As per the Foreign Exchange Management Act (FEMA) of RBI, NRIs can make repatriable and non-repatriable investments in India. The Transfer or Issue of Security by a Person Resident outside India or TISPRO Regulations allow NRI and OCI investors to invest into the capital instruments of Indian companies on repatriation and non-repatriation basis.
Repatriable and Non-Repatriable Investments – Regulatory Framework
NRI investors are allowed to invest in India on a repatriation basis where the investor can take back the proceeds of investment or sale to the current country of their residence from where the investment was made. Whereas in the case of non-repatriable investment, proceeds of investment or sale can’t easily be transferred outside India.
Repatriable Investment
NRIs can invest in different asset classes in India on repatriable basis, using funds in their NRE (Non-Resident External) account. However, NRIs are allowed to trade in a recognized Indian stock exchange on repatriable basis through PIS (Portfolio Investment Scheme) – a scheme of RBI that enables NRIs to trade shares of Indian companies by routing such purchases and sell through their NRI savings accounts.
NRI Repatriable Investment Options
An investment made by NRIs using funds in their NRE bank account qualifies for repatriable investment. However, NRIs will need to route their investment in India through PIS to invest in Indian equity on repatriation basis. To invest in stocks on repatriable basis, demat and trading accounts of NRI investors must be linked to their PIS-enabled NRE bank account. Such transactions are reported to the RBI.
Apart from stock trading, NRIs can invest in the following financial instruments on a repatriation basis.
- Domestic Mutual funds
- Government dated securities
- Treasury bills
- Bonds issued by PSUs in India
- Bonds issued by infrastructure debt funds
- Listed non-convertible debentures
- Perpetual debt instruments and debt capital instruments issued by banks in India
- Initial Public Offerings (IPOs)
- National Pension System (NPS)
NRI Non-Repatriable Investments
NRI non-repatriable investment in India is deemed as domestic investment at par with the investment made by resident Indians. They can invest in an array of asset classes in India through their Non-Resident Ordinary (NRO) account. NRIs can use their income sourced in India, such as rent, dividends, pension, etc., for non-repatriable investments.
NRI Non-Repatriable Investment Options
Unlike repatriable investment where NRIs enjoy the freedom of transferring money from India to abroad, there are some restrictions on transfer of proceeds of sale or investment made on non-repatriable basis. NRIs don’t need to seek RBI permission to trade/ invest in Indian equity on non-repatriable basis. They just need to link their demat and trading accounts to their NRO bank account to start trading.
NRIs can invest in the following financial instruments on a non-repatriation basis.
- Futures & Options
- Equity stocks
- Domestic and money market mutual funds
- Government dated securities
- Treasury bills
- Bonds issued by PSUs in India
- Bonds issued by infrastructure debt funds
- Listed non-convertible debentures
- Perpetual debt instruments and debt capital instruments issued by banks in India
- Initial Public Offerings (IPOs)
- National Pension System (NPS)
- Chit funds
In case of NRI non-repatriable investment by NRIs, the funds in an NRO account can’t easily be transferred outside India and NRI investors should remember the following points:
- Repatriation of funds from an NRO account is subject to payment of applicable taxes.
- Up to USD 1 million can be repatriated per financial year across all the NRO bank accounts held by an NRI.
- The interest earned in an NRO account is repatriable.
- Income earned in India, such as rent, divided, pension, etc. and proceeds of investments in equity, mutual funds, IPO, etc. and proceeds from the sale of immovable property in India is repatriable up to USD 1 million per financial year.
- For repatriation above USD 1 million, you need to get RBI approval.
- The repatriation from an NRO account to third party accounts is not allowed.
Document Required for Repatriation of Funds
Here is the checklist of basic documents required to process the repatriation funds from India to a bank account abroad. Documents required may slightly vary from bank to bank. Get in touch with your bank to get the specific list of documents.
Documents required for repatriation from NRE/FCNR account
- Request form from bank for repatriation of funds abroad.
- A2 Form known as FEMA declaration or form for outward remittance. Each bank issues its A2 form with specific instructions. NRIs will have to mention the NRI repatriation purpose code for which the funds are being repatriated.
- NRIs can download the form from the respective bank’s website and send the filled form via courier for processing. However, many banks offer online repatriation services for NRIs.
Documents required for repatriation from NRO account
- Request form from bank for repatriation of funds abroad.
- A2 Form.
- Form 15CA: An NRI needs to fill this form as a self-declaration along with the details of the payment liable to taxes.
- Form 15 CB: A certificate from Chartered Accountant to declare that applicable taxes on the funds to be remitted have been paid.
- Supporting documents declaring the source of funds.
To process the repatriation of funds, an NRI needs to upload or send the self-attested copies of all above documents to the bank. The bank may also require you to submit physical copies.
When investing in India NRIs may have several questions regarding documentations or other aspects of investments. You can get in touch with experts at SBNRI. Download SBNRI App from the Google Play Store or App Store to ask any questions related to NRI Demat account, NRI repatriation/ non-repatriation investments, NRI account opening and tax filing in India. To ask any questions, click on the button below. Also visit our blog and YouTube channel for more details.
