under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR.

Q12. Whether the Scheme is in addition to acquisition of qualification shares (i.e USD 20,000/- as 1% of paid up capital of overseas company whichever is lower)?

The remittance under the Scheme is in addition to acquisition of qualification shares.

Q13. Whether a resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes etc under this scheme?

A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc under this Scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme.

Q14. Whether an individual, who has availed of a loan abroad while a non-resident can repay the same on return to India, under this Scheme as a resident?

This is permissible.

Q15. Whether it is mandatory for resident individuals to have PAN number for sending outward remittances under the Scheme?

It is mandatory to have PAN number to make remittances under the Scheme.

Q16. In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends putting through the permissible transactions) at the time of his private visit abroad, whether against self declaration of the remitter such an outward remittance can be effected?

Such outward remittance in the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.

Therefore, you visit your banks foreign desk and ask for help.There is no problems whatsoever.

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Send Money Abroad Up To USD 2,00,000 Now!

News You Can Use

The Reserve Bank Of India has further liberalised the forex rules and one of the relaxation affecting Individuals immediately will be raising of remittance limit under Liberalised Remittance Scheme for resident Indians. Read the press release issued by RBI.

P. (DIR SERIES) CIRCULAR NO. 9, DATED 26-9-2007

Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to A. P. (DIR Series) Circular No. 51 dated May 8, 2007 on the Liberalised Remittance Scheme for Resident Individuals (the Scheme).

2. With a view to further liberalize the Scheme it has been decided, in consultation with the Government of India, to enhance the existing limit of USD 100,000 per financial year to USD 200,000 per financial year (April - March) with immediate effect. Accordingly, AD Category – I banks may now allow remittance up to USD 200,000, per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both.

......

For understanding better on Liberalised Remittance Scheme, read the FAQ for better understanding. The FAQ is the excerpt from RBI web site

What are the purpose/s for which remittance can be made under the Scheme?

This facility is available for making remittance/s for any permissible current or capital account transaction or a combination of both. It is not available for purposes specifically prohibited (Schedule I) or regulated by the Government of India (Schedule II) of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

Can residents avail of this facility for acquiring immovable property and other assets abroad?

Yes. Individuals are free to use this Scheme to acquire and hold immovable property, shares or any other asset outside India without prior approval of Reserve Bank.

Can individuals open foreign currency account abroad for making remittance under the Scheme?

Yes. Individuals are free to open, hold and maintain foreign currency accounts with a bank outside India for making remittances under the Scheme without the prior approval of Reserve Bank. The account can be used for putting through any transaction connected with or arising from remittances under the Scheme.

What is the impact of the Scheme on the existing facilities for private/business travel, studies, medical treatment etc./items covered in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000?.

The facility under the Scheme is in addition to those already available under Foreign Exchange Management (Current Account Transactions) Rules, 2000.

Can an individual send remittance under the Scheme to any country?

Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan. The facility is also not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories, from time to time.

For the current list of such countries/ territories please visit www.fatf-gafi.org.

Further, remittance under the facility cannot be made to individuals and entities identified as posing significant risk or committing acts of terrorism as advised to banks by Reserve Bank from time to time.

What are the requirements to be complied with by the remitter?

The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. He has to furnish an application-cum-declaration in the specified format regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.

If an investment of USD 50,000 rises in value within the year, can one book profits and invest abroad again?

The investor is free to book profit or loss abroad and to invest abroad again. He is under no obligation to repatriate the funds remitted abroad.

Can an individual, who has repatriated the amount remitted during the financial year, avail of the facility once again?

Once a remittance is made for an amount upto USD 50,000 during the financial year, he would not be eligible to make any further remittances under this route, even if the proceeds of the investments have been brought back into the country.

Can remittances be made only in US Dollars?

The remittances can be in any currency equivalent to USD 50,000 in a financial year.

Last year, resident individuals could invest in overseas companies listed on a recognised stock exchange abroad and which has the shareholding of at least 10 per cent in an Indian company listed on a recognised stock exchange in India. Does this condition still exist?

Investment by resident individual in overseas companies is subsumed under the Scheme of USD 50,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.

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When Is Your International Credit Card Transaction Illegal?

These days international credit cards are being issued by all banks and other companies to most of the persons.Most of the online shops and businesses on internet accept credit cards and one can make payments in foreign exchange for any purchase made by through credit cards. However under FEMA , there are certain transactions for which foreign exchange withdrawl is prohibited . The list of such items are published in the Schedule I of Notification in the Gazette of India on 3/5/2000. The rule came into force from 1/6/2000. The list of these items are:

1. Remittance out of lottery winnings,
2. Remittance of income from racing/riding etc. or any other hobby,
3. Remittance for purchase of lottery tickets, banned/proscribed magazines, football pools, sweepstakes etc.
4. Payment of commission on exports made towards equity investment in Joint Ventures/ Wholly Owned Subsidiaries abroad of Indian companies,
5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable.
6. Payment of commission on exports under Rupee State Credit Route,
7. Payment related to "Call Back Services" of telephones,
8. Remittance of interest income on funds held in Non Resident Special Rupee Account Scheme.

It must be added that responsibility lies with card issuers since they are very much in knowledge of the nature of transactions .RBI has issued direction to them vide its circulars that they are not authorised to allow with drawl of foreign exchange for the purpose mentioned above. However, it is indeed a responsibility for everyone having international credit card to know if they are using the card legally or not.

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Money Without Limit Can Be Brought In India On Declaration!

Dear sir,as i am planning to return to India for vacation after working here for one year the first time i want you to tell me how much us dollars i can carry with me in person and what is the procedure to declare at Mumbai airport and proceed to my town. subuooty@....co.in

As per RBI guideline, a person can bring in any amount of money in India , but after a limit you will have to declare at the custom office on landing in India. Below is the excerpt from RBI FAQ on foreign exchange

• " 22. While coming into India how much foreign exchange can be brought in?
  A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its equivalent and/or the value of foreign currency exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India"

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What are best ways for saving tax for a returning NRI?

Someone Asked on Yahoo Answer-replied by me on 10/10/06

I am an NRI in USA and planning to come back to India.?
I have invested in USA in CD's , Savings account etc and want to keep them going even after return back to India. Now for USA income, I will have to file tax return every year to show only my interest earnings, although nothing will get taxed since all my earning will go under standard deduction. So do I have to show that interest income in Indian tax return too ?? Do you think this is the best way of saving taxes on invenstent interest or ther are other ways too ??

I think , you need to know following facts /laws1. An NRI can get exemption from any tax on any income earned outside India for two years from the day he lands in India. During these two years your status will be Resident but not ordinarily resident .Previously, he could get exemption for 9 years. So any interest, or any other income earned in any country is NONTAXABLE for two years. After that all income, that is , GLOBAL INCOME is taxable in India. So enjoy your interest income earned on CD or Saving accounts in USA for two years only. After that, those income are taxable. However, there are specific relief under I T Act and DTAA which may come for your help.2.You should also know the law called FEMA-Foreign Exchange Management Act - previously it was FERA. Following points need your attentioni) As is law today,you become a resident for FEMA with effect from the date of arrival in India.ii)A returning NRI require approval from RBI to maintain bank accounts abroad. iii)A returning NRI require approval from RBI to maintain bank accounts abroad. iv)Income earned on overseas assets needs to be repatriated to India.v)Immovable property acquired, held or owned while you were abroad can be continued to be so held and owned.vi)Similarly movable assets maybe held/ disposed off without permission of RBI , better although but not necessary . to avoid any possibility of litigation; you should inform RBI of the same.vii)Reinvestment abroad of sale proceeds of overseas assets is not permitted .However, you can do it through RFC accountWhat is RFC account:RFC stands for Resident Foreign Currency account is free from all RESTRICTION-means you can invest abroad from this account.No approval is required if transaction is done through this accont.The funds in RFC accounts are free from all restrictions .The minus point of such GOOD account, return on saving in that account is very very low compared to other type of saving instruments.I have put this question on my recently started blog .

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