Borrowing by an NRI from Resident:

A NRI is permitted to avail loan from a Bank in India subject to terms and conditions specified by RBI. Banks can grant loans to NRIs on the security of shares and other securities and immovable property (other than agricultural land / plantation property / farm house).

NRIs can freely avail loan / overdraft against their NRO / NRE FDs in India. However, such loan / overdraft cannot be utilized for the purposes of relending, carrying on agricultural / plantation activities or for investment in real estate business. There is no restriction on the monetary ceiling of the loan amount.

A resident individual can lend money within the overall limit of USD 2,50,000 per financial year under LRS to an NRI relative. The loan should be interest free and have a maturity of minimum 1 year and cannot be remitted outside India.

Borrowing by an individual Resident from NRI in foreign exchange:

An individual resident can borrow upto USD 2,50,000/- from his close relatives outside India subject to the following conditions:

·         The minimum maturity period of the loan is one year.

·         The loan is free of interest and

·     The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender

Borrowing by an individual Resident from NRI in Rupees:

A person resident in India (other than an Indian company) may borrow on non-repatriation basis from an NRI or a PIO outside India subject to following:

·     Amount of loan shall be received by inward remittance from outside India or out of NRE/FCNR/NRO account of the lender in India.

·    The period of loan shall not exceed 3 years

·     Rate of interest shall not exceed 2 % points over the Bank rate prevailing on the date of loan

·     Repayment for interest and repayment of loan shall be made credit to the lender’s NRO account.

·      Amount borrowed shall not be allowed to be repatriated outside India

ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA

The Foreign Exchange Management Act, 1999 (FEMA) and the Regulations notified by the Reserve Bank of India (RBI), regulates the acquisition and transfer of immovable property in India by Persons resident outside India.

A.    Acquisition of immovable property by NRI/OCI:

·     NRI/OCI can acquire immovable property in India without prior approval of RBI (under general permission) in the following manner:      

·   Further, NRI/OCI can transfer immovable property in India under general permission in the following manner:

·         The consideration to acquire/purchase the immovable property should be made out of the following:

a.    Foreign inward remittance

b.    Balances held in Non-Resident (Ordinary) account (NRO account)/Non-Resident (External) account (NRE account)/ Foreign Currency Non-Resident account (FCNR account)

c.    Housing loan can be availed from Authorised Dealer (AD) Bank or a housing finance institution in India.

·         The payments cannot be made either by traveller’s cheque or by foreign currency notes or by any other mode other than those specified above.

B.    Joint Acquisition by the spouse of an NRI/OCI:

Foreign national resident outside India, can acquire one immovable property (other than agricultural land/ farm house/ plantation property) jointly with spouse who is NRI or OCI, subject to below conditions:

·         The consideration is paid only through the modes specified above

·          The marriage has been registered and subsisted for continuous period of atleast 2 years

·          The non-resident spouse is not otherwise prohibited from such acquisition (see para E below)

C.    Acquisition by a Long-Term Visa holder:

A person who is citizen of Afghanistan, Bangladesh or Pakistan belonging to minority namely, Hindu, Sikh, Buddhist, Jain, Parsis and Christians and residing in India under Long Term Visa can acquire one residential house for self – occupation and one immovable property for carrying on self-employment, subject to specified conditions.

D.   Acquisition/Transfer by Foreign Embassies/Diplomats/Consulate Generals

Foreign Embassy/Diplomat/Consulate General, can purchase/sell immovable property (other than agricultural land/plantation property/farm house) in India provided:

·    Clearance from the Government of India, Ministry of External Affairs is obtained for such purchase/sale, and

·    The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.

E.    Acquisition/Transfer by Foreign Nationals (other than OCI cardholder):

·         Foreign Nationals of 11 Countries:

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or Democratic People’s Republic of  Korea (DPRK),

a.    Irrespective of their residential status, cannot acquire or transfer immovable property in India, without prior RBI permission.

b.    However, they can acquire immovable property by way of lease, not exceeding five years. 

·         Foreign Nationals of other countries:

a.    Foreign nationals of non-Indian origin resident in India can acquire immovable property in India.

b.   Foreign nationals of non-Indian origin resident outside India cannot acquire/ transfer immovable property in India except by way of inheritance from a resident or by way of lease not exceeding five years.

F.    Acquisition of Immovable Property for carrying on permitted activity

A person resident outside India who has established branch in India can acquire immovable property which is necessary for or incidental to carry on such activity. The person resident outside India can also mortgage the said property.

Further, such person resident outside India has to file a declaration in Form IPI with the Reserve Bank within ninety days from the date of acquisition of immovable property;

However, person of 11 countries mentioned in point E above will require prior RBI permission if such property is to be acquired for period exceeding five years. 

1.    Exceptional Cases:

·         A person resident outside India can continue to hold, transfer any immovable property situated in India if such property was acquired, held or owned by him/her when he/she was resident in India or inherited from a person resident in India.

·   Any existing holding of immovable property in India by a person resident outside India made in accordance with the applicable regulation at the time of such acquisition would not require any further compliance/permission

2.    Typical Guidance:

·         NRIs/PIOs can remit the sale proceeds of immovable property in India subject to certain conditions and payment of applicable taxes.

·         Transfer of immovable property has to be routed through banking channels in India only. Direct payment from a Person resident outside India to another Person resident outside India is not permitted.

·         It is advisable to obtain Foreign Inward Remittance Certificate (FIRC) and documents evidencing repayment of loan in foreign exchange to facilitate smoother repatriation process at later stage.

                                                                                                                                                                              - Updated 01/2023  

A Non-Resident Indian (NRI) can open the following Bank accounts in India:

1.    Non Resident Ordinary Account (NRO A/c):

Any person resident outside India for putting through bonafide transactions in rupees is eligible to open NRO a/c in India.

However, individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin will require prior approval of the Reserve Bank of India to open NRO a/c in India.

The key features of NRO a/c are as under:

·         The account is denominated in Indian Rupees

·         It can be opened and held in the form of savings, current, recurring, fixed deposits etc.

·         It can be jointly held with residents or other NRIs/ PIOs

·        A/c holder can avail loan facility in India for himself or in favour of third party, against the security of funds held in NRO a/c

·        The interest earned on NRO a/c is taxable in India as per Indian Income-tax laws.

·      Balances held in NRO a/c is repatriable to NRE or Overseas account upto USD One Million per Financial Year (subject to payment of applicable taxes) 

2.    Non-Resident External Account (NRE A/c):

NRIs and PIOs are eligible to open such a/c in India. The account should be opened by the non-resident account holder himself and not by the holder of the Power of Attorney in India.

The key features of NRE a/c are as under:

·         The account is denominated in Indian Rupees

·         It can be opened and held in the form of savings, current, recurring, fixed deposits etc.

·         It can be jointly held with other NRI(s) or a close relative who may be a resident

·         A/c holder can avail loan facility for himself or in favour of third party, in India and outside India, against the security of funds held in NRE account

·        The interest earned on NRE a/c is exempt from Tax as per Indian Income Tax laws. Hence, no tax is deducted at source on such interest earned.

·         Funds are freely repatriable outside India from such an account.

3.    Foreign Currency Non Resident (Bank) Account – FCNR (B) Account:

NRIs and PIOS are eligible to open and maintain FCNR (B) Deposit in India.

The key features of FCNR a/c are as under:

·    The account is denominated in any permitted currency i.e.  foreign currency which is freely convertible

·         It can only be opened only as Term Deposit with maturity of 1-5 years

·         It can be jointly held with other NRI(s) or a close relative who may be a resident

·       A/c holder can avail loan facility for himself or in favour of third party, in India and outside India, against the security of funds held in FCNR(B) a/c

·      Interest income from FCNR account is exempt as per Indian Income Tax laws in case of a person whose Residential Status under the Income Tax Act, 1961 is Non-Resident or Resident but not Ordinarily Resident

·        The funds are freely repatriable, without any restriction

                                                                                                                                                                        - Updated 01/2024