NRI Legal Services: NRI Investment in India
NRI Tax IssuesNRI India Investment has been subjected to ample neglect over the years. It is only in the past few years that the Indian Government is paying utmost interest in this matter as NRIs all over the globe are being encouraged to bring fresh funds for the economy. BEING THE 10TH largest economy in the world and the 4th largest in terms of purchasing power parity (PPP), India has emerged as a potential destination for NRI investment. It has a large reservoir of skilled labor which is internationally cost-competitive, a large entrepreneurial base and a diversified manufacturing sector. These attributes make it easy to find partners for collaborations.
Non Resident Indians are allowed to invest any of the following investments in India with conformance to the following stipulations.
1. Residential Property
2. Commercial Property
3. Bank Accounts
The NRI/PIO may use his own funds to acquire immovable property; other than the option of availing home loan from bank for this purpose. The NRI's ‘own funds’ refer to the money received in India by way of inward remittance from overseas out of income earned overseas, personal savings outside India. These funds can be remitted through Non-Resident External (NRE) or Non-Resident Ordinary (NRO) or Foreign Currency (non-resident) (FCNR) bank accounts.
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.
Moreover, they can remit sale proceeds outside India for up to two such properties without any RBI approval. Remittance for subsequent properties requires RBI's approval. In case the property is acquired from rupee funds held in India, the remittance depends on the holding period of the property.
SPECIFIC PERMISSION OF RBI
Permission of the RBI is required to be obtained by all Non-Residents, resident foreign citizens, foreign companies and branches of foreign companies operating in India for:
· Carrying on in India any trading, commercial or industrial activity on its own or through an agent;
· Establishing a place of business in India to carry on such activity;
· Acquiring the whole or any part of business or industrial undertaking in India;
· The purchase of shares in Indian companies;
· Accepting appointment or acting as agents in India of any person or company;
· Acquiring, holding, transferring, disposal by sale, mortgage, gift, lease of more than 5 years, settlement orotherwise, of any immovable property situated in India.
An Indian company, in which non-resident interest is more than 40%, requires RBI permission to engage in agriculture or plantation activities or to acquire the whole or part of any undertaking engaged in such activity.Foreign nationals require RBI permission to practice any profession or to carry on any occupation, trade or business in India if they wish to repatriate their earnings abroad.
NRIs can invest in India as under:
1. Investment under Automatic Route with repatriation benefits
2. Investment with Government approval
3. Other investments with repatriation benefits
4. Investments up to 100% equity without repatriation benefits
5. Other investments by NRIs without repatriation benefits.
1. Investment under Automatic Route with repatriation benefits:
NRIs can invest in shares/convertible debentures of Indian companies under the Automatic Route without obtaining Government or RBI permission except for a few sectors where FIPB/SIA permission is necessary, or where the investment can be made only up to a certain percentage of paid up capital.
2. Investment with Government approval:
Investments not eligible under the Automatic Route are considered by the Foreign Investment Promotion Board (FIPB), a high powered inter-ministerial body under the chairmanship of Secretary, Department of Industrial Policy & Promotion, SIA, subject to sectoral limits/norms. These investments also enjoy full repatriation benefits.
3. Other investments with repatriation benefits:
· INVESTMENT IN DOMESTIC MUTUAL FUNDS
· INVESTMENT IN BONDS ISSUED BY PUBLIC SECTOR UNDERTAKINGS
· PURCHASE OF SHARES OF PUBLIC SECTOR ENTERPRISES (by NRIs/PIOs/OCBs)
· DEPOSITS WITH COMPANIES (FOR A MINIMUM PERIOD OF THREE YEARS)
· INVESTMENT IN GOVERNMENT SECURITIES/SHARES
4. Investments up to 100% equity without repatriation benefits:
CAPITAL CONTRIBUTION TO ANY PROPRIETARY OR PARTNERSIP CONCERN: NRIs can invest by way of capital contribution in any proprietary or partnership concern in India provided the firm or the proprietary concern is not engaged in any agricultural/plantation activities or real estate business or Print Media on non-repatriation basis subject to the certain conditions.
NEW ISSUES OF SHARES/DEBENTURES OF INDIANS COMPANIES: NRIs as been ranted general permission to subscribe to the shares/convertible debentures of an Indian company on non-repatriation basis, and to an Indian company to issue shares or convertible debentures by way of new/rights/bonus issue to NRIs on non-repatriation basis provided that the invitee company is not engaged in agricultural/plantation activities or real estate business (excluding real estate development i.e. development of property or construction of houses) or chit fund.
5. Other investments by NRIs without repatriation benefits:
· Investment in Non Convertible Debentures
· Money Market Mutual Funds
· Deposits with Companies
· Commercial Papers
NRI can also, without any limit, purchase on non-repatriation basis dated Government Securities, treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds.
However, NRIs are not permitted to make Investments in Small Savings Schemes including PPF.
Non Resident Indians are allowed to invest any of the following investments in India with conformance to the following stipulations.
1. Residential Property
2. Commercial Property
3. Bank Accounts
The NRI/PIO may use his own funds to acquire immovable property; other than the option of availing home loan from bank for this purpose. The NRI's ‘own funds’ refer to the money received in India by way of inward remittance from overseas out of income earned overseas, personal savings outside India. These funds can be remitted through Non-Resident External (NRE) or Non-Resident Ordinary (NRO) or Foreign Currency (non-resident) (FCNR) bank accounts.
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.
Moreover, they can remit sale proceeds outside India for up to two such properties without any RBI approval. Remittance for subsequent properties requires RBI's approval. In case the property is acquired from rupee funds held in India, the remittance depends on the holding period of the property.
SPECIFIC PERMISSION OF RBI
Permission of the RBI is required to be obtained by all Non-Residents, resident foreign citizens, foreign companies and branches of foreign companies operating in India for:
· Carrying on in India any trading, commercial or industrial activity on its own or through an agent;
· Establishing a place of business in India to carry on such activity;
· Acquiring the whole or any part of business or industrial undertaking in India;
· The purchase of shares in Indian companies;
· Accepting appointment or acting as agents in India of any person or company;
· Acquiring, holding, transferring, disposal by sale, mortgage, gift, lease of more than 5 years, settlement orotherwise, of any immovable property situated in India.
An Indian company, in which non-resident interest is more than 40%, requires RBI permission to engage in agriculture or plantation activities or to acquire the whole or part of any undertaking engaged in such activity.Foreign nationals require RBI permission to practice any profession or to carry on any occupation, trade or business in India if they wish to repatriate their earnings abroad.
NRIs can invest in India as under:
1. Investment under Automatic Route with repatriation benefits
2. Investment with Government approval
3. Other investments with repatriation benefits
4. Investments up to 100% equity without repatriation benefits
5. Other investments by NRIs without repatriation benefits.
1. Investment under Automatic Route with repatriation benefits:
NRIs can invest in shares/convertible debentures of Indian companies under the Automatic Route without obtaining Government or RBI permission except for a few sectors where FIPB/SIA permission is necessary, or where the investment can be made only up to a certain percentage of paid up capital.
2. Investment with Government approval:
Investments not eligible under the Automatic Route are considered by the Foreign Investment Promotion Board (FIPB), a high powered inter-ministerial body under the chairmanship of Secretary, Department of Industrial Policy & Promotion, SIA, subject to sectoral limits/norms. These investments also enjoy full repatriation benefits.
3. Other investments with repatriation benefits:
· INVESTMENT IN DOMESTIC MUTUAL FUNDS
· INVESTMENT IN BONDS ISSUED BY PUBLIC SECTOR UNDERTAKINGS
· PURCHASE OF SHARES OF PUBLIC SECTOR ENTERPRISES (by NRIs/PIOs/OCBs)
· DEPOSITS WITH COMPANIES (FOR A MINIMUM PERIOD OF THREE YEARS)
· INVESTMENT IN GOVERNMENT SECURITIES/SHARES
4. Investments up to 100% equity without repatriation benefits:
CAPITAL CONTRIBUTION TO ANY PROPRIETARY OR PARTNERSIP CONCERN: NRIs can invest by way of capital contribution in any proprietary or partnership concern in India provided the firm or the proprietary concern is not engaged in any agricultural/plantation activities or real estate business or Print Media on non-repatriation basis subject to the certain conditions.
NEW ISSUES OF SHARES/DEBENTURES OF INDIANS COMPANIES: NRIs as been ranted general permission to subscribe to the shares/convertible debentures of an Indian company on non-repatriation basis, and to an Indian company to issue shares or convertible debentures by way of new/rights/bonus issue to NRIs on non-repatriation basis provided that the invitee company is not engaged in agricultural/plantation activities or real estate business (excluding real estate development i.e. development of property or construction of houses) or chit fund.
5. Other investments by NRIs without repatriation benefits:
· Investment in Non Convertible Debentures
· Money Market Mutual Funds
· Deposits with Companies
· Commercial Papers
NRI can also, without any limit, purchase on non-repatriation basis dated Government Securities, treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds.
However, NRIs are not permitted to make Investments in Small Savings Schemes including PPF.
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