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Investment in India by NRIs under Repatriable/Non-Repatriable basis

The matter of contention for the Non-Resident Indians (NRI) is whether the investment undertaken by them in India is under repatriation or non-repatriation basis i.e. whether the NRI will be able to transfer the funds received on selling the investment from his Indian account to his account in the country of residence.

This article will decode the investment classes with the threshold limit eligible for repatriation back to the home country.

I. Equity Shares in Listed Companies in India

Non-resident Indian (NRI) is allowed to purchase or sell equity instruments of a listed Indian company on repatriation basis, on a recognized stock exchange in India, subject to the following conditions:

  • The purchase and sale is done through a designated authorised dealer branch;
  • The total holding by any individual NRI should not exceed 5% of the total paid-up equity capital or
  • It should not exceed 5% of the paid-up value of each series of debentures or preference shares or warrants issued by an Indian company and the total holdings of all NRIs put together should not exceed 10% of the total paid up equity capital or should not exceed 10% of the paid-up value of each series of debentures or preference shares or warrants;
  • The aggregate ceiling of 10% can be raised to 24% if a Special Resolution to that effect is passed by the General Body of the Indian company

II. Mutual Funds

NRI may without any limit purchase or sell units under the repatriation route of domestic mutual funds which invest more than 50% in equity.

III. Fixed Deposit (FD)

Because of the high interest rates under Fixed Deposits, NRIs prefer to invest their money in Fixed Deposits in India. There are 3 types of FD accounts that an NRI can open:

  • NRE FD Account: In the case of NRE FD A/c, the NRI can invest and earn interest on FD account tax free. In addition, the deposit is fully repatriable i.e. principle and interest can be transferred back to the home country.
  • NRO FD Account: NRO FD account allows an NRI to earn high interest rate on earnings in India. But the interest earned in this account is subject to taxability in India. The interest income is fully repatriable but the funds in NRO account can be repatriable upto $ 1 million per FY.
  • FCNR Account: Foreign Currency Non-Resident Account is a Fixed Deposit account for NRIs in India. This account can be opened with the purpose of earning interest on the earned overseas in Foreign Currency. The interest earned is tax free. The principle and interest earned is fully repatriable.

IV. Immovable Property

Property is acquired through Rupees

If the NRI has purchased a property out of rupee funds/NRO account, the NRI can repatriate an amount up to $ 1 million per financial year.

Property is acquired out of the foreign exchange

If the NRI has acquired the property out of the foreign exchange, then repatriation of sale proceeds shall be permitted to the extent of the amount paid for the acquisition of the property. It is also restricted to not more than 2 such properties.

• Property is acquired through inheritance

NRls/PIO may repatriate an amount not exceeding $ 1 million, per financial year, on the production of documentary evidence in support of acquisition/inheritance of assets, an undertaking by the remitter and a certificate by a CA.

V. National Pension System (NPS)

An NRI can subscribe to the National Pension System (NPS) which is administered by PFRDA and the annuity/accumulated savings will be 100% repatriable.

VI. Public Provident Fund (PPF)

PPF is a long term savings account backed by the Government of India which provides a safe and guaranteed return for investors. But an NRI is not allowed to open a new PPF account and invest in it.

VII. Exchange Traded Derivative Contracts

Yes, NRIs can invest in the Exchange Traded Derivative Contracts approved by SEBI but on non-repatriable basis.

VIII. Intraday Trading

NRI is not allowed to undertake intraday trading transaction which is considered to be a speculative transaction. This implies, the NRI is allowed to undertake transactions in shares only in Delivery basis

IX. Government Bonds

Government securities are the safest and risk-free investments which are backed by the Government. The tenure ranges from 91 days to 4 years. NRIs are allowed to invest in G-Secs and the investment made in G-Secs through NRE account is fully repatriable. But the investment made through NRO account or rupee denominated source shall be repatriable upto the extent of $1 Million per FY for all the repatriation made.

The above are the potential options for investments for NRI with their regulations on repatriation.

In case of any clarification and help, please feel free to contact us at connect@osganconsultants.com

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