NRI Non-repatriation

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NRI Non-repatriation refers to the restriction on the movement of Indian Rupee funds from NRO Saving Bank Account to a bank account outside India.

Content:

  1. NRI Non-repatriation
  2. NRI non-repatriable account
  3. Repatriation of funds from NRO account
  4. NRI investments on non-repatriation basis
  5. FAQs

NRI Non-repatriation

NRI Non-repatriation puts restrictions on the NRI to freely move the rupee funds earned in India to NRIs country of residence. An NRO saving bank account is designed to keep the funds for Non-repatriation.

When an NRI invests its foreign earnings in India (or money earned in India) on a non-repatriation basis, there are a number of restrictions applied to these funds (by RBI) when transferring them to the NRIs country of residence.

An NRI can invest in India on a non-repatriation basis by using the funds from the NRO bank account. When an NRI invests on a non-repatriation basis, the funds cannot be easily transferred to the NRIs country of residence nor can they be converted to any foreign currency.

Before 2012, the funds in the NRO bank account were strictly non-repatriable i.e. transfer from NRO account to NRE account was not at all permissible. On 7th May 2012, RBI permitted the transfer of funds from NRO to NRE account to the extent of USD 1 million per financial year subject to payment of applicable taxes.

The opposite of non-repatriation is repatriation. In the case of investment on a repatriation basis, the funds can be transferred back to the NRIs country of residence by converting from India Rupee to the foreign currency at any time easily. RBI has Reserve Bank of India (RBI) has permitted Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) bank accounts for repatriation purposes.


NRI Non-Repatriable Account (NRO)

An NRO bank account is a non-repatriable account. NRO account is commonly used to manage the NRI earnings in India viz. salary, rent, dividend, pension, etc.

Some key points to note for the funds held in NRO account:

  • The principal amount held in NRO is not repatriable.
  • The interest earned on NRO balances is freely repatriable.
  • The income earned in India in nature of rent, salary, dividend, pension, etc. and proceeds from the sale of financial assets viz. equity stocks, initial public offering (IPO), mutual funds and proceeds from the sale of immovable property in India is repatriable up to USD 1 million per financial year. Any repatriation above the mentioned limit is subject to RBI approval.

Repatriation of Funds from NRO account

NRO account is a non-repatriable account; however, RBI has permitted remittance of funds from NRO account subject to below rules and documentation requirement:

  • The repatriation of funds from NRO account is subject to payment of applicable taxes.
  • The repatriation limit of USD 1 million is applicable across all the NRO bank accounts held by NRI.
  • The repatriation from the NRO account is not allowed to third party accounts.
  • The repatriation limit of USD 1 million from the NRO account allowed per financial year has to be utilized in one financial year only. There is no carry forward permitted if the limit if unutilized.

Documents required for NRI repatriation of funds from NRO account

The repatriation of funds from the NRO account is not as easy as in the case of the NRE account. An NRI is required to furnish the below documents to initiate the transfer of funds from the NRO account.

  • Request to Bank for repatriation - An NRI needs to fill up the request form to notify the bank about the remittance.
  • A2 Form known as 'FEMA declaration' or form for outward remittance. [Sample form from RBI website A2 Form]. Each bank has its A2 form with its logo and specific instructions if any. The A2 form is required to apply for the purchasing of foreign exchange. An NRI is also required to mention the NRI repatriation purpose code for which the funds are required to be repatriated
  • Form 15 CA - This form is required to be filled by the NRI remitting the funds as a self-declaration furnishing the details of the payment that are liable to taxes.
  • Form 15 CB - This is a certificate from Chartered Accountant declaring that applicable taxes on the funds to be remitted have been paid.
  • Supporting documents to prove the source of funds.

To know more details on Form 15 CA and 15 CB, refer to FAQs under NRI repatriation.

An NRI needs to upload or scan and email the self-attested copies of all these documents to the banks for processing the repatriation request. The banks may also ask for physical copies to be courier if required.


NRI Investments on Non-repatriation Basis

A non-repatriable investment is the one wherein the investments are made by NRI from NRO accounts. NRIs are permitted to trade in derivatives (Futures & Options) in India only on a non-repatriatable basis out of rupee funds held in India. NRIs can also invest in Indian equity stocks on a non-repatriable basis by utilizing the funds from the NRO account. The good news to trade via NRO mode in equity stocks is, NRIs are now no longer required to obtain PIS approval from RBI for investing in Indian equity. Apart from this, the government has specified various other investment options for NRI to invest on a non-repatriation basis without any limit.

  • Government dated securities;
  • Treasury bills (T-bills);
  • Units of domestic mutual funds;
  • Units of Money Market Mutual Funds
  • Listed non-convertible/ redeemable preference shares or debentures.
  • Initial Public offerings
  • National Pension System
  • Chit funds

 

ProStocks Non-PIS NRO Trading

 

Answered on


Frequently Asked Questions

  1. 1. What is NRI non-repatriation?

    An NRI maintains an NRO account to manage his Indian income received in the form of rent, dividend, pension, etc. The funds held in NRO account cannot be taken by NRI easily to his country of residence. This control is known as non-repatriation and the NRO account is known as a non-repatriable account.

    An NRI is allowed to invest in India with rupee funds held in NRO account. The funds from this investment cannot be easily converted to any foreign currency nor can be taken back by the NRI to his country of residence. Such investments are known as investments on non-repatriation basis. RBI has permitted NRIs to invest in a range of investment options on a non-repatriation basis. This includes Stocks, Derivatives, Mutual Funds, Bonds, NPS and IPO, etc.

     

  2. 2. Can the funds from NRO account be repatriated?

    NRO bank accounts are non-repatriable accounts. However, since May 2012, RBI has permitted repatriation from NRO account up to USD 1 million per financial year subject to certain documentation requirements.

    The principal amount in the NRO bank account is not repatriable; however, the interest earned is freely repatriable post deduction of taxes. The limit of USD 1 million applies to other balances accumulated in NRO accounts by way of Indian income or from the sale of the financial asset or immovable property.

     

  3. 3. Is the NRO account repatriable?

    An NRO account is a non-repatriable account by its legal nature. An NRO account is maintained by an NRI to manage their Indian income received in the form of rent, dividend, pension, etc. The funds in NRO account were not allowed to be taken back to NRIs country of residence nor were they allowed to be converted to any foreign currency till 2012. However, in May 2012, RBI relaxed these norms and allowed NRIs to remit up to USD 1 million per financial year post payment of applicable taxes and subject to certain documentation requirements. Thus, though transfer from the NRO account has been permitted by RBI, the NRO account remains non-repatriable in nature as funds cannot be freely remitted as in the case of the NRE account.

     

  4. 4. Is money in the NRO account Repatriable?

    No, the principal amount in the NRO bank account is non-repatriable in nature which means you cannot remit the funds to your country.

    An NRI can repatriate up to USD 1 million in a financial year for any bonafide purpose after submitting Form 15 CA and Form 15 CB. Although, the interest earned on such securities are fully repatriable. Apart from this, other incomes from the investment, such as dividends, rent, pensions are repatriable in nature.

     


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