Non-Resident Indian (NRI) and PIO under FEMA
- Blog|FEMA & Banking|
- 4 Min Read
- By Taxmann
- Last Updated on 6 December, 2022
Definition of NRI:
‘Overseas Citizen of India’
- He is citizen of India
- He is an Overseas Cardholder.
Person of India Origin:
‘Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if:
- He at any time held an Indian passport;
- He or either his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955
- The person is a spouse of an Indian citizen or a person The definition has been modified for various purposes in various regulations. For the purpose of Foreign Exchange Management Regulations, 2000, citizen of ‘Sri Lanka’ is also excluded in addition to citizen of Bangladesh and Pakistan.
Income Tax Definition:
Income tax classifies persons as ‘Resident’, ‘Resident but not ordinarily resident’ and ‘Non-resident’. The definition under FEMA and definitions under Income Tax are not same, and there are variations, though sometimes they match.
Investment Facilities are available to NRI and PIOs at a glance.
NRIs and PIOs have been given some special facilities for investment in India. These are, of course, in addition to facilities available to other foreign investors. They also have some facilities after return to India. These are discussed at appropriate places, but summarised below to know facilities at a glance.
a. Bank Accounts and Deposits
- NRE Account
- FCNR (B) account
- NRO Account
c. Investment on repatriation basis:
- Government dated securities/treasury bills
- Units of domestic mutual funds
- Bonds issued by PSU in India
- Shares in PSU dis-invested by Government of India
- Shares and convertible debentures under the FDI scheme
- Shares and debentures of Indian companies through PIS
- Deposits with Indian companies, NBFC, Housing Finance companies, and other Financial Institutions
- National Pension Scheme
- Investment Vehicle
d. Investment on a non-repatriation basis:
- Units of money market mutual funds of India
- Capital of firm or proprietary concern in India, not engaged in agricultural or plantation activity or real estate business
- Chit funds
- Postal savings
e. Immovable Property:
- Immovable property other than agricultural/plantation property or a farm house
- Sale proceeds to the extent of repatriable funds used in acquiring immovable property can be repatriated without any lock-in period upto two residential properties
- Refund of application/earnest money together with interest subject to TDS, if original payment was made out of NRE/FCNR (B) account or inward remittance
f. Transmission of Inheritance:
No permission required
g. Housing Loans:
h. Facilities to returning NRI/PIO:
- May continue to hold, own transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was held or owned when resident outside India
- RFC account. Proceeds of sale of assets held outside India can be credited to RFC account.
i. Rupee Loan employees of India companies for acquiring ESOP:
Returning NRI/PIO can keep assets out of India.
As per section 6(4) of FEMA, a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if it was acquired when he was resident outside India or was inherited. He can utilize these asset broad freely.
Repatriation of income and sale proceeds in India of assets held abroad by NRI:
Fresh investment out of assets abroad, even after return to India:
Retaining investment abroad made under LRS:
An investor can retain and reinvest the income earned on investments made under the Liberalised Remittance Scheme of RBI (FED) Master Direction No. 19/2015-16 dated 1-1-2016.
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