RBI Guidelines on NRI

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Let's look at some of the rules and regulations laid down by the Reserve Bank Of India (RBI), when it comes to an NRI/or NRI's making Investments in India. The federal government has considerably eased entry norms for NRI investment in real estate. Foreign citizens of Indian origin (PIOs) have been permitted to invest without the need to obtain approval from the Reserve Bank of India. With the passage of FEMA, the power to affect repatriation proceeds has been decentralized and delegated to authorize foreign exchange dealers. What is more, even the rental income can be repatriated now. It makes sense for NRIs now to earmark a portion of their investment portfolio in Real Estate and earn competitive return on investment.

  • Permission For Purchase Of Residential Property / Commercial Property:
    • NRIs holding Indian passports — No permission required
    • NRIs holding foreign passports — Intimation to RBI via form
    • IPI - 7 within 90 days of purchase of property or final payment of consideration.
    • Funds through NRE/NRO accounts.
  • Sale Of Property
    • Property held by NRIs in India can be sold. No permission is required from the Reserve Bank of India.
  • Repatriation Of Sale Proceeds
    • Repatriation of proceeds from sale of residential property purchased on or after 26th May 1993 is allowed.
    • The RBI will consider repatriation of the consideration amount remitted in foreign exchange for the acquisition of 2 properties. The sale has to have taken place after 3 years from the date of final purchase deed or from the date of final payment.
    • Application of repatriation (IPI-8) has to be done within 90 days of the sale of the property.

General Permissions

Reserve Bank has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies, under the Automatic Route purchase of shares under Portfolio Investment Scheme, investment in companies and proprietorship/partnership concerns on non-repatriation basis and for remittances of current income. NRIs/PIOs do not have to seek specific permission for approved activities under these schemes.

The Reserve Bank of India has now further simplified financial transactions by NRIs/PIOs by granting general permissions to:
  1. To resident individuals, partnership/proprietorship concerns to avail of interest bearing rupee loans from NRIs/PIOs out of funds remitted by them from abroad or out of funds held in their bank accounts in India, on non-repatriation basis, subject to certain conditions one of them being that the rate of interest on such loans should not exceed Bank Rate plus two percentage points.
  2. NRIs/PIOs to transfer by way of gift shares held by them in Indian companies and to transfer by way of gift immovable property held by them in India subject to compliance with other applicable rules/regulations including the provisions of Foreign Contribution Regulations Act, 1976 by the charitable trust/organization concerned.
  3. All domestic public/private sector mutual funds for issue of Units to NRIs/PIOs/OCBs on bot repatriation as well as non-repatriation basis.
  4. NRIs/PIOs/OCBs to place deposits wit Indian firms, on non-repatriation basis and wit Indian companies including Non-banking financial companies on bot repatriation and non-repatriation basis.
  5. NRIs/PIOs/OCBs for sale of shares acquired under direct investment Schemes on stock exchanges in India.