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FAQs - Repatriation Benefit Schemes

How has making investments for NRIs seeking repatriation benefit become hassle-free?
NRIs can make the following investments in India through foreign currency remittances or out of NRE/ FCNRA with the benefits of repatriation. This is true not only of the initial amount of investment, but also of the interest and dividend income, as well as the appreciation on initial investment realized by way of capital gains.

What is the benefit to an NRI returning to India?
Upon return to India for settlement, the balance of NRE/FCNRA can be transferred to the Resident Foreign Currency (RFC) Account, which can be maintained either as a Savings or Term Deposit Account in US Dollar, Sterling Pound or Deutsche Mark. The benefit of repatriation can be availed of with respect to balance in RFC A/c.

What developments have been made in portfolio investment in equity/preference shares or convertible debentures through stock exchanges in India?
Purchase of shares or convertible debentures by a single investor should not exceed 1% of the total paid-up capital or paid-up value of convertible debentures of that series issued by the company. There is also an overall ceiling of 24% investment by all Non-Residents put together.

Since September, 1994 the lock-in period of one year for availing the repatriation benefit on transfer under this category has been done away with. Shares/debentures can now be transferred at any time after purchase and the sale proceeds can be repatriated after payment of income tax on the amount of taxable capital gains.

Is any concession applicable on tax rate?
In the event of shares/debentures being held for more than one year before transfer, the resultant capital gains would be treated long-term and the applicable tax rate would be at a concessional rate of 10%.

What are the different schemes available to NRIs for direct investments in India with repatriation benefits?
NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24% scheme/ 40% scheme/ 100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by public sector undertakings. The company concerned will have to obtain permission from the Reserve Bank.

How can NRIs benefit from 24% Scheme?
Under the 24% scheme, Indian companies engaged or proposing to engage in any activity including finance, hire purchase, leasing, trading or other services, establishment of schools/colleges etc. (except agricultural/plantation activities) are allowed by Reserve Bank to issue shares/debentures to NRIs with repatriation benefits to the extent of 24% of the new issue.

What are the special features of 40% Scheme?
Under the 40% Scheme, Indian companies engaged or proposing to engage in the following activities are allowed by Reserve Bank to issue shares/debentures to NRIs with repatriation benefits to the extent of 40% of the new issue.

  • Industrial and Manufacturing units
  • Hotels with 3, 4 or 5 star category
  • Hospitals and diagnostic centers
  • Shipping companies
  • Development of computer software
  • Oil exploration services
What are the specified industries under the 100% Scheme?
Under 100% Scheme, NRIs are permitted to invest in high priority industries listed in Annexure III to the Statement on Industrial Policy dated 24th July 1991 of the Government of India up to 100% of the new issue.

Is dividend/interest earned in respect of investment made under the 100% Scheme freely remittable to the NRIs abroad?
Dividend/interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is required to be balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. This requirement is enforced for a period of seven years from the commencement of commercial production.

What is the Resident Foreign Currency (RFC) Accounts Scheme?
This is a Scheme initiated by the Reserve Bank for persons of Indian nationality or origin, who have returned to India on or after 18th April 1992 for permanent settlement, having stayed outside India for a continuous period of not less than one year. The scheme allows them to open foreign currency accounts with banks in India for holding funds brought by them to India.

Persons who have returned to India before 18th April 1992 can also open RFC account if (a) they are holding foreign currency assets abroad with Reserve Bank's permission or (b) are in receipt of pension or other monetary benefits from their erstwhile employers abroad.

What funds can be credited to RFC accounts of Returning Indians?
The entire amount of foreign exchange brought to India at the time of their return to India for permanent settlement as well as the balances standing to the credit of their NRE and FCNR accounts at the time of return can be credited to RFC accounts.

However, the foreign exchange brought to India in the form of foreign currency notes/bank notes/travelers' cheques should have been declared to Customs at the time of arrival on the Currency Declaration Form (CDF) if it exceeded U.S. $ 10,000 or its equivalent. In the case of foreign currency/bank notes, declaration of form CDF is compulsory if the amount exceeds U.S. dollar 5,000 or its equivalent.

Are income received from overseas assets in the form of dividends etc, or sale proceeds of such assets credited to RFC accounts?
Yes. Income from such assets or sale proceeds of such assets repatriated to India can be credited to RFC accounts.

Can pension received by the account holder from abroad be credited to his RFC account?
Yes. The entire amount of pension received from abroad can be credited to his RFC account.

Can funds in RFC accounts be remitted abroad?

Yes. Funds in RFC accounts can be remitted abroad for any bonafide purpose of the account holder or his dependents including exchange required for travel and other personal purposes and investments.

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