An Indian abroad is popularly known as Non-Resident Indian (NRI). The NRI status is legally defined under the Foreign Exchange Management Act, 1999 and the Income Tax Act, 1961 for applicability of respective laws.

NON-RESIDENTS UNDER FEMA, 1999

The definition under FEMA is explained in simple terms for individuals hereunder.

1. The residential status of a person leaving India shall be determined as under:

   If a person leaves India  for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a non-resident from the day he leaves India for such purpose.

2. The residential status of a person returning to India  will be determined us under:

   If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a resident from the day he comes to India for such purpose.

In the definition, requirement of physical stay for a period of 182 days in India is also stated. However, in our opinion, the period of stay does not affect determination of status as explained in (1) and (2) above.

Thus if a person comes as a tourist, or for any purpose (not for employment or business in India), AND, he comes for a fixed or certain period of time he shall continue to be a non-resident.

NRI UNDER THE INCOME TAX ACT, 1961

The term non-resident is negatively defined under section 6 of the Income-tax Act. An individual who is not a resident under the Income-tax Act is a non-resident (generally, termed NRI). 

The status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act). 

The definition is explained in simple terms as under:

If an individual who satisfies understated both the conditions of Section 6 of the Income-tax Act, then he becomes a non-resident.

If you are not satisfying above conditions to become non-resident, check whether following assists you to become a non-resident.

An individual who is not becoming a non-resident as per the above provisions, there are provisions under section 6(6) of the Income-tax Act under which a special status of RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR) is available to such individual, if he satisfies one of the following conditions:

Note:

1. The status of RNOR renders certain income of such individual non-taxable.
2. A person may be resident under the Income Tax Act and non-resident under FEMA or vice-versa. The criteria for deciding residential status are different under both the Acts.

This information provided is general and requires proper guidance and advise before it is acted upon as certain provisions in case of complex facts are not explained here.

INVESTMENTS IN INDIA Nature of Investment Procedure PORTFOLIO INVESTMENT SCHEME IN SHARES & CONVERTIBLE DEBENTURES THROUGH STOCK EXCHANGE The NRIs are permitted to invest on delivery basis subject to following conditions: Purchase/sale Transactions shall be routed through: -Only one designated branch of an authorised Dealer (Bank). -A registered broker on a recognised stock exchange. The investment by each individual NRI should not exceed 5% and the aggregate investment by all NRIs/OCBs should not exceed 10% or 24% (as the case may be) of the paid-up capital / each series of convertible debentures respectively of the company. ON REPATRIATION BASIS The payment is received through an inward remittance in foreign exchange or by debit to the investor's NRE/FCNR account. In that case the net sale / maturity proceeds (after payment of taxes) of such securities shall be allowed to be remitted abroad or at his option credited to NRE / FCNR/ NRO account ON NON-REPATRIATION BASIS The payment is received through an inward remittance in foreign exchange or by debit to the investor's NRE/FCNR/NRO account. In that case the net sale / maturity proceeds (after payment of taxes) of such securitiesshall not be allowed to be remitted abroad and credited to NRO account INVESTMENT IN NEW ISSUE OF SHARES /CONVERTIBLE DEBENTURES ON NON-REPATRIATION BASIS Non resident Indian may without any limit, purchase on non-repatriation basis, shares or convertible debentures of an Indian company issued by way of public issue or private placement or right issue subject to following conditions The payment for purchase of shares and debentures is received out of funds held in NRO account or through an inward remittance in foreign exchange or by debit to the investor's NRE/FCNR account. Where the NRI is resident in Nepal or Bhutan, the amount of investment shall be paid only by way of remittance in foreign exchange through normal banking channels. The Indian company should not be a Chit fund or a Nidhi company nor should it be engaged in agricultural /plantation activities or real estate business or construction of farm houses or dealing in Transferable Development Rights (excluding development of townships, construction of residential /commercial premises, roads, bridges etc.) The sale / maturity proceeds (net of applicable taxes) shall be credited to NRO account. The amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated. Repatriation of Dividend / Interest is allowed after payment of taxes. DOMESTIC MUTUAL FUNDS No permission is required to purchase or sale of units. The transfer/sale is required to be arranged through registered stock broker or a recognised stock exchange or tender units of Mutual funds to the issuer for repurchase or for payment of maturity proceeds or tender Government security /treasury bills to the RBI for payment of maturity proceeds ON REPATRIATION BASIS The payment for purchase consideration is received through an inward remittance in foreign exchange or by debit to the investor's NRE/FCNR account.  The net sale / maturity proceeds (after payment of taxes) of such securities shall be allowed to be remitted abroad or at his/its option credited to NRE / FCNR/ NRO account ON NON-REPATRIATION BASIS The payment for purchase consideration is received through an inward remittance in foreign exchange or by debit to the investor'sNRE/FCNR/NRO account. account.  Sale proceeds are Not Repatriable and are required to be credited to NRO account. Repatriation of Dividend / Interest is allowed after payment of taxes. GOVERNMENT COMPANIES (Public Sector Undertaking) BONDS AND SHARES GOVERNMENT SECURITIES (OTHER THAN BEARER SECURITIES)/ TREASURY BILLS TAXATION ON INVESTMENT INCOME IN INDIA NATURE TDS Rate of TAX** Dividend - Mutual Fund Income Distribution NIL NIL Long Term Capital Gains     Equity shares and equity oriented Mutual fund Units sold on Recognised Stock Exchange NIL NIL Specified Assets (purchase in forex) 11.22% 10.20% Other Asset (including mutual funds & equity shares other than above) (without indexation Benefit) 11.22% 10.20% Other Asset (including Mutual funds & equity shares other than above) (with indexation benefit) 22.44% 20.40%   Short Term Capital Gains     Equity shares and equity oriented Mutual fund Units sold on Recognised Stock Exchange 11.22% 10.20% Other Asset (including mutual funds & equity shares other than above) 33.66% Normal Slab Rates Interest Specified Asset (purchase in forex) 22.44% 20.40%   Other Asset 33.66% Normal Slab Rates Normal Rates of Taxation Individual Income Rate Upto Rs.1, 00,000/- Nil Rs. 1,00,000/- to Rs.1, 50,000/- 10% of the amount by which the income exceeds Rs. 100,000/- Rs. 1,50,000/- to Rs. 2,50,000/- 5,000/- plus 20% of the amount by which the income exceeds Rs.1,50,000/- Above Rs.2, 50,000/- 25,000/- plus 30 % of the amount by which income exceeds Rs.2,50,000/- Surcharge @ 10% (If income exceeds Rs.10,00,000/-) Education Cess: - 2% on Total Tax SECURITIES TRANSACTION TAX (STT) Nature Of Transaction Tax Rate ·  Equity shares transaction in a Recognized Stock Exchange:-  1. With Delivery ·  Purchaser ·  Seller 2. Without Delivery ·  Seller         0.125% 0.125%   0.025% ·  Derivative transactions in a Recognized Stock Exchange:- ·  Seller     0.0166% ·  Sale of Units of Equity Oriented Mutual Fund: -  ·  Seller   0.25% ·  Note: The above rates will be effective from the 1st June, 2005. STT paid on purchase transaction shall not be allowed to be added to the purchase cost. STT paid on sales transaction shall not allowed to be deducted from sales value. There is no Tax credit for STT paid.

Can NRIs invest in Mutual Funds in India ?

Investments by NRIs in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investor

Repatriable Basis
To invest on a repatriable basis, you must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:

1. The mutual fund should comply with the terms and conditions stipulated by SEBI.
2. The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
3. The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.

Non-Repatriable Basis
The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions:

1. Funds for investment should be provided by debit to NRO account of the NRI investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
2. The current income in the form of dividends is allowed to be repatriated.

No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.

Which schemes of Mutual Fund can NRIs invest in ?

NRIs can invest in all schemes of Mutual Fund. However, please note that none of the schemes of Mutual Fund mentioned on this website have been approved in any jurisdiction other than India. In particular, the funds contained herein have not been and will not be registered under the United States Securities Act of 1933 (the "Securities Act") or under the securities laws of any state and the funds have not been and will not be registered under the Investment Company Act of 1940 (the "Investment Company Act").

Units in the funds may not be offered or sold within the United States or to United States Persons, except in a transaction not subject to, or pursuant to an exemption from, the registration requirements of the Securities Act and any applicable state securities laws and which would not require the funds to register under the Investment Company Act. The term "United States Person" shall have the meaning ascribed to such term in Regulations under the Securities Act.

Does an NRI need any approvals from the Reserve Bank of India to invest in mutual fund schemes?

No. As an NRI one does not need any specific approval from the RBI for investing or redeeming from Mutual Funds. Only OCBs and FIIs require prior approvals before investing in Mutual Funds.

Being away from India doesn't mean you have to compromise the safety and security of your loved ones. In fact, your savings from your time overseas can be easily channelised to meet your family's needs - now and in the future. So, whether its your dream to retire in your hometown; to secure funds for your children's education; or to build assets, ICICI Prudential has a range of solutions that can be customized to meet your needs.

Investment and Saving Plans

Endowment policies are a good way of putting aside your savings today for a future goal - whether it's to buy a house in India or fund your entrepreneurial vision. Our savings-oriented policies are designed to make your savings grow and have them available to you at the end of a fixed number of years or through the term of the plan.

LifeTime II - A complete market-linked insurance plan that adapts itself to your changing protection and investment needs, throughout a lifetime.

Investshield Gold - A unit-linked insurance plan with an assurance of Capital Guarantee*, which offers you the benefit of a limited premium payment and coverage term.

Premier Life - A market linked insurance plans that meets your Investment and Protection needs.

Retirement Plans

Many of us picture ourselves enjoying the fruits of our labour after retirement - going on a dream vacation, or helping our child's career take wing. Financing all this will depend on our personal savings and investments, so its important to save for the future from today. Our retirement plans are designed to help you systematically save, so that you can enjoy all the things you have dreamed of when you retire.

LifeTime Pension II - A regular premium linked deferred pension plan that gives you the freedom to choose the amount of premium, and invest in market-linked funds, to generate potentially higher returns.

Child Plans

As a responsible parent, you want to ensure a hassle-free, successful life for your child. However, life is full of uncertainties and even the best-laid plans can go wrong. SmartKid Education Plans are designed to provide flexibility and to safeguard your child's future education and lifestyle, taking all possibilities into account. SmartKid Child Plans has a bouquet of three products which can help you secure your child's education.

- Unit-linked Regular Premium 
- Unit-linked Single Premium

To claim refund in case where:

However, in any case NRI must file the return of income where his income exceeds minimum exemption limit (Rs.100,000 after enactment of Finance Bill, 2005).

A Returning Indian needs to plan his return to India. For the purpose, he needs advice / information on various aspects of Tax Laws / FEMA, 1999.

1. What is your residential status under: 
   
   
   1. Foreign Exchange Management Act, 1999
   2. The Income Tax Act, 1961
      
      
2. Planning the date and month of return to India so as ensure minimum tax liability in the year of return (i.e. April to March)? 
   
   
3. Holding and operating of non-resident Banking accounts on your return to India and Taxability thereof.
   
   
4. Holding of assets in and outside India / earning income in and outside India and its taxability?
   
   
5. Benefits of Double Taxation Avoidance Treaty, if any applicable

Plan you smooth return so as to avail maximum benefits offered to NRIs.

1. Who is a NRI under the provisions of Foreign Exchange Management Act?

Generally, an Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad or a person who is not resident in India for a period over 182 days is a non-resident Indian. Persons posted in U.N. organisations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-residents.

2. Who is a person of Indian Origin? 

Generally, under the provisions of Foreign Exchange Management Act a person of Indian Origin is an individual (other than a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan) who

• At any time held an Indian passport, or
• He or his father or his grandfather was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).

Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens for the purpose of certain facilities.

3. Do NRIs and PIOs require permission of Reserve Bank to acquire residential/commercial property in India? 

NRIs and POIs do not require permission from RBI to acquire residential / commercial premises in India (other than agricultural land/farm house/plantation property). A person resident outside India acquiring property to carry on business from India has to file with the Reserve Bank a declaration in Form IPI within ninety days from the date of acquisition of immovable property. A citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire immovable property without prior permission of Reserve Bank. However, he can take on lease an immovable property for not more than 5 years.

4. Can NRIs and PIOs sell residential/commercial premises in India without the permission of Reserve Bank? 

A person resident outside India who is a citizen of India is permitted to sell immovable property in India other than agricultural/plantation/farm house to a person resident in India or to an NRI or to a PIO resident outside India. He can also gift residential or commercial property in India to a person resident in India, NRI or to a PIO resident outside India. 
However, he can gift or sale any agricultural land/farmhouse/plantation property only to a person resident in India who is a citizen in India. 
A PIO resident outside India is permitted to sell the immovable property other than agricultural land/farmhouse/plantation property to a person resident in India.

5. Can the sales proceeds of residential / commercial premises be remitted out of India? 

The repatriation of sale proceeds of immovable property other than agricultural land / farmhouse / plantation property may be remitted out of India on fulfilling the following conditions.

• The immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition.
• The amount to be remitted does not exceed (a) the amount paid in foreign exchange for purchase of the immovable property received through normal banking channels or out of funds held in Foreign Currency Non-Resident account or (b) the foreign currency equivalent as on date of payment made for acquisition of property out of funds held in Non Resident External account.
• The remittance of sale proceeds in case of residential property is restricted only to two properties.

Reserve Bank has further liberalised the provisions regarding remittance. Accordingly, Authorised Dealers may allow the repatriation of funds out of balances held by NRIs/PIOs in the Non-Resident Ordinary Rupee (NRO) Accounts up to US$ 1,00,000 per year, representing sale proceeds of immovable property, held by them for a period of not less than 10 years subject to payment of applicable taxes.

6. Has the Reserve Bank of India issued any guidelines for grant of housing loans to NRIs? 

The Reserve Bank of India has issued the following guidelines for granting housing loans to Non-Resident Indians:

• Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
• Repayment of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.

7. Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorised dealers/financial institutions providing housing finance? 

Yes. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the borrower's NRE/FCNR/NRO accounts.

8. Can Indian companies grant loans to their NRI staff? 

Reserve Bank permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions.

9. Can NRIs and PIOs give a Power of Attorney in favour of a person of their choice in India to complete loan formalities on their behalf? 

Yes. Normally it is desirable to appoint a Power of Attorney in India to represent you in dealings in India. The Power of Attorney should be executed as per drafts provided by the housing finance company. The Power of Attorney holder should be a trustworthy person.

10. Can NRIs and PIOs gift residential / commercial premises to relatives / registered charitable trusts / organisations in India? 

Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organisations subject to the condition that the provisions of any other laws, including Foreign Contribution (Regulation) Act, 1976 and stamp duty laws, as applicable, are duly complied with.

11. Can NRIs and PIOs give residential / commercial premises on rent if not required for immediate use? 

Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation subject to payment of taxes and production of a certificate issued by a chartered accountant with the guidance of an Authorised Dealer such as a bank for completion of formalities.

12. How should NRIs and PIOs make payment of the consideration for residential / commercial property? 

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR/NRO accounts maintained with banks in India.

RESERVE BANK OF INDIA website for information

Do Mutual Funds assure returns ?

Although SEBI regulations allow Mutual Funds to offer guaranteed returns subject to the Fund meeting certain conditions, most Mutual Funds in India do no provide a guaranteed return on their schemes. In such cases, the sponsor, the AMC, or any other person, guarantees a minimum level of return and makes good the difference if the actual returns are less than the guaranteed minimum. The name of the guarantor and the manner in which the guarantee shall be met must be disclosed in the offer document by the Mutual Fund. Investment in mutual funds is not guaranteed by the Government of India, the Reserve Bank of India or any other government body.

Can I gift Mutual Fund units to my relatives in India ?

Yes. Certain funds do permit gifting of units. One should refer to the offer document of the specific fund to know the details.

Can I repatriate my earnings on redemption ?

If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment are eligible for repatriation subject to regulatory guidelines in force at the time of repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriation.

Can I repatriate my initial investment, earnings (capital gains) from redemption and any dividend arising from it ?

If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment is eligible for repatriation subject to regulatory guidelines in force at the time of the repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriation