Breaking Down the vital FEMA rules for NRIs to follow.
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As an NRI, you can continue maintaining your financial relationship with your homeland through remittances and investments. Such financial exchange across borders is governed by FEMA guidelines. The rules under FEMA apply to your bank accounts, investments, purchase of immovable properties, repatriation, income as a student, and foreign currency exchange.
The Foreign Exchange Management Act (FEMA) 1999 is an integral part of the legal framework in India. All the cross-border exchange of funds is regulated under FEMA. Hence, if you have moved overseas from India and attained Non-Resident Indian (NRI) status, you must learn about FEMA regulations. All your financial transactions like investments, remittances, and repatriation are governed under this Act. Here is a breakdown of the FEMA rules.
The key regulations under FEMA apply to the following operations for NRIs:
The primary rule as per FEMA for NRIs pertains to Bank Accounts. Once you become an NRI, you cannot transact through Resident Bank Accounts. You must either close or convert them into an NRI Bank Account. The Bank Accounts you can open as an NRI include, Non-Resident Ordinary (NRO), Non-Resident External (NRE), and Foreign Currency Non-Resident (FCNR (B)) Account. An NRO Account is designed to manage your Income originating from India. An NRE Account lets you maintain your foreign income in India. Lastly, an FCNR (B) Account stores your foreign income in the original currency without conversion.
If you are interested in the Indian real estate market as an NRI or a Person of Indian Origin (PIO), you can invest in residential and commercial properties in India. While you can purchase most types of immovable properties, FEMA regulations do not permit NRIs to buy agricultural land, plantation, and farmhouses.
Under the FEMA guidelines, you can invest in various financial instruments in India, subject to certain limits and conditions. Permitted investments include Equity Funds, Mutual Funds, Government Securities, Corporate Bonds, Real Estate, etc. The only exceptions are Savings Schemes like National Savings Certificate (NSC) and Public Provident Fund (PPF), local unorganised funds like chit funds, and exempted properties.
When you move overseas to study, you are treated as an NRI student and are eligible for all the facilities available for NRIs under FEMA. One such facility includes the receipt of remittances from India under the Liberalised Remittance Scheme. The remittance under this scheme includes money sent from family for managing your expenses while studying overseas. The total remittance permitted is up to USD 1 million from NRE/NRO Account in a financial year.
As an NRI, you can send money to India freely through an NRE or FCNR Account or via remittance services. You can remit a maximum of USD 1 million per financial year under FEMA rules. However, if you bring foreign currency to India, you must submit a Currency Declaration Form (CDF) to the designated Customs authorities upon arriving in India. Such declaration is mainly required when the foreign currency exceeds USD 5,000 or when the cash plus trade certificates exceed USD 10,000.
Learning about the FEMA regulations lets NRIs plan their investments and financial decisions in an informed manner. Such guidelines are catered towards encouraging foreign investments under specified limits. They are subject to revisions from time to time. Hence, it is best to keep a check on the rules periodically while making financial choices as an NRI.
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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.
The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.