5 Major Rules Under FEMA Every NRI Must Know
As anyone who conducts business dealings abroad or has voyaged overseas can affirm __ the government likes to keep a strict leash on currency that goes out of the country. There are major reasons for this, such as stopping foreign exchange outflow, money laundering concerns and so on.
Any cross-border financial transaction be it to or from India is managed by FEMA (Foreign Exchange Management Act) 1999, which came right into effect after the FERA act was revoked. FEMA swapped the earlier Foreign Exchange Regulation Act or FERA, which was stricter, in the aftermath of financial reforms brought in the Indian economy right back in the early nineties. There were lot of incorrect regulation of all transactions that deal with foreign exchange.
The Foreign Exchange Management Act 1999 (FEMA) is a law thus enacted by the Government of India to control this flow of foreign currency that goes out to other countries.
In comparison to Persons Resident Outside India (PROI), NRI/OCI community ideally enjoys some good privileges under Foreign Exchange Management Act, 1999 (FEMA).
FEMA 1999 aims to enable external trade and their payments in financial capital like Mumbai as well as other cities in India; a systematic enhancement and continuation of foreign exchange in the domestic market. FEMA 1999 outlines the procedures, protocols and documentation formalities to businesses for foreign exchange transactions in India.
Here are the five most significant FEMA regulations every NRI must be aware of:
- Maintenance of bank account
- An NRO account if you send cash produced abroad back to India
- An NRE account designed for repatriable or portable assets such as securities and cash.
- A FCNR (B) account which keeps money in foreign currency. Both NRO and NRE are only used for rupees.
- Financial investment options
- Acquisition and transfer of fixed properties
- Agricultural land
- Plantation areas
- Farm houses
- Repatriation of current and fixed assets
- Income for students
Once you turn into an NRI, you need to open some bank accounts that are rightly designated for NRIs. These comprise of:
NRIs are permitted unlimited investment in both repatriable or non-repatriable financial transactions. The only exclusions are small savings schemes or Public Provident Fund (PPF) which aims to assemble small savings by providing an investment with healthy returns together with income tax benefits.
Both NRIs and Persons of Indian Origin (PIO) (not including those from some countries) can buy all kinds of residential and commercial real estates in India. The exclusions are the following:
An NRI can easily send money back to India on foreign repatriable assets that encompasses of rent got from a building that is owned abroad. He is more constrained on fixed assets (for instance, property and lands), because the NRI can just be repatriated on his formerly invested foreign fund. He simply can’t profit from any sort of ROI that proceeds from these investments. Prior to remitting funds abroad, an NRI must learn how he will be taxed for it that country.
As stated by the Liberalized Remittance Scheme, Indian students who are NRIs can obtain a maximum of US$ 10 lakhs every year from their NROs or NREs, or from any profit revenue gained from properties or estates. NRI students can also avail an amount equivalent to US$ 2.5 lakh per year for taking care of their close relations.
