NRIs have the option to make non-repatriation investments in India utilizing funds from their NRO bank account. With such investments, the funds cannot be easily transferred to the NRI’s country of residence or converted into foreign currency. In this blog, we will shed light on the NRI non-repatriable investments.
NRI Non-Repatriable Investments
- Non-repatriation refers to restrictions on transfers of money from India to abroad.
- An NRO savings bank account is specifically designed to hold these funds.
- When NRIs invest their foreign earnings or income earned in India on a non-repatriation basis, such investments are called Non-repatriable investments.
- However, there are restrictions by RBI on transferring these funds to the NRI’s country of residence.
- Prior to 2012, the funds held in the NRO bank account were strictly non-repatriable. This means that transfers from the NRO account to the NRE (Non-Residential External) account were not permitted.
- However, on May 7, 2012, the RBI allowed the transfer of funds from the NRO account to the NRE account.
- The limit was up to USD 1 million per financial year, subject to payment of applicable taxes.
Non Repatriable Account Meaning
The NRO bank account serves as a non-repatriable account. NRIs use this account to manage their earnings in India, such as salary, rent, dividend, pension, and more.
Here are some important points to consider regarding funds held in an NRO account:
- The NRO account is an account denominated in Indian rupees and allows partial repatriation.
- NRO account holders have a repatriation limit of up to USD 1 million per financial year for any bonafide purpose.
- However, the repatriation of funds from an NRO account is subject to specific conditions, including the submission of tax compliance proof and a certificate from a chartered accountant.
Investments on Non-Repatriable Basis
Non-Repatriation investments for NRIs (Non-Resident Indians) include securities like shares, convertible debentures, government securities, units of domestic mutual funds, units of money market mutual funds, Fixed Deposits, etc.
NRI Non-Repatriable Investments Explained
NRIs have the option to make investments on a non-repatriable basis in various financial instruments in India. Some of the investments that NRIs can make on a non-repatriable basis include:
Equity Shares in Listed Companies in India
The portfolio investment scheme (PIS) enables NRIs to participate in the primary and secondary capital markets in India. Through this scheme, NRIs have the opportunity to purchase shares/debentures of Indian companies on the stock exchanges in India, subject to the following conditions:
- A designated authorized dealer branch must conduct these transactions.
- NRIs cannot hold more than 5% of the total paid-up equity capital or the paid-up value of each series of debentures, preference shares, or warrants issued by an Indian company
- The combined holdings of all NRIs should not exceed 10% of the total paid-up equity capital or the paid-up value of each series of debentures, preference shares, or warrants.
- The aggregate ceiling of 10% can be increased to 24%, if the General Body of the Indian company passes a Special Resolution.
NRIs can invest in units of the mutual fund schemes offered by RBI on a non-repatriable basis. If you choose the non-repatriable option, the principal amount invested cannot be repatriated, but the income distributions generated from the investment can be repatriated.
NRIs often choose to invest their funds in fixed deposits in India due to the attractive interest rates. There are three types of FD accounts available for NRIs-
- NRE FD Account
- NRO FD Account
- FCNR Account
Both NRE FD and FCNR FD are fully and freely repatriable. However, when NRIs invest in NRO FDs, the interest income is fully repatriable, but funds in the NRO account can be repatriated up to $1 million per financial year.
- NRIs can repatriate up to $1 million per financial year if the property was purchased using rupee funds/NRO account.
- Repatriation of sale proceeds is permitted up to the amount paid for the acquisition of the property, not exceeding two properties.
- NRIs can repatriate an amount not exceeding $1 million per financial year, supported by documentary evidence, an undertaking by the remitter, and a certificate by a Chartered Accountant.
Exchange Traded Derivative Contracts
NRIs can invest in Exchange Traded Derivative Contracts approved by SEBI but on a non-repatriable basis.
NRIs are allowed to invest in Government Securities (G-Secs), and investments made through NRE accounts are fully repatriable. Investments made through NRO accounts or rupee-denominated sources are repatriable up to $1 million per financial year for all repatriations.
Repatriation of Funds from NRO account
The NRO account, while being non-repatriable, allows for the remittance of funds as per the following rules and documentation requirements:
- Repatriation from the NRO account is permissible upon payment of applicable taxes.
- The repatriation limit of USD 1 million is applicable to all NRO bank accounts held by the NRI collectively.
- Repatriation from the NRO account is not permitted to third-party accounts.
- The repatriation limit of USD 1 million from the NRO account, allowed per financial year, must be utilized within that specific financial year. Any unutilized limit cannot be carried forward.
Documents Required for Repatriation of Funds from NRO Account
An NRI needs to provide the following list of documents for the transfer of funds from the NRO account:
- Request Form from the bank for repatriation
- A2 Form known as ‘FEMA declaration’ or form for outward remittance.
- Form 15CA
- Form 15CB
Transfer of funds between NRO to NRE accounts are subject to taxation. Once you pay all your taxes on the funds in NRO Account, you can transfer it to the NRE Account.
To ask any question related to fNRI account opening in India, you can download SBNRI App from the Google Play Store or App Store. Or click on Apply for NRI button in this blog.
NRI Banking can invite multiple queries and doubts. We, at SBNRI aim at resolving these doubts and make the entire banking experience seamless for NRIs.