CHAPTER 11
FOREIGN/FERA COMPANIES AND
FOREIGN NATIONALS
11.1 Introduction
PART A - STATUTORY PROVISIONS
11A.1 Appointment as Agent in India
11A.2 Trading, Commercial and Industrial Activities of Foreign
Companies/Foreign Nationals
11A.3 Opening of Branches/Offices in India by Foreign Banks
11A.4 Acquisition of Undertakings in India
11A.5 Purchase of Shares of Indian Companies
11A.6 Agricultural/Plantation Activities, etc. of FERA
Companies
11A.7 Practising Profession or carrying on an Occupation,
Trade or Business in India by Foreign Nationals
11A.8 Transfer/sale of Shares/Bonds/Debentures of Indian
Companies
11A.9 Immovable Property in India
11A.10 Reserve Bank Approval Pre-requisite for Remittances
11A.11 Hospitality to Non-resident Visitors
11A.12 Exemptions granted to Foreign Nationals of Indian
origin permanently resident in India
11A.13 Exemptions granted to Foreign Nationals Not Permanently
Resident in India
PART B - MAINTENANCE BANK ACCOUNT (QA 22)
11B.1 General
11B.2 Status of QA 22 Accounts
11B.3 Authorised Dealers' Responsibilities regarding QA 22
Accounts
11B.4 Loans in India to Foreign Nationals/Liaison Offices of
Foreign companies
11B.5 Diplomatic Bond Stores Account
PART C - REMITTANCE OF PROFITS/SURPLUS ETC. BY
FOREIGN COMPANIES
11C.1 Remittance of Profits by Foreign Companies (other than
Banks)
11C.2 Remittance of Profits by Foreign Banks Operating in
India
11C.3 Remittance of Surplus Passage/Freight Collections by
Foreign Airline/Shipping Companies
11C.4 Refund of Income-tax Non-resident Firms/Companies
11C.5 Remittance of Winding up Proceeds
PART D - REMITTANCE FACILITIES TO FOREIGN NATIONALS
11D.1 General
11D.2 Short-term Engagement of Foreign Nationals by Indian
Firms/Companies
11D.2A Engagement of foreign artistes for performance in India
11D.3 Recurring Remittances by Foreign Nationals who are in
regular employment of Indian Firms/Companies
11D.4 Remittance Facilities to Iranian Nationals
11D.5 Retirement Facilities
11D.6 Foreign Born Widows of Indian Nationals
11D.7 Repatriation Facilities to Foreign Students/Trainees
11D.8 Issue of Travellers Cheques to Foreign Tourists, Transit
Passengers and Foreign Nationals
11D.9
Eligibility criteria for Remittance of Income to Non-residents
11D.10 Remittance of Interest and Dividend
11D.11 Pension
11D.12 Other types of income
11D.13 Report to Reserve Bank
11D.14 Provident/Pension Fund Contributions of Expatriate
Staff
11D.15 Sitting Fee, Commission, etc. to Non-resident Director
11D.16 Legacies, Bequests and Inheritances
11D.17 Certain Remittances not permitted
11D.18 Holding to International Conferences/Seminars/Training
Programmes in India
PART E - IMMOVABLE PROPERTY IN INDIA
11E.1 Acquisition, Holding, etc. of Immovable Property in
India by Certain Persons
11E.2 Acquisition, Sale etc. of Immovable Property by Foreign
Banks
11E.3 Application forms
11E.4 General permission for Acquisition of Property for
Carrying on Activities permitted by Reserve Bank
11E.5 Properties held at the commencement of the Act
11E.6 General Permission for Acquisition/Disposal of
Residential/Commercial Properties by Foreign Citizens of Indian origin
11E.7 General Permission for letting out by Non-resident
Indians and Persons of Indian Origin
11E.8 Purchase of Immovable Property in India by Foreign
Citizens of Non-Indian origin/Foreign Companies
11E.9 Acquisition, Transfer of Property in India by way of
Lease, Mortgage, Gift, Inheritance, etc.
FOREIGN/FERA COMPANIES AND FOREIGN NATIONALS
Introduction
11.1
- 'Foreign companies', i.e., companies (other than banking companies)
which are
not incorporated in India and foreign nationals (whether resident in India
or not) are subjected to special regulations relating to their business etc.
activities in India through the provisions of Sections 28, 29 and 30 of FERA
1973. Acquisition/disposal of immovable properties in India by foreign
companies/foreign nationals is also subject to regulation under Section 31
of FERA 1973. Until 1992, Indian companies, (other than banking companies)
in which non-resident interest exceeded forty per cent i.e. FERA companies,
were also subjected to these regulations. However since January 1993 i.e.
after the amendment to FERA 1973, FERA companies are treated on par with
other Indian companies except in regard to carrying on 'agricultural or
plantation' activities in India. Regulations relating to these restrictions
as also other matters connected with remittance of profits by foreign
companies, remittance facilities to foreign nationals etc. are given in this
Chapter.
- For the purposes of Sections 28 and 29 of FERA 1973, as defined in
the Explanation thereto, the term 'Company' includes a firm or other
association of individuals. Accordingly, the term 'foreign company' used in
this Chapter connotes also firms and other institutions which are registered
or incorporated outside India. Likewise, the term 'FERA company' connotes
Indian firms and institutions in which non-resident interest exceeds forty
per cent. The term 'Non-resident interest' has been defined in the
Explanation (ii) to Section 29, to mean participation in the share capital
by, or entitlement to the distributable profits of, any individual or
company resident outside India, or any company not incorporated under any
law in force in India or any branch of such company whether resident outside
India or not.
PART A - STATUTORY PROVISIONS
Appointment as Agent in India
11A.1 In terms of Section 28(1) of FERA 1973, foreign
companies and foreign nationals
(whether resident in India or not) are required to obtain permission of Reserve
Bank
for acting or accepting appointment as agent in India of any person or company
in the trading or commercial transactions of such person or company. Such
permission was also required under Section 28(3) of the Act in cases where
appointments as agents were held by foreign companies/foreign nationals since
prior to the coming into force of the Act, i.e., 1st January 1974 and were
continuing thereafter. Applications for permission to act or accept appointment
as agents in India should be made in form FNC 1 to the Central Office of Reserve
Bank (Foreign Investment Division).
NOTES:
- The term 'agent' includes any person or company (including
its branch) buying goods with a view to selling them before any processing
thereof. The term 'processing' has the meaning assigned to it in Explanation
(c) under Section 28 of the Act.
- See paragraph 11A.12 for details regarding exemption
granted to foreign nationals of Indian origin permanently resident in India.
Trading, Commercial and Industrial Activities of Foreign Companies/Foreign
Nationals
11A.2
- In terms of Section 29(1)(a) of FERA 1973, foreign companies and foreign
nationals
(whether resident in India or not) are required to obtain permission of
Reserve Bank to carry on
in India, any activity of a trading, commercial or industrial nature or to
establish in India, a branch, office or other place of business for carrying
on such activities. Application for permission should be made to the Central
Office of Reserve Bank (Foreign Investment Division) by Foreign Companies in
form FNC 2 and by foreign nationals in form FNC 3.
NOTES:
- Reserve Bank has by Notification No. FERA.22/74-RB dated 11th
October 1974 issued under Section 29(1) of the Act granted general
permission to shipping companies incorporated outside India for carrying
on their normal commercial activities through agents provided such
companies do not have a branch, office or other place of business in
India.
- See paragraph 11A.12 for details regarding exemption granted to
foreign nationals of Indian origin permanently resident in India.
- Foreign companies engaged in manufacturing or trading activities will be
permitted to
open branches in India for the following purposes:
- To represent the parent company/other foreign companies in various
matters in India, e.g., acting as buying/selling agent in India,
- To conduct research work in which the parent company is engaged provided
the results of the research are made available to Indian companies,
- To undertake export and import trading activities, and
- To promote technical and/or financial collaborations between Indian
companies and overseas companies.
Applications for opening of branches in India for the above purposes
should be made to the Central Office of Reserve Bank (Foreign Investment
Division) in form FNC 4.
- Foreign companies intending to set up a liaison office in India or to
post a representative
in India for undertaking liaison activities on behalf of the parent
company or foreign trading companies intending to set up liaison offices
in India for promotion of exports from India should submit their
applications in form FNC 5 to the Central Office of Reserve Bank
(Foreign Investment Division). In approved cases, permission is granted
initially for a period of 3 years subject, inter alia, to the condition
that the expenses of the liaison/representative office are met
exclusively out of inward remittances. Applications for renewal of
permission should, however, be made to the concerned regional office of
Reserve Bank under whose jurisdiction the office is situated.
- Applications for opening temporary project/site offices in India by
foreign companies
proposing to engage in execution of specific projects/contracts
undertaken with the approval of Government of India/Reserve Bank should
be submitted in form FNC 5 to the concerned regional office of Reserve
Bank under whose jurisdiction the office will be situated.
NOTE: Authorised dealers need not insist on documentary evidence if the
amount of credit of refund/claim to QA 22 account does not exceed
Rs.10,000.
- In terms of Section 29(2)(a) of the Act, it was obligatory for foreign
companies/foreign
nationals who were carrying on trading, commercial or industrial
activities in India as on 1st January 1974 to apply to Reserve Bank for
permission to continue their activities in India. Applications received
from companies/persons were dealt with by Reserve Bank in terms of the
Guidelines framed by Government of India for the purpose.
- Authorised dealers may open QA.22 accounts in the names of Liaison
Offices in India of foreign companies after verifying the relative
approval granted by Reserve Bank under Section 29(1)(a) of Foreign
Exchange Regulation Act, 1973. These accounts should be non-interest
bearing and should be funded exclusively by way of inward remittances
through normal banking channels. Authorised dealers may also allow
credits in these accounts of refunds/claims received from various
Government Departments/Municipal Authorities, Insurance Companies,
refunds of security deposits on termination of lease of immovable
property etc., provided the original payment relating to the transaction
was made from the QA.22 account after verifying the original claim,
refund order received from Government Department/Municipal
Authorities/Insurance Company/Utility Company etc. In case of refund of
security deposit from the landlords, the Lease Agreement and
correspondence leading to the termination of lease agreement and refund
of deposits may also be verified. Similarly, authorised dealers may also
allow credit of sale proceeds of assets of Indian branches/offices of
foreign companies to their respective QA.22 accounts provided these
amounts are less than the book value of the assets as certified by a
Chartered Accountant and the assets were acquired by payment from QA.22
account. Authorised dealers should keep copies of documentary evidence
so verified on their records for inspection by their internal
auditors/Reserve Bank.
Opening of Branches/Offices in India by Foreign Banks
11A.3
Opening of branches/offices in India by banks incorporated abroad
(foreign banks)
requires permission of Reserve Bank under Section 22 of the Banking
Regulation
Act, 1949. Applications for the purpose should be made to the Chief
General Manager, Department of Banking Operations and Development,
Reserve Bank of India, Central Office, Mumbai 400 001. Remittance of net
profits/surplus by Indian branches of foreign banks to their Head
Offices abroad, however, requires prior approval of the Exchange Control
Department of Reserve Bank. (See paragraph 11C.2).
Acquisition of Undertakings in India
11A.4
Foreign companies and foreign nationals(whether resident in India or
not) need permission of
Reserve Bank under Section 29(1)(b) of FERA 1973 for acquiring the whole
or any part of any undertaking in India, of any person or company carrying on any
trade, commerce or industry. Applications for the purpose should be made
to the Central Office of Reserve Bank (Foreign Investment Division) in
form FNC 6.
NOTES:
A.
The association of a foreign company or a foreign national as a partner
in an existing partnership firm in India is deemed to be an acquisition
of the undertaking in India by the foreign company/foreign national
requiring approval of Reserve Bank.
B.
See paragraph 11A.12 for details regarding exemption granted to foreign
nationals of Indian origin permanently resident in India.
Purchase of Shares of
Indian Companies
11A.5
- Reserve Bank vide Notification No.F.E.R.A.206/99-RB dated 31st
July 1999 has granted general permission to Non-Residents to acquire
shares from other Non-Residents (except from NRIs/PIOs and OCBs).
NRIs/PIOs and OCBs are permitted to acquire shares from other
NRIs/PIOs/OCBs. The rights of transferee/purchaser in respect of shares
so acquired, shall be subject to same restrictions and conditions as
were applicable to the transferor/seller of the shares. In terms of the
above-mentioned Notification, permission has also been granted to a
company incorporated in India and/or a depository defined in clause (2)
of sub-section 1 of Section 2 of Depository Act, 1996 to enter in its
register or books in which securities are registered or inscribed an
address outside India of a holder of any securities consequent upon
acquisition of such securities by non-residents as permitted above.
It is clarified that the notification No.F.E.R.A.206/99-RB dated 31st
July 1999 does not permit transfer of shares from NRIs/PIOs/OCBs to
foreign nationals/companies incorporated outside India. In such cases,
the transferee may approach the Secretariat for Industrial Assistance
(SIA), Ministry of Industry, Government of India, New Delhi for
necessary permission. Subsequently an application in form FNC 7 along
with SIA's permission may be made to Reserve Bank of India, Exchange
Control Department, (Foreign Investment Division), Central Office,
Mumbai for necessary permission under Foreign Exchange Regulation Act,
1973.
Note: See paragraph paragraph 11A.12 for details regarding exemption
granted to foreign nationals of Indian origin permanently resident in
India.
- Reserve Bank vide its Notification No.F.E.R.A.207/99-RB dated 31st
July 1999, has granted general permission to a person resident outside
India or a company incorporated outside India to acquire shares from the
shareholders who had acquired such shares as signatories to the
Memorandum and Articles of Association provided (i) the Indian company
is permitted to become a 100% owned subsidiary and (ii) the total number
of shares so acquired does not exceed 500 and (iii) the face value of
the shares to be transferred is less than 0.1% (one tenth of one per
cent) of the paid-up capital. The company whose shares are so released
and/or a depository have also been granted general permission to enter
an address outside India in their books in respect of such shares.
- Shares held by foreign companies/foreign nationals as on 1.1.1974
were required to be declared to Reserve Bank. Licences were issued by
Reserve Bank granting permission to hold such shares declared specifying
the eligibility or otherwise of the holder for repatriation of the
capital and income earned thereon (See paragraph 10A.2).
Agricultural/Plantation Activities, etc. of FERA Companies
11A.6
In terms of Section 29(1A) of FERA 1973, FERA companies are required to
obtain
general or special permission of Reserve Bank for carrying on in India
any activity
relating to agriculture or plantation or to acquire the whole or any
part of any undertaking in India, of person or company carrying on any
activity relating to agriculture or plantation or purchase of the shares
in such a company. Applications for the purpose should be made in form
FNC 2 to the Central Office of Reserve Bank (Foreign Investment
Division).
Practising Profession or carrying on an Occupation, Trade or Business in
India by Foreign Nationals
11A.7
Under Section 30 of FERA 1973, a foreign national wishing to practise a
profession
or carry on an occupation,trade or business in India should obtain prior
permission of
Reserve Bank if he desires to seek facilities for remittance outside
India of his earnings in India by reason of such profession, occupation,
trade or business. Applications for obtaining permission of Reserve Bank
should be submitted in form EFN to the Office of Reserve Bank under
whose jurisdiction the applicant resides.
Transfer/Sale of Shares/Bonds/Debentures of Indian companies
11A.8
In terms of Section 19(5) of FERA 1973, transfer of
shares/bonds/debentures of a
company registered in India by foreign companies/foreign nationals to
residents is
required to be confirmed by Reserve Bank on an application made to it by
the transferor or transferee. Applications for the purpose should be
made by foreign companies/non-resident foreign nationals in form TS 1
and by resident foreign nationals in form TS 2 (Also see paragraphs
10B.8 and 10B.9). Foreign nationals of Indian origin resident outside
India have been granted general exemption from the above provisions in
respect of transfer of shares/bonds/debentures held by them in companies
in India through recognised stock exchanges [See paragraph 10C.25(i)].
Immovable Property in India
11A.9
Under Section 31 of FERA 1973, foreign companies/foreign nationals are
required to
obtain permission of Reserve Bank to acquire, hold, transfer or dispose
of in any
manner (except by way of lease for a period not exceeding 5 years) any
immovable property in India. Regulations governing such transactions in
immovable properties in India are set out in Part E.
Reserve Bank Approval Pre-requisite for Remittances
11A.10
Reserve Bank may refuse permission for remittances outside India on
account of profits,
dividends, etc. earned by foreign companies or on account of savings,
family maintenance, etc. by foreign
nationals not permanently resident in India unless necessary permission
under Sections 28, 29, 30 or 31 of FERA 1973, as appropriate, has been
obtained by them.
Hospitality to Non-resident Visitors
11A.11
- In terms of Notification No.FERA.91/91-RB dated 13th September 1991
issued under
Section 9(1) of FERA 1973, Reserve Bank has granted general permission
to persons resident
in India to meet expenses in Indian rupees on account of boarding,
lodging and services related thereto and/or for travel within India, of
their non-resident guests visiting India in connection with business,
activity or any other work of the host. The Notification also permits
residents to receive such payments from other residents on behalf of
persons resident outside India, but on a visit to India. It will,
therefore, be in order for Indian firms/companies and other
organisations to meet expenses on local hospitality on behalf of their
non-resident guests coming to India for the purpose stated above without
obtaining specific permission of Reserve Bank.
NOTE:
Indian firms/companies are sometimes required to pay for cost of to and
fro passage fare of their non-resident directors, foreign technicians
etc. coming to India for official business. There are no restrictions on
payment of passage fares in India by residents on behalf of
non-residents for travel to/from India on any Airline/Shipping company
operating in/through India (see paragraph A.3 of Annexure III to Chapter
8).
- In cases where expenses for travel to India and back as also expenses
for internal travel,
lodging, boarding etc., have been incurred by the non-resident
company/person, authorised dealers may allow remittances towards
reimbursement of such expenses to the non-resident company/person on
verification of appropriate documentary evidence in support of the
amount sought to be remitted and provided such expenses were required to
be met by the Indian company in terms of the provisions of the relative
contract/agreement.
Exemptions granted to Foreign Nationals of Indian origin permanently
resident in India
11A.12
Foreign nationals of Indian origin permanently resident in India have
been granted general
exemption from the requirements of Sections 28(1) and 29(1) of FERA
1973, vide Reserve
Bank Notification No.FERA 146/93-RB dated 26th April 1993. They do not,
therefore, need any permission from Reserve Bank for accepting
appointment as agents in India or for carrying on any trading,
commercial or industrial activity in India or for the acquisition of an
undertaking or purchase of shares referred to in paragraphs 11A.1,
11A.2(i), 11A.4 or 11A.5.
NOTE:
A foreign citizen of Indian origin is regarded as not permanently
resident in India if he has been residing in India for employment of a
specified duration (irrespective of the length thereof) or for a
specific job or assignment the duration of which does not exceed three
years.
Exemptions granted to Foreign Nationals Not Permanently Resident in
India
11A.13
Foreign nationals who are on a visit to India on grounds of business,
tourism,
etc. or who are resident but not permanently resident in India are
exempted from
the restrictions imposed under FERA 1973, in respect of the following.
- Maintenance of and operations on their foreign currency bank accounts
outside India.
- Making payments to or for the credit of persons resident outside India
out of funds held in foreign currency accounts maintained abroad.
- Holding in India of foreign currency in the form of travellers cheques,
currency notes, bank notes and coins.
- Acquisition, holding or disposal of foreign securities, provided such
securities are acquired by them as their own property or are held by
them for or on behalf of foreign citizens not permanently resident in
India.
- Making of settlement or gift of property outside India.
NOTE:
For the purpose of these exemptions, foreign citizens of Indian origin
are treated as not permanently resident in India if they are residing in
India for employment of a specified duration (irrespective of the length
thereof ) or for a specific job or assignment the duration of which does
not exceed three years
(See Note to paragraph 11A.12).
PART B - MAINTENANCE OF BANK ACCOUNTS
(QA 22)
General
11B.1
- Branches/offices in India of foreign firms companies or associations and
foreign
nationals resident but not permanently resident in India are permitted to
maintain and
operate bank accounts in India only with authorised dealers. The object
behind subjecting the opening of and operations on such accounts to a
certain degree of regulation is to bring to the notice of such account
holders that it is illegal for them to provide any foreign exchange to other
residents through their non-resident associates against reimbursement
provided locally and to ensure that necessary approval of Reserve Bank has
been obtained for their activities in India. While opening rupee accounts in
the names of branches/offices in India of foreign companies and foreign
nationals (resident in India), authorised dealers should obtain an
undertaking in form QA 22 duly signed by all the persons (irrespective of
nationality) who are authorised to operate on the accounts. Fresh
declarations will be necessary in the event of any addition to the list of
persons authorised to operate on the accounts. Form QA 22 should be
carefully preserved by authorised dealers along with respective account
opening forms.
NOTES :
A.
Form QA 22 need not be completed in respect of accounts to be opened in the
names of Foreign Embassies, Consulates, Legations, Trade Representations and
other Foreign Government establishments in India and the United Nations
Organisation and its subsidiary/affiliate bodies in India or their officials
in India. (This exemption is however not applicable to accounts maintained
in the names of members of families of such officials and hence they may be
required to furnish the undertaking in form QA 22).
B.
Form QA 22 need not be completed by foreign nationals of non-Indian origin
permanently resident in India and foreign nationals of Indian origin (other
than those who are residing in India for employment of specified duration
irrespective of the length thereof or for a specific job or assignment, the
duration of which does not exceed three years) and foreign-born wives of
Indian nationals and of persons of Indian origin resident in India.
Status of QA 22 Accounts
11B.2
- Accounts in the names of Indian branches/offices of foreign companies and
resident foreign nationals and in respect of which forms QA 22 have been
obtained are treated as resident accounts and operations thereon allowed
freely provided credits to the account arise out of sources declared on the
form. When the account holder ceases to be resident in India, the account
may be converted into an Ordinary Non-resident Rupee (NRO) account.
While QA 22 accounts in the name of individuals can be maintained in any
form such as current, savings and fixed deposits, the QA 22 accounts of
foreign firms/companies can be maintained as current accounts only. There
would, however, be no objection to funds in such accounts, held by
firms/companies/associations, rendered surplus temporarily being placed in
term deposits with a maturity not exceeding three months with the authorised
dealer with whom the account is maintained.
- Authorised dealers may allow credits of refund of security deposit paid for
securing
accommodation/reimbursement of vehicle insurance claims/loan repayments by
the employees etc. to the QA 22 account of the Indian branches/offices of
foreign companies and resident foreign nationals maintained with them
provided authorised dealer is satisfied with reference to documentary
evidence that the relevant original payment was made by debit to concerned
QA 22 account. Authorised dealers should keep copies of documentary evidence
so verified, on their records for inspection by their internal
auditors/Reserve Bank.
NOTE: Authorised dealers need not insist on documentary evidence if the
amount of credit of refund/claim to QA 22 account does not exceed Rs.10,000.
Authorised Dealers' Responsibilities regarding QA 22 Accounts
11B.3
- Authorised dealers should exercise caution and report to Reserve Bank any
ransactions which may appear to represent reimbursement in rupees against
foreign
exchange made available to any person in India other than an authorised
dealer. Any other transactions where authorised dealer has reason to believe
that they relate to an activity of the account holder requiring Reserve
Bank's approval but not approved by Reserve Bank, should also be reported.
- Where foreign companies/foreign nationals have given an undertaking not to
seek remittance facilities out of any income earned in India or where a
condition has been imposed to that effect by Reserve Bank while granting
approval, (this may be ascertained by calling for perusal the letter of
approval granted by Reserve Bank at the time of opening of the account), a
prominent note of this fact should be taken in the ledger folio, etc. so
that no remittance facilities are extended to such account holders.
Loans in India to Foreign Nationals/Liaison Offices of Foreign
companies
11B.4
- Loans and advances to foreign nationals not permanently resident in India
should not be granted if required for investment or for dealing in stocks
and shares.
Loans for personal purposes such as purchase of household articles may be
given up to a maximum of Rs.5,00,000/-(Rupees Five lakhs). This limit
applies to total borrowings from all banks of the borrower and his
dependents. Applications in form LOV 2 for loans in excess of this limit
should be referred to Reserve Bank for prior approval.
- Loans/overdrafts should not be granted to liaison offices of foreign
companies
since entire expenses of such offices are required to be met out of funds
remitted from abroad.
Diplomatic Bond Stores Account
11B.5
In order to facilitate payment by foreign diplomatic personnel in India for
their
purchases from bonded stocks held by firms and companies which have been
granted
special facilities for import of stores into bond, arrangements have been
made for maintenance of special bank accounts styled as 'Diplomatic Bond
Store Accounts' by such diplomatic personnel. Authorised dealers may open
such accounts denominated in rupees subject to the following conditions :
- Credits to the accounts may be effected only out of proceeds of remittances
received from abroad through banking channels in any of the permitted
currencies or in rupees from non-resident bank account.
- Before allowing any cheques to be drawn on a special account, authorised
dealer concerned should apply to Reserve Bank and obtain a code number for
the account. Applications for code numbers should state name and designation
of the account holder and manner in which credits are proposed to be made to
the account. There is no objection to a single account being utilized for
more than one official. In such cases details in respect of all the
beneficiaries should be advised.
- All cheque leaves issued to account holders in respect of the special
accounts should be superscribed 'Diplomatic Bond Store Account No. .....'
- Debits to the accounts may be freely permitted for local disbursements but
remittance of funds outside India will require prior approval of Reserve
Bank.
- Authorised dealers maintaining such special accounts should forward to
Reserve Bank by the 10th of each month a statement in form DBS, listing (1)
credits to the accounts during the previous month together with source of
each credit and (2) payments made, stating numbers of the cheques and names
of the payees.
PART C - REMITTANCE OF PROFITS/SURPLUS ETC. BY FOREIGN COMPANIES
Remittance of Profits by Foreign Companies (other than Banks)
11C.1 Applications for remittance of profits by the branches
of the foreign companies should be accompanied by the following documents:
- Certified true copy of audited Balance Sheet and Profit and Loss Account
statement for the year to which the profit relates.
- Certificate from the auditors covering the following:
- manner of arriving at the remittable amount;
- confirmation that the entire income of the branch office included in the
accounts for the year had accrued from sources in India (In case any part of
the income had accrued form sources outside India, the auditor's certificate
should clearly indicate that this amount was repatriated to India
immediately on realisation);
- confirmation that the requirements of the Companies Act, 1956 have been
complied with.
- Certificate, citing RBI's approval number and date, from the auditors to the
effect that the branch office has carried on business strictly in terms of
the approval under Section 29(1)(a) granted by the Reserve Bank of India.
- Certificate from the auditors that sufficient funds have been set aside to
meet all Indian tax liabilities or that these liabilities have already been
met.
- Declaration from the applicant that the profit sought to be remitted is
purely the profit earned in the normal course of business and does not
include profit from any other source.
Authorised Dealers may scrutinize the above documents particularly with
reference to -
- source of income which should be out of activities approved by RBI and
- calculations of the amount sought to be remitted with reference to the
Profit and Loss account and the provision of tax.
If found in order, authorised dealers may allow the remittance.
Remittance of Profits by Foreign Banks Operating in India
11C.2
Indian branches of foreign banks operating in India may remit to their Head
Offices
outside India net profit/surplus (net of taxes) arising out of their Indian
business after
finalisation of the accounts for the respective year, in accordance with the
provisions of the Banking Regulation Act, 1949 and directions issued by
Reserve Bank in this regard. Full details of the remittances made should be
advised to the Chief General Manager, Exchange Control Department (External
Payments Division), Reserve Bank of India, Central Office, Mumbai 400 001
duly certified by their auditors imeditely after making the remittance.
Remittance of Surplus Passage/Freight Collections by Foreign
Airline/Shipping Companies
11C.3
Regulations governing remittance of surplus freight and passage collections
by
foreign airline/shipping companies operating in or through India are laid
down in
Part B of Chapter 8.
Refund of Income-tax to Non-resident Firms/Companies
11C.4
Applications for remittances on account of refund of income-tax to foreign
firms/companies
should be made to authorised dealers on form A2 supported by the following
documents/particulars:
- Original assessment order (together with certified copy) and copy of
Income-tax Return for the corresponding assessment year.
- Certificate from authorised dealer through whom the income-tax refund order
has been encashed that the proceeds of the refund order are held by them in
suspense account pending remittance abroad.
- Source of funds from which tax was originally paid. If paid out of
remittance from abroad, a bank certificate for the inward remittance; if tax
was paid by deduction at source from dividend, interest on loans, royalty or
other income which has already been remitted to the foreign firm/company,
full details as under of the income on which tax was deducted should be
furnished.
- Nature of income i.e. dividend, interest, royalty, etc. amount and
assessment year in which it accrued.
- Name and address of Indian firm/company from which the income was derived.
- The year/period to which the income related.
- The date of remittance and other particulars of the amount originally
remitted.
Authorised dealers may allow such remittances if they are satisfied that the
tax amount of which the refund has been claimed was deducted from the amount
remitted originally.
(See paragraph 11D.12 regarding remittance of income-tax refunds to
individuals).
Remittance of Winding up Proceeds
11C.5
Applications for remittance of winding up proceeds abroad will be
entertained by Reserve
Bank only after winding up has been completed and the actual net remittable
surplus established.
Applications should be made on form A2 supported by following
particulars/documents:
- Number and date of Reserve Bank's approval for establishing the
branch/office in India.
- Number and date of Reserve Bank's approval for sale of immovable properties,
if any, held by the branch/office.
- Auditor's certificate containing the following:
- manner in which remittable amount has been arrived at, duly supported by a
statement of all assets and liabilities of the applicant, the manner of
disposal of assets, name/s, and address/es of the purchaser/s, Reserve
Bank's approval number/s and date/s under Section 31 of FERA 1973 for
disposal of immovable properties etc.;
- confirmation that all liabilities in India including arrears of gratuity,
employee benefits, etc. in respect of the applicant have either been fully
met or adequately provided for;
and
- confirmation that no income accruing from sources outside India (including
proceeds of exports) has remained unrepatriated to India.
- No objection Certificate or Tax Clearance Certificate from Indian Income-tax
Authorities for the remittance of net surplus.
- Confirmation from applicants that no legal proceedings in Indian Courts or
enquiries from Enforcement Directorate are pending against them and that
after remittance of the net surplus, no further remittance facilities will
be asked for.
PART D - REMITTANCE FACILITIES TO FOREIGN NATIONALS
General
11D.1 The regulations and procedures relating to remittance
facilities available to foreign nationals
including those resident outside India are set out in this Part. Ordinarily,
foreign nationals
who have taken up residence in India temporarily on account of their employment,
profession or other activity with the intention of retiring eventually to their
own or any other foreign country, will be considered as 'not permanently
resident in India' and be eligible for various facilities explained in this
Part, if the activity undertaken in India is in accordance with the general or
special permission of Reserve Bank as required under FERA 1973. Foreign
nationals permanently resident in India and persons of Indian origin other than
those residing in India for employment of a specified duration (irrespective of
the length thereof) or for a specific job or assignment the duration of which
does not exceed three years, are treated on par with Indian nationals resident
in India and will not be eligible for facilities for which foreign nationals not
permanently resident in India are eligible, except as specifically provided in
the Manual or where Reserve Bank's specific approval has been obtained.
NOTE :
The procedure set out in the following paragraphs will not apply to the
personnel of foreign diplomatic missions in India. Their requests for
remittances will require prior approval of Reserve Bank, for which applications
may be made by letter.
Short-term Engagement of Foreign Nationals by Indian Firms/Companies
11D.2
- Indian firms/companies may engage the services of foreign nationals
(including
non-resident persons of Indian nationality/origin) on short-term assignments
without prior
approval of Reserve Bank. Applications for remittance of remuneration to
foreign nationals or foreign companies (in the case of company-to-company
contracts) should be made by the Indian firms/companies to authorised
dealers on form A2 together with a statement in form EFT (in duplicate) and
an Undertaking/ Certificate regarding payment of Income-tax (cf paragraph 3
B.10) Before allowing the remittance, authorised dealers should verify the
statement in form EFT and the other documents/information submitted and be
satisfied that -
- the amount of remittance sought for is in accordance with the terms of
contract entered into by the applicant firm/company with the foreign
national/company.
- the services of the foreign national are not covered either by any foreign
collaboration agreement entered into by the Indian firm/company or under any
warranty/guarantee obtained providing for deputation of the foreign national
without any remuneration or any payment during the warranty/guarantee
period. A confirmation to this effect should be obtained from the company
concerned.
- If the period of engagement of the foreign national is upto 3 months,
authorised dealers should ensure that the concerned foreign national holds a
valid visa i.e. employment, business, tourist etc. If the period exceeds
three months, authorised dealers should ensure that the concerned foreign
national holds a valid employment visa.
- A copy of the form EFT should be forwarded to Reserve Bank along with
form A2 at the time of reporting the remittance in R Returns.
- All payments made in connection with engagement/ deputation of foreign
personnel including payments made locally in Indian rupees towards their
passage fares, local living expenses, etc. are liable for the levy of Cess
under the Research and Development Cess Act, 1986. Authorised dealers should
advise their constituents to deposit the amount of Cess while allowing the
remittance towards fees of foreign personnel.
Engagement of foreign artistes for performance in India
11D.2A
- Authorised dealers may allow remittance facilities for engagement of
foreign artistes such as dancers, musicians in the following cases.
- Where the artistes are engaged by tourism related organisations in India
like India Tourism Development Corporation, State Tourism Development
Corporation, etc. during special festivals organised by them.
- Where the artistes are engaged by hotels in India in five star category and
the foreign exchange expenditure is met out of funds held in EEFC account of
the hotel concerned.
Remittance should be allowed as per the terms of the contract and on
production of an Accountant's certificate/undertaking regarding payment of
Income-tax. Before allowing the remittance authorised dealers should ensure
that the concerned artiste holds a valid visa where the period of engagement
is up to 3 months and employment visa where the period exceeds 3 months. In
the case of artistes engaged by hotels in five star categories, the
remittance should be allowed only by debit to the EEFC account of the hotel
concerned.
- Authorised dealers should keep a certified copy of the contract on record
for verification by their internal auditors/Reserve Bank.
NOTE :
Foreign nationals employed/engaged in racing trade (such as jockeys,
stewards, bookies, trainers, breeders, etc.) as also foreign cabaret
artistes, wrestlers and other entertainers visiting India would not be
eligible for remittance facilities.
Recurring Remittances by Foreign Nationals who are in regular employment of
Indian firms/companies
11D.3
- Foreign nationals who are not permanently resident in India but are in
regular
employment with Indian firms/companies on payment of monthly salary, are
permitted to
make recurring remittances for family maintenance. Authorised dealers may
allow such foreign nationals, who are their regular constituents, to make
recurring remittances for family maintenance, etc., upto 75% of their net
salary (i.e., after deduction of contribution to provident etc. funds and
taxes payable) after verifying that they hold valid employment visas. On
request, authorised dealers may also allow remittances in excess of 75% of
net salary provided the foreign national is in receipt of perquisites in
India such as free housing, conveyance and medical facilities and his family
(wife and/or children) is resident outside India.
- Salaries to the employees deputed by foreign companies to their Indian
offices/branches/subsidiaries/joint ventures may be paid abroad to the
extent of 75% of the net salary (tax to be paid for the full amount in
India) and balance amount of salary may be paid in India.
NOTES:
A.
The foreign national concerned should be advised to maintain a bank account
with the authorised dealer through whom the remittance is proposed to be
made, for depositing his income in India.
B.
Every time a remittance is effected by authorised dealer in terms of this
paragraph, a declaration should be obtained from the applicant, on the
relative form A2, that remittances made by him for all purposes during the
month including that applied for, have not in the aggregate exceeded the net
salary and that remittance applied for is being made out of savings from
income accrued during that month after retention of adequate funds for his
current expenses in India. Authorised dealers should also append a
certificate on reverse of the form that remittances made by applicant during
the month have not exceeded the net salary.
Remittance Facilities to Iranian Nationals
11D.4
Deleted
Retirement Facilities
11D.5
- Foreign nationals not permanently resident in India are permitted to
transfer,
to their own countries, at the time of retirement from India, their current
assets such as
savings from salary, dividend, interest, commission, Provident Fund balance,
sale proceeds of personal effects, etc. in full. In addition, they will also
be allowed to repatriate their assets of a capital nature in India such as
sale proceeds of their investments in India up to a limit of Rs.10,00,000/-
at the time of retirement; any investments in excess of Rs.10,00,000/- will
be allowed to be repatriated only in annual instalments not exceeding
Rs.5,00,000/- per annum. For purpose of grant of these facilities, the
entire family of a person will be considered as a single unit. Applications
for transfer of assets on retirement should be made to Reserve Bank in form
RFN accompanied by documents specified therein. Such foreign nationals are
also entitled to receive current income earned by way of interest/dividend
on securities/shares, interest on deposits, pension etc. as indicated in
paragraph 10B.6, 10B.7, 11D.11 and 11D.12.
- Authorised dealers may release foreign exchange up to U.S.$ 2000 or its
equivalent to retiring foreign nationals pending disposal of their
applications for transfer facilities submitted to Reserve Bank. (Exchange
sold in the form of foreign currency notes and coins should not however
exceed U.S.$ 500 or its equivalent).
Foreign Born Widows of Indian Nationals
11D.6
Reserve Bank permits, on a selective basis, remittance facilities to
foreign-born widows of
Indian nationals who wish to go back to the country of their birth.
Applications in such cases
should be made in form EMG together with documents specified on the form. In
approved cases, the facility for transfer of assets in India will be allowed
to such ladies up to Rs.10,00,000/- at the time of leaving India for good
and up to Rs.5,00,000/- annually thereafter. This scale will apply to their
entire assets and income, if any, arising in India and they will not be
eligible for separate remittance facility in respect of their income on
assets left behind in India.
Repatriation Facilities to Foreign Students/Trainees
11D.7
- Foreign students/trainees are permitted to transfer to their own countries,
at the time
of leaving India after completion of their studies/training in India, the
balance available in their
bank accounts maintained by them in terms of paragraph 11B.1. Authorised
dealers may allow such remittances provided the balance in the account
represents funds derived from rupee proceeds of remittances in foreign
exchange received from abroad in an approved manner or rupee proceeds of
foreign exchange brought by them to India and sold to authorised dealers or
stipend/scholarship received from Central or State Government.
- Authorised dealers may also permit such students/trainees to take with them
foreign exchange up to U.S.$ 1000/- or its equivalent for meeting en route
expenses while on visit to their home/foreign countries during
vacation/holidays provided their accounts are fed exclusively by remittances
in foreign currency.
NOTES:
A.
Trainees financed by the Commonwealth Fund for Technical Co-operation
(CFTC), World Health Organisation (WHO) and United Nations Development
Programme (UNDP) are not eligible for the above facility.
B.
Exchange sold in the form of foreign currency notes and coins should not
exceed U.S.$ 500 or its equivalent.
Issue of Travellers Cheques to Foreign Tourists, Transit Passengers and
Foreign Nationals
11D.8
- Authorised Dealers may issue travellers cheques/letters of credit/drafts to
foreign
tourists/transit passengers and make remittances towards their hotel
accommodation, tour
arrangements etc. either against reimbursement in any permitted currency by
banks abroad or against surrender of foreign currency drafts, cheques, etc.
by the applicant. Authorised dealer may also sell foreign currency notes,
coins and travellers cheques to such persons against internationally
recognised credit cards provided reimbursement is obtained promptly in any
permitted currency from the credit card issuing institution abroad.
Authorised dealers may also issue travellers cheques/letters of
credit/drafts to foreign nationals who are not permanently resident in India
and make remittances towards their hotel accommodation, tour arrangement,
etc. if funds are provided by them from an external source. If, however,
funds are provided from a resident source, authorised dealers may permit
such remittances only within the remittance entitlements in terms of
paragraph 11D.3. Issue of foreign currency notes may be restricted to US $
500 or its equivalent
- Full-fledged money changers/Restricted money changers may sell rupees to
foreign tourists against International Credit Cards and obtain reimbursement
promptly through banking channel from the overseas credit card issuing
organisations.
Eligibility criteria for Remittance of Income to Non-residents
11D.9
Authorised dealers may allow remittance of income earned in India by foreign
nationals permanently resident outside India, provided beneficiary belongs
to
any of the following categories
- Foreign national who was never resident in India.
- Foreign national of Indian origin who settled down permanently in a foreign
country before introduction of Exchange Control (i.e. 8th July 1947 in the
case of erstwhile Sterling Area countries and 3rd September 1939 in the case
of other countries).
- Foreign national who has retired from India after availing of retirement
facilities.
- Emigrant from India in whose case Reserve Bank had agreed specifically to
allow remittance of income on his assets left behind in India.
Regulations contained in the following paragraphs will also have to be
complied with for remittance of specified types of income. Remittance of
income other than income specifically stated in this Manual, such as income
of a non-resident proprietor/partner from a proprietorship/partnership
concern in India, capital gains arising out of any activity in India etc.
requires specific prior approval of Reserve Bank.
NOTE:
See paragraph 10C.24A regarding repatriation of current income earned by
non-residents of Indian nationality/origin.
emittance of Interest and Dividend
11D.10
Regulations regarding remittance of interest/dividend on investments in
India are laid down in paragraphs 10B.6, 10B.7and 10C.24.
Pension
11D.11
- Authorised dealers may remit pension, net after tax, without obtaining prior
approval
of Reserve Bank to persons eligible to receive current income from India in
terms of
paragraph 11D.9 provided that in case of foreign nationals who have retired
from India, standing approval of Reserve Bank had been obtained for
remittance of pension from his employers in India, at the time of obtaining
retirement facility.
- Authorised dealers may also remit pension to widows of foreign nationals who
had earlier
retired from India after availing themselves of retirement facilities.
Other types of income
11D.12
Authorised dealers may remit, amounts representing refunds of income-tax to
persons eligible
to receive current income from India in terms of paragraph 11D.9 after
verifying the original
assessment order and the amount retained for payment of tax from the amount
originally remitted.
Report to Reserve Bank
11D.13
Authorised dealers should certify on form A2 covering remittances under
paragraphs 11D.11
and 11D.12 that the person to whom the remittance is being made is eligible
for remittance
facilities in terms of paragraph 11D.9 and that regulations laid down in the
said two paragraphs have been complied with. Wherever specific approval of
Reserve Bank has been obtained such as in case of pension, the number and
date of approval should also be cited.
Provident/Pension Fund Contributions of Expatriate Staff
11D.14
Authorised dealers may allow remittances by Indian firms and companies on
account of Provident fund/Superannuation/Pension fund contributions in
respect of
their expatriate staff who are not permanently resident in India in
accordance with the service conditions of the foreign national concerned. A
copy of the letter from the applicant indicating the service conditions on
the basis of which the remittance was allowed may be forwarded to Reserve
Bank alongwith form A2 while reporting the transactions in R return.
Sitting Fee, Commission, etc. to Non-resident Director
11D.15
- By its Notification No.FERA 128/93-RB dated 29th March 1993, Reserve Bank
has granted general permission under Section 9(1)(a) of FERA 1973 to
companies in India
for making payments in Indian rupees to their non-resident (including
foreign nationals) non-wholetime directors while on a visit to India for the
company's work such as attending Board meeting etc., towards sitting fees,
commission or remuneration by way of monthly or quarterly or annual payment
in accordance with the provisions contained in the Company's Memorandum of
Association or Articles of Association or in any agreement entered into by
it or in any resolution passed by the company in general meeting or by its
Board of Directors. This general permission is, however, subject to the
condition that the company has obtained the necessary approval from the
Central Government under Section 309(4) or Section 310 of the Companies Act,
1956 wherever it applies.
- Applications for remittances of savings, if any, out of sitting fees paid to
the non-resident
directors by the Indian companies concerned for actual attendance in Board
meetings should be made to authorised dealers on form A2 together with a
certificate issued by the company concerned confirming payment of sitting
fees. Authorised dealers may allow such remittances without reference to
Reserve Bank on verification of the company's certificate regarding payment
of the sitting fees.
- Applications for remittances on account of payment of commission,
remuneration, etc.
to the non-resident directors should be made by the Indian companies
concerned to authorised dealers on form A2 together with a certified copy of
the audited balance sheet of the company and a work sheet duly certified by
a Chartered Accountant indicating how the remittable amount has been arrived
at. Applicant's undertaking/Accountant's certificate regarding payment of
income-tax in the prescribed form should also be submitted (cf paragraph
3B.10). Authorised dealers may allow remittances of net
commission/remuneration after satisfying about the correctness of the amount
and verification of the terms of appointment of the director.
Legacies, Bequests and Inheritances
11D.16
- Applications for remittances on account of legacies, bequests and
inheritances to foreign
nationals permanently resident outside India should be submitted to Reserve
Bank in
form LEG together with particulars/documents mentioned therein.
- Legacies and bequests are treated as capital funds in India. Accordingly,
where a foreign national is availing of retirement facilities, Reserve Bank
will consider requests for transfer of assets bequeathed to or inherited by
him only within the quotas laid down from time to time for repatriation of
capital assets from India.
Certain Remittances not permitted
11D.17
Foreign nationals will not be permitted to remit outside India winnings in
State lotteries, horse racing and similar activities in India.
Holding of International Conferences/Seminars/Training Programmes in India
11D.18
- Holding of international conferences/ seminars/ training programmes of
scientific, technical
or educational nature in India as well as remittances towards payment of
honoraria to the guest
speakers, etc. and fees to the concerned international organisations abroad
require prior approval of the concerned Administrative Ministry of
Government of India. Further, in the case of participation of overseas
invitees, the Indian organisers of the conferences/seminars, etc. are
required to seek the clearance from the Ministry of Home Affairs as well as
from the Ministry of External Affairs. Applications for remittances towards
honoraria/fees etc. by Indian organisers should be made to authorised
dealers together with full details such as name of the conference/seminar,
details of payments to be made, etc. and original approvals together with
certified copies thereof obtained from the concerned Administrative
Ministry/Ministry of Home Affairs/Ministry of External Affairs of the
Government of India and an undertaking regarding payment of Income-tax
together with the Accountant's certificate in the prescribed form (cf
paragraph 3B.10). Authorised dealers may allow the remittances in accordance
with the approval of the Administrative Ministry.
- Authorised Dealers should keep certified copies of the contract and the
approvals of the
Ministries of the Government of India on record for verification by their
internal auditors/Inspecting officers of Reserve Bank.
PART E - IMMOVABLE PROPERTY IN INDIA
Acquisition, Holding, etc. of Immovable Property in India by Certain
Persons
11E.1 In terms of Section 31(1) of FERA 1973, persons who are
not citizens of India
(whether resident in India or not) and companies (other than banking companies)
which are not incorporated under any law in force in India are required to
obtain prior permission of Reserve Bank to acquire, hold, transfer or dispose of
by sale, mortgage, lease, gift, settlement or otherwise any immovable property
situated in India. The work relating to the permission for acquisition etc. of
immovable property is centralized in the Central Office of Reserve Bank (Foreign
Investment Division) at Mumbai.
NOTES:
A. The above restrictions do not apply to immovable property
taken or given on lease for a period not exceeding five years.
B. Prior permission of Reserve Bank is necessary for
acquisition, disposal etc. of flats in co-operative housing societies.
C. Nepalese or Bhutanese nationals, whether resident in India
or not, as well as Nepalese companies in Nepal or Bhutanese companies in Bhutan
should obtain prior permission of Reserve Bank for acquisition, holding, etc. of
immovable property in India even though the transactions may be settled in
Indian rupees.
D. In the case of partnership firms, if any of the partners is
a foreign citizen, the firm should obtain permission of Reserve Bank for
acquisition/disposal of the immovable property. Likewise, if any member on the
governing body of an association/organisation or any trustee of a trust is a
foreign citizen, such a body/trustee should obtain Reserve Bank's permission
under Section 31(1) of FERA 1973.
Acquisition, Sale etc. of Immovable Property by Foreign Banks
11E.2 The acquisition, sale, etc. of immovable properties in
India by foreign banks operating in
India is governed by the relevant provisions of Banking Regulation Act, 1949 and
the policy of
Reserve Bank in this regard in force from time to time. Foreign banks should
ensure while undertaking such transactions in immovable property that they are
in accordance with the provisions of the Act and directions issued, if any, by
the Department of Banking Operations and Development of Reserve Bank.
Application forms
11E.3 Applications for fresh acquisition or holding of
immovable property in India
(other than those covered under the general permissions granted by Reserve Bank)
should be made to Reserve Bank in form IPI 1 and for sale/transfer of property
(other than tea, coffee, rubber, etc. plantations or those covered by general
permissions granted by Reserve Bank) in form IPI 2. Applications for
sale/transfer of tea, coffee, rubber etc. plantations should, however, be made
in form IPI 3 together with the particulars of productivity, income, etc. in
form IPI 4.
General permission for Acquisition of Property for Carrying on
Activities permitted by Reserve Bank
11E.4 By its Notification No.FERA 133/93-RB dated 26th April
1993, Reserve Bank
has granted general permission to companies, (other than banking companies),
which
are not incorporated under any law in force in India, to acquire or hold any
immovable property which is necessary for or incidental to any activity
permitted by Reserve Bank under Section 28 or Section 29 of FERA 1973. Companies
which acquire or hold any immovable property in India in terms of the general
permission are required to submit to Reserve Bank a declaration in form IPI 5
not later than 90 days from the date of acquisition of the immovable property.
NOTE:
The above general permission does not apply to foreign companies which have been
permitted under Section 29 of the Act to open liaison offices or to post
representatives in India.
Properties held at the commencement of the Act
11E.5 In terms of Section 31(4), properties held since prior
to 1st January 1974 i.e. the
date of coming into force of FERA 1973, were required to be declared to Reserve
Bank. Applications for the purpose were required to be made in form IPI 6.
Holding licences have been issued by Reserve Bank on the basis of declarations
received by it in terms of this provision.
General Permission for Acquisition/Disposal of Residential/Commercial
Properties by Foreign Citizens of Indian origin
11E.6
- By its Notification No.FERA.152/93-RB dated 26th May 1993, Reserve Bank
has granted general permission to foreign citizens of Indian origin,
(whether resident in
India or not), to acquire and dispose of immovable properties (other than
agricultural land/farm house/plantation property) situate in India subject
to the fulfilment of the following conditions:
- Acquisition/Disposal of Residential Property/ies in India other than by way
of Gift
- Property is acquired by way of purchase or inheritance for the person's bona
fide residential use and transferred by way of sale. (No restrictions are
placed on the number of residential properties that can be acquired/disposed
of under the general permission except what is mentioned against condition 6
below).
- Consideration for the property purchased is met out of foreign exchange
remitted from abroad through normal banking channels or funds withdrawn from
the purchaser's NRE/FCNR account maintained with a bank in India.
- Property purchased is not let out except where it is not immediately
required for the purchaser's own residential use.
- A declaration is submitted to Reserve Bank (Central Office) about such
acquisition in form IPI-7 within a period of 90 days from such
acquisition/final payment of purchase consideration along with a certified
copy of the document evidencing the transaction and bank certificate
regarding the consideration paid.
- Income accruing by way of rent or sale proceeds of the property or income
arising out of investment of such proceeds is credited to the person's NRO
account (if the property is held by a non-resident foreign citizen of Indian
origin) or to the Resident Rupee Account i.e. Q.A.22 Account (if the
property is held by a foreign citizen of Indian origin resident in India)
with a bank in India.
- In respect of residential properties purchased on or after 26th May 1993,
Reserve Bank would consider applications for the repatriation of sale
proceeds up to the consideration amount remitted in foreign exchange for the
acquisition of the property( only up to two such properties ) provided the
sale takes place after three years from the date of final purchase deed or
from the date of payment of final instalment of consideration amount,
whichever is later. Applications for the purpose should be made to Reserve
Bank (Central Office) in form IPI 8 within 90 days of the sale of the
property.
- Acquisition/Disposal of Residential property by way of Gift
- Properties (up to two houses) are acquired, transferred or disposed of by
way of gift from or to a relative who may be an Indian citizen or a person
of Indian origin whether resident in India or not.
- Gift tax, if any, has been paid.
NOTE:
The word relative has the meaning assigned to it under Section 6 of the
Companies Act, 1956 (1 of 1956).
- Acquisition by way of purchase or inheritance or Disposal by way of sale of
Commercial Property/ies in India
- Property (not being agricultural land/farm house/plantation property)
situate in India is acquired by way of purchase or inheritance and
transferred or disposed of by way of sale (No restrictions are placed on the
number of such properties acquired/disposed of under the general permission
except what is mentioned against condition 4 below).
- Consideration for the property purchased is met out of foreign exchange
remitted from abroad through normal banking channels or funds withdrawn from
the purchaser's NRE/FCNR account maintained with banks in India.
- A declaration is submitted to Reserve Bank (Central Office) about
acquisition of the commercial property in form IPI-7 within a period of 90
days from such acquisition/final payment of purchase consideration along
with a certified copy of the document evidencing the transaction and bank
certificate regarding the consideration paid.
- Reserve Bank would consider applications for repatriation of original
investment in commercial property in respect of properties purchased on or
after 26th May 1993 up to the consideration amount remitted in foreign
exchange for the acquisition of the property provided the property is sold
after a period of three years from the date of the final purchase deed or
from the date of payment of final instalment of consideration amount,
whichever is later. The balance amount of sale proceeds of the property/ies
should be credited to the seller's NRO account or Resident Rupee Account
(Q.A. 22 Account) in the case of resident foreign citizens maintained with a
bank in India. Applications for repatriation of the amount should be made to
Reserve Bank (Central Office) in form IPI-8 within 90 days of the sale of
the property.
- For the purpose of above general permission, a foreign citizen is deemed to
be of
Indian origin if (a) he held an Indian passport at any time, or (b) he or
his father or paternal grandfather was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955) provided
that the citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and
Nepal shall be deemed to be not of Indian origin.
- Non-resident Indian nationals are also eligible for the facility regarding
repatriation
of sale proceeds of the properties referred in items A.6 and C.4 above of
sub-paragraph (i), provided the other conditions referred to in the said
sub-paragraph are satisfied.
NOTE:
See paragraph 10C.24A regarding repatriation of income/interest earned
during the financial year 1994-95 and onwards.
General Permission for letting out of Residential Property in India by
Non-resident Indians and Persons of Indian origin
11E.7
By its Notification No.FERA.155/93-RB dated 16th September 1993, issued
under
Section 29(1) of FERA 1973, Reserve Bank has granted general permission to
non-resident Indian citizens and foreign citizens of Indian origin to let
out any immovable property in India held by them. The rental income or
proceeds of any investment of such income shall not be repatriable outside
India at any time in future and such funds should be credited to the owner's
Ordinary Non-Resident Rupee (NRO) account maintained with a bank in India.
NOTE:
See paragraph 10C.24A regarding repatriation of income/interest earned
during the financial year 1994-95 and onwards.
Purchase of Immovable Property in India by Foreign Citizens of Non-Indian
origin/Foreign Companies
11E.8
- Foreign citizens of Non-Indian origin (whether resident in India or not)
and foreign companies including trusts, societies and associations
incorporated/
registered abroad will be permitted by Reserve Bank, on application, to
acquire immovable property in India, provided the following conditions are
satisfied.
- The property to be purchased is for residential use only.
- The consideration for purchase of the property is met out of foreign
exchange remitted from abroad in any convertible currency through normal
banking channels.
- Income accruing by way of rent from the property purchased, or the sale
proceeds of such property/income arising out of investment of such sale
proceeds at any future date shall be credited only to the Ordinary
Non-resident Rupee (NRO) account of the non-resident purchaser.
- Applications for necessary permission under Section 31(1) of FERA, 1973
for purchase of immovable property in India should be made in form IPI 1
together with the documents indicated therein to the Chief General Manager,
Exchange Control Department, (Foreign Investment Division-III), Reserve Bank
of India, Central Office, Mumbai 400 001.
Acquisition, Transfer of Property in India by way of Lease, Mortgage, Gift,
Inheritance, etc.
11E.9
Applications for permission to acquire or transfer immovable property by way
of
lease exceeding 5 years or by way of mortgage, gift, inheritance,
settlement, etc.
other than those covered by general permissions referred to in paragraphs
11E.4 and 11E.6 should be made to Reserve Bank in the appropriate form
together with relevant documents indicated therein (see paragraph 11E.3 ).