This presentation summarizes the recent development in foreign exchange laws of India related to residents, non residents and person of Indian origin.

1. Presentation by Mr. GD Chugh
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2.  Key Issues for Residents and NRIs – Overview
 Liberalized Remittance Scheme for Residents
(LRS)
 Relaxations for Non Resident Individuals
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3. Definition of Resident
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5. Section 5 of FEMA, 1999 & Foreign
Exchange Management (Current Account
Transactions) Rules, 2000
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6. Capital Account Transactions Current Account Transactions
‘capital account transaction’ means a All transactions undertaken by a
transaction which alters the assets or resident that do not alter his / her
liabilities, including contingent assets or liabilities, including
liabilities, outside India of persons contingent liabilities, outside India
resident in India or assets or are current account transactions.
liabilities in India of persons
resident outside India
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7. Remittances out of
• lottery winnings
• Income from racing/riding etc. or any
other hobby
Remittance for purchase of lottery tickets,
banned/proscribed magazines, football
pools, sweepstakes etc.
Payment of commission on exports made
for equity investment in JV/WOS abroad
Continued on next page
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8. Dividend to which dividend
balancing is applicable
Commission on export under
rupee state credit route
Call back services
Interest income on funds in Non-
Special Rupee (Account) scheme
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9. Private visits abroad:
• upto USD 10,000 or its equivalent per financial year
for private visits Business Trips
Business Trips:
• upto USD 25,000 per visit
• Visits in connection with attending of an international
conference, seminar, specialised training, study tour,
apprentice training, etc., are treated as business visits.
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11. Maximum amount of USD 100,000 or its equivalent
 Self declaration from applicant
required
For the amount Exceeding above limit
 Estimate from hospital/doctor is
required
 An amount up to USD 25,000 is allowed for maintenance expenses of
a patient going abroad for medical treatment or check-up abroad, or to a
person for accompanying as attendant to a patient going abroad for
medical treatment/check-up.
 The amount of USD 25,000 allowed to the patient going abroad is in
addition to the limit of USD 100,000 mentioned above.
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12.  Facilities to students:
1. Estimate received from the institution abroad
or
USD 100,000, per academic year,
whichever is higher
2. A student holding NRO account may withdraw
and repatriate up to USD 1 million per financial
year from his NRO account.
3. The student may avail of an amount of USD
10,000 or its equivalent for incidental expenses
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13.  Foreign exchange available to a Person going abroad
for employment: upto USD 100,000 on self declaration
 Foreign exchange available to a Person going abroad
for emigration: upto the amount prescribed by the
country of emigration or USD 100,000
 Small value remittances (upto USD 25000 or
equivalent
 Category of visit requiring prior Government approval:
Dance troupes, artistes, etc.
 No. of days in advance for buying Forex for travel: 60
days
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14.  Mode of payment for buying forex: Where Rupee
equivalent exceeds Rs.50,000/-, the entire payment has to
be made by way of a crossed cheque/ banker’s cheque/
pay order/ demand draft/ debit card / credit card / prepaid
card only.
 What to do with unspent Forex balance: 1. To be
surrendered to AD bank within 180 days 2.May retain
USD 2000 in F/c or T/C 3. May put in RFC(D) account.
 Gift / Donation to a person resident outside India: upto
limit of USD 200,000 under LRS
 Use of International Credit Cards (ICCs) / ATMs/ Debit
Cards for forex transactions: Use is permitted
 Amount of Indian currency that can be taken abroad,
brought back : upto INR7500 per person
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15.  Amount of foreign currency by a person coming to
India:
 No limit. On declaration to Customs on CDF
 Total Foreign Exchange upto USD10,000 including
T/Cs, currency notes
 Foreign Currency notes upto USD 5000 may be
brought without declaration.
 Sending Gift article out of India- of value upto INR
500,000
 Taking personal Jewellery out of India- as per the
Baggage Rules
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16.  Extending local hospitality to a non resident:
 permitted under Regulation 2(i) of Receipt from
and Payment to, a person resident outside India
Regulations, 2000
Regulation 2 of Notification No. FEMA/16/RB-2000 dated 3.05.2000 permits
“ a person resident in India, to make payment in rupees (i) towards meeting expenses
on account of boarding lodging and services related thereto or towards to and from
and within India of a person resident outside India who is on a visit to India.
 Foreign Currency Account in India by a resident-
EEFC, RFC and RFC(D) A/c s
 Holding of assets abroad by a resident in India –
1. If acquired, held or owned by such person when he was
resident outside India or inherited from a person who
was resident outside India.
2. Acquired out of remittances made under the
Liberalized Remittance Scheme of USD 200,000
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17. Under sub-section (5) of Section 10 of the
FEMA, 1999 –
Documents and
other information
has to be submitted to the satisfaction of AD
bank.
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18. Liberalized Remittance Scheme (LRS) of USD
200,000 :
 The Scheme was announced 04.02.2004 as a step
towards further simplification and liberalization of the
foreign exchange facilities available to residents.
 Under the Liberalised Remittance Scheme, all resident
individuals, including minors, are allowed to freely
remit up to USD 200,000 per financial year (April –
March) for any permissible current or capital account
transaction or a combination of both.
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19.  Permissible transactions under the Scheme:
 Investment in immovable property or shares or debt
instruments or any other assets outside India.
 Open foreign currency accounts with banks outside
India for carrying out transactions permitted under
the Scheme
 Prohibited items under the Scheme:
 Purposes prohibited, restricted under Current Account
transactions Rules
 Trading forex, setting up a company abroad, to
terrorist destinations
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20.  LRS is a facility in addition to existing facilities
 Gifts/Donations to non residents: within the limit
under LRS
 Rupee gifts, loans to close relative NRIs / PIOs:
also within LRS limit
 Repatriation of investments and income thereon.
Not required
 LRS is on gross basis
 Use of LRS for ESOPs etc. permissible
 Use for repayment of overseas loan; Permissible
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21.  Remittances under LRS may be consolidated in
respect of family members
Yes. In case of remitter being a minor, the LRS
declaration form should be countersigned by the
minor’s natural guardian.
 Purchase of objects of art as Foreign Trade Policy
 Permissible, as per Foreign Trade policy
 Opening a Foreign Currency account with a bank
outside India - No restriction
 Restrictions on frequency of remittances under
LRS - No restriction
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22.  Requirements to be complied by remitter
 Designate a branch of an AD
 2.Furnish an application-cum-declaration in the
specified format regarding the purpose of the
remittance
 Declare that the funds belong to him and will not be
used for purposes prohibited or regulated under the
Scheme.
 No guidelines for investing: Except exercising due
diligence.
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25.  Non-Resident Indians
A Non Resident Indian (NRI) is a person resident
outside India, who is a citizen of India or is a person
of Indian origin.
 Person of Indian Origin
 Person of Indian Origin (PIO) for this purpose is
defined as a citizen of any country other than
Bangladesh or Pakistan, if (a) he at any time held
Indian passport; or (b) he or either of his parents
or any of his grandparents was a citizen of India
by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955); or (c) the
person is a spouse of an Indian citizen or a person
referred to in sub-clause (a) or (b).
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26.  Non Resident Ordinary Rupee Account (NRO
Account)
 Non Resident (External) Rupee Account (NRE
Account)
 Foreign Currency Non Resident (Bank) Account (
FCNR(B) Account )
Individuals/ entities of Bangladesh and Pakistan
require prior approval of the Reserve Bank for opening
above accounts.
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27.  Types of Account - Current, Savings, Recurring, Fixed
 Rate of Interest - As determined by Bank, cannot be higher
than those offered by them on comparable domestic rupee
deposits.
 Permissible credits - Inward remittances, Current income, sale
proceeds of assets
 Eligible debits - Local payments, Current income net of taxes,
Remittance of USD 1 million per financial year after paying
applicable taxes.
 Operations - may be held jointly with Resident/ NRI
 Loans: Loans in rupees to non-resident account holder and to
third against the security of fixed deposits.
 Repatriations of balances in NRO account: upto exceeding
USD one million per financial year, subject to payment of
applicable taxes.
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28.  Type of Account - Current, savings, Recurring & Fixed.
Accounts can be opened only by the non-resident himself
 Rate of Interest: As determined by Bank, cannot be higher
than those offered by them on comparable domestic rupee
deposits
 Permissible Credits: Inflow, Sale proceeds of FDI, income
on investment under Sch.3 of FEMA 20,
 Eligible debits: Local payments, FDI, Repatriation, transfer
to other NRE/FCNR Accounts
 Operations: Resident Power of Attorney holder can only
make local payments or remittances to Account holder
 Loans: upto 100 lakh on security of deposit to depositors
older or third party.
 Repatriability: Freely repatriable
 Tax Benefits: Accrued interest income and balances held in
NRE accounts are exempt from Income tax and Wealth tax,
respectively.
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29.  Type of Account: Only in Term Deposits of 1 to
5 years
 Currency of Account: In any freely convertible
currency
 Rate of Interest: within the ceiling rate of
LIBOR/SWAP rates plus 125 basis points for the
respective currency/corresponding maturities
 Permissible credits: : Inflow, Sale proceeds of FDI,
income on investment under Sch.3 of FEMA 20
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30.  Eligible Debits - Local payments, FDI, Repatriation,
transfer to other NRE/FCNR
 Operations - NRI can open joint account with a
resident close relative on former or survivor basis
 Loans - upto 100 lakh on security of deposit to
depositors older or third party.
 Repatriability - Freely repatriable
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31.  Borrowing money by an individual resident Indian
from his close relatives outside India
 Maximum USD 2,50,000
 Subject to the conditions as follows:
 the minimum maturity period of the loan is
one year;
 the loan is free of interest; and
 the amount of loan is received by inward
remittance in free foreign exchange through
normal banking channels or by debit to the
NRE/FCNR(B) account of the NRI
 RBI vide its A.P.(DIR Series) Circular No. 95 dated 21.03.2012 has
allowed that the repayment of such loans may also be made by credit
to NRE / Foreign Currency Non-Resident (Bank) [FCNR(B)] account
of the lender concerned.
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32.  Lending money by individual resident to his
close relative NRI/PIO
 Within overall limit of USD 200000 under LRS per finacial
year
 by way of crossed cheque /electronic transfer to meet
the borrower’s personal or business requirements in
India
 Conditions. The loan should be interest free; have a
maturity of minimum one year and cannot be remitted
outside India.
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33.  Repayment of loans of an NRI by an Resident
Individual close relative
Where an AD bank in India has granted loan to a non-
resident Indian, such loans may also be repaid by
resident close relative, of the NRI by crediting the
borrower's loan account through the bank account
of such relative.
Close Relative means a Relative as defined in Section 6
of the Companies Act, 1956
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34. On Repatriation basis – Under Schedule 1 and
Schedule 3 of Notification No. FEMA 20
On non-repatriation basis under Schedule 4 of
above Notification
NRI can also invest in non-convertible debentures
both on repatriation basis and on non-repatriation
basis
Note : NRIs are not permitted to invest in small
savings or Public Provident Fund (PPF).
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35.  Definition of NRI/PIO for investment in property
 Property prohibited for acquisition
 Source of funds
 Acquisition by gift, inheritance
 Transfer of property by NRI
 Repatriation of sale proceed
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36.  NRI - Non-Resident Indian (NRI) is a citizen of India
resident outside India
 PIO - A ‘Person of Indian Origin' means an individual
(not being a citizen of Pakistan or Bangladesh or Sir
Lanka or Afghanistan or China or Iran or Nepal or
Bhutan) who
 at any time, held an Indian Passport or
 who or either of whose father or mother or whose
grandfather or grandmother was a citizen of India by
virtue of the Constitution of India or the Citizenship
Act, 1955 (57 of 1955).
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37. Agricultural Land
Plantation property
Farm house
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38. Funds remitted to India through normal
banking channels or
Funds held in NRE / FCNR (B) / NRO
accounts maintained in India
No payment can be made either by traveller’s
cheque or by foreign currency notes or by other
mode except those specifically mentioned above.
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39.  NRIs and PIOs can freely acquire immovable
property by way of a gift either from
a person resident in India; or
 an NRI; or
 a PIO
 The property can only be commercial or residential
in nature.
 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.
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40. NRI may transfer his immovable property to:
A Resident Indian
A NRI and
A PIO
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41.  Amount to be repatriated shall not exceed:
 the amount paid for acquisition of the immovable
property in forex through normal banking channels
 the amount paid out of funds held in FCNR (B)
Account
 the foreign currency equivalent (as on the date of
payment) of the amount paid where such payment was
made from the funds held in Non-Resident External
account for acquisition of the property; and
In the case of residential property, the repatriation of sale
proceeds is restricted to not more than two such
properties
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42. Resident Foreign Currency Account:
Meaning
Features
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43.  Under clause (b) of section 2 of the RFC Scheme -
'RFC Account' means an account expressed in any
permitted currency, opened and maintained
pursuant to this Scheme, by an eligible person with
any Authorised Dealer
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44.  Proceeds of assets held outside India at the
time of return can be credited to RFC account.
 The funds in RFC accounts are free from all
restrictions
 Maintenance in the form of current or savings
or term deposit accounts
 permitted to be held jointly with the resident
close relative(s)
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45.  Holding joint accounts with resident close relatives
 Gift of shares/securities/convertible debentures etc
to NRI close relative
 Types of services that can be provided by resident
to NRI
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47. GD Chugh
Corporate Professionals, D-28, South Ex-Part-1, New Delhi -
110 049, India, (B): 9013802058, +91 11 40622243
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