FACILITIES FOR RETURNING INDIANS
The provisions relating to assets of returning
Indians are governed by FEMA, 1999 as:
Movable Assets Abroad: Foreign
exchange/Overseas assets such as Bank accounts, stocks and securities, Life
insurance policies, Loans, company deposits, debentures, bonds etc., acquired, held or
owned by NRI while he was abroad can be continued to be so held and owned evenafter the
NRI returns to India for permanent settlement. Such investments can accumulate/accrue
income outside India. Such balances can be utilised for reinvestment and can be
repatriated to India at any time.
Immovable Assets Abroad: NRIs can continue to hold their immovable
properties outside India, such properties can be rented out, rentals can be credited to
overseas bank accounts. Such properties can be sold/transferred and the sale proceeds
credited to overseas bank accounts. Expenses relating to such properties, such as
maintenance, insurance premium etc. can be paid out of the overseas balances.
Bank accounts in India: Immediately on return to India, NRIs should
inform their Bankers and the Bankers will designate their accounts as Resident accounts or
transfer the balance in their NRE/FCNR accounts to RFC accounts if so desired. FCNR
accounts can be continued till the date of maturity and on maturity can be converted to
Concessional Tax treatment for Foreign
exchange assets: NRE/FCNR deposits with banks in India and investments in
Government securities and company debentures out of foreign exchange funds would be
eligible for a flat income tax of 20% on their income after permanent return of the NRI.
The concession will be available till maturity of these investments.
RESIDENT FOREIGN CURRENCY
(RFC) ACCOUNTS SCHEME
This is a Scheme approved by Reserve Bank of
India permitting persons of Indian nationality or origin, who have returned to India on or
after 18th April 1992 for permanent settlement (Returning Indians), after being resident
outside India for a continuous period of not less than one year, 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 RBI's permission or (b) they are in receipt of pension or other monetary
benefits from their erstwhile employers abroad.
RFC account can be held singly or jointly in the
names of eligible persons.
RFC account can be maintained in the form of
Savings, Current and term deposit. No cheque books are given for RFC-SB account.
RFC account can be opened and maintained in US
Dollars, Pounds Sterling and Deutsche Marks.
Only certain permissible credits viz.,
remittances in any permitted currency from abroad, pension or any other monetary benefits
received from abroad, interest on RFC accounts, foreign currency notes/travelers cheques,
transfers from other RFC account of the account holder, balance in NRE/FCNR account at the
time of his arrival in India and any other amount specifically permitted by RBI are
allowed under RFC. Funds in RFC accounts can be remitted abroad for any bona fide purpose
of the account holder and his dependents including exchange required for travel and other
personal purposes and investments.
Funds can be transferred from one RFC account to
another RFC account of the same person. Withdrawals/Payments other than foreign currency
remittance abroad, shall be made in equivalent Indian Rupees only. Returning NRIs are
required to redesignate their Non-resident accounts as Resident Rupee/RFC accounts after
their arrival in India.
However, RBI has now permitted Returning Indians
to continue their FCNR (B) deposits till the original maturity date and on maturity be
transferred to RFC accounts. RFC accounts are eligible for interest benefits, as
prescribed by the Bank from time to time.
No loans/advances are allowed whether directly
or indirectly against balance in an RFC account. If the Returning Indian
subsequently goes abroad to become an NRI, the balance in the RFC account can be converted
to NRE/FCNR account. Interest income from RFC is excempt from income-tax till such time
the Returning Indian maintain the status of Resident but Not Ordinarily Resident (RNOR).
Hence if the Returning NRI had been non-resident for a continous period of 2 years, he get
excemption from income-tax for subsequent 9 years.