As a non-resident Indian (NRI), you may want to repatriate money that you had transferred to India for purchasing a property or investing in stock markets. Alternatively, you may want to remit local income or proceeds from sale of some of your Indian assets. RBI has given sufficient flexibility to NRIs to remit funds abroad from India. Even the funds from the sale of assets acquired before becoming a non-resident can be remitted up to a certain limit.
However, a few limits have been placed to check the outflow of foreign currency from India. In this post, we shall discuss such limitations on remittance/repatriation and exceptions in FEMA guidelines.
Limit on Repatriation from NRE/NRO/FCNR Accounts
Typically, you will want to repatriate/remit money from one of your bank accounts in India.
NRIs can have three types of bank accounts in India. NRE (Non-resident external), NRO (Non- Resident Ordinary) and FCNR (B) (Foreign Currency Non-Resident Bank Account). The extent to which an NRI can repatriate/remit money from these accounts varies.
There is no limit on the amount you can repatriate from your NRE/FCNR accounts. Since there is no limit on repatriation from these accounts, there are restrictions on what can be credited to NRE/FCNR accounts.
You can repatriate/remit up to USD 1 million per financial year from your NRO account.
For more on NRO, NRE and FCNR(B) accounts and deposits please refer to this post.
The basic rule is that if you purchase an asset on repatriation basis, then the sales proceeds of such assets can be repatriated. To purchase an asset on repatriation basis, the funds for purchase shall be repatriable. This means the payment for purchase shall be made by debiting NRE/FCNR(B) account or through foreign currency remitted through normal banking channel. On the other hand, if you purchase an asset on a non-repatriation basis, then the sales proceeds of such assets shall be credited to NRO account and be subject to extant limits of repatriation on NRO accounts. There can be additional restrictions depending upon the source of funds you want to remit.
For instance, you can purchase equities in Indian stock markets on both repatriable and non-repatriable basis. Sales proceeds of securities purchased on repatriable basis can be repatriated without any limits while sales of proceeds of securities purchased on non-repatriable basis shall be subject to repatriation limits on NRO accounts. For more on how NRIs can trade in Indian stock markets, please go through this post.
Sometimes, a few assets can only be purchased on a non-repatriation basis. For instance, the recent issue of NTPC tax-free bonds could only be purchased on non-repatriation basis.
Repatriable funds are in your NRE/FCNR accounts and can be sent abroad without limitation. Non-repatriable funds are in your NRO account and there are limitations on remittance from such accounts.
Remittance from NRO Account
Any balance in the NRO account, irrespective of the source of funds, can be remitted abroad subject to a maximum of USD 1 million per financial year. The source of these funds could even be the salary you earned before becoming an NRI or sales proceeds of a property you acquired/inherited before becoming non-resident. So, the source of funds just doesn’t matter. There are certain kinds of remittances that are prohibited such as lottery winnings etc. but these wouldn’t impact most NRIs.
Are there any exceptions? Can you remit more than USD 1 million from your NRO account? Yes, there is an exception.
Remittance of Current Income
You can remit current income such as rent, dividend, pension, interest etc from your NRO account with any limit. There is no limit on the amount of current income you can repatriate each financial year from your NRO account. The remittance limit of USD 1 million per financial year does not apply to current income. You can remit any amount subject to the condition that all the applicable taxes have been paid on such income.
In fact, NRIs also have an option to credit their current income to NRE accounts but the Authorized dealer bank has to be satisfied that the credit amount belongs to current income of the NRI and the applicable taxes have been paid.
Repatriation of sale proceeds of residential property purchased by NRIs out of Foreign Exchange
In this case, NRI can repatriate the sale proceeds to the extent of Foreign Currency used to purchase the residential property. Payment for purchase of such property shall be made by debiting NRE/FCNR account or through foreign currency remitted from abroad through normal banking channels (inward remittances). The balance funds can be deposited to the NRO account. This facility is restricted to not more than two such properties. If you have sold three properties, the proceeds for the third property have to be credited to NRO account and can be remitted subject to limit of repatriation from NRO accounts.
For instance, a residential property was purchased for USD 100,000 (equivalent of Rs 60 lacs) and sold for Rs 78 lacs. Assuming the INR has moved to INR 65/USD in the interim, sales proceeds is equivalent to USD 120,000. Ignoring any taxes to be paid, you can repatriate USD 100,000 and the remaining Rs 13 lacs can be credited to NRO account. The funds in the NRO account can further be remitted to the extent of USD 1 million per financial year.
If you had taken a loan from AD bank or housing finance companies to purchase a residential property and repaid part/entire loan through inward remittances or by debiting NRE/FCNR account, you can repatriate the sales proceeds of such property to the extent of loans repaid through inward remittance or debit to NRE/FCNR account.
For the sales proceeds of any immoveable property purchased by NRI out of Rupee funds (non-repatriable funds) or as a resident, the remittance limit of USD 1 million per financial year for NRO accounts shall apply. There shall be no lock-in period.
Refund of Application/Earnest Money
You have applied for allotment of flats/plot under a scheme by Government or a builder. It may so happen that you do not the allotment under the lottery scheme and the builder refunds you the earnest money or application fee. Can you repatriate the refund amount? There is a specific provision for such cases.
Repatriation of amount pertaining to refund of application/earnest money/purchase consideration made by the seller on account of non-allotment of flat/plot/booking cancellation for purchase of residential/commercial property (along with interest) is permitted. This is subject to the condition that the original payment was made out of NRE/FCNR(B) account or remittance from outside India through normal banking channels. If you so desire, such funds can also be credited to your NRE/FCNR(B) accounts.
Facilities for NRI students
As non-residents, they are eligible to receive remittances from resident Indians (close relatives) under Liberalized Remittance Scheme (LRS). Under LRS, a resident Indian can remit up to USD 250,000 per financial year. For studies, the amount remitted can exceed USD 250,000 if demanded by the foreign university.
In addition, facility remittance of USD 1 million from their NRO accounts is also available to students. All other facilities available to NRIs as per FEMA are available to students too.
Education loans and any other loans availed by them as residents shall continue to be available.
International Credit Cards
Authorized Banks have been permitted by RBI to issue international credit cards to NRIs. Transactions on such cards can be settled by inward remittance or debiting NRE/NRO/FCNR(B) accounts.
Tax Compliance is mandatory
Authorized dealer banks have to ensure that the applicable taxes have been paid on the income/funds that you intend to remit/repatriate abroad. Hence, while remitting funds from NRO account, you need a certificate from chartered account (Form 15CB) and an undertaking (Form 15CA) along with the remittance request form. The remitting bank may ask for additional documents based on the source of funds you seek to remit.
For list of documents required for outward remittance by ICICI Bank, please visit this link.
PersonalFinancePlan Take
The Government of India and the Reserve Bank have given enough flexibility to non-residents to remit their income and proceeds from asset sale in India. You can remit not just income or capital gains but even the principal amount subject to certain limitations. And this is not just for the investments you made in India after becoming non-resident but even those assets that you owned as a resident. The remittance limit of USD 1 million per financial year from NRO accounts shall suffice for most NRIs. With such favorable treatment meted out to NRIs, it is no surprise they want to invest in India.
Source: RBI Master Circular on Remittance Facilities for NRIs/PIOs/Foreign Nationals, 2015
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Deepesh is a SEBI Registered Investment Adviser and Founder, PersonalFinancePlan.in.