RBI and Indian Government Agencies have made a lot of changes affecting NRIs and NRI Investments in last 8 months. I have selected 15 and have summarized them in the following table for easy understanding.
| 15 Important Changes affecting NRIs by RBI and Indian Government | |||||||||
| # | Date |
Topic |
Detail |
Effect / Benefit |
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| Bank Accounts | |||||||||
| 1 | 10-May-12 |
EEFC Account |
50% of balance and 50% of future credit to be converted into Rupees within 15 days |
Conversion may reduce / stop further Rupee depreciation |
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| 2 | 7-May-12 |
NRO, NRE Account |
Transfer from NRO to NRE account allowed |
Save cost, Convert your taxable return into TAX FREE return, Limit for transfer from NRO to NRE but NO Limit for conversion out of NRE (see #8 for more) |
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| 3 | 4-May-12 |
FCNR Accounts |
Interest rate increased upto LIBOR + 3% in FD in $, £, €, ¥, A$, C$; e.g. Interest on 5 Yr FD in A$ is 7.09% |
FCNR deposit Rates increased by upto 1.75%. TAX FREE, 100% RISK FREE(Not even currency risk) FULLY Repatriable, No PAN, No TDS, No ITR |
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| 4 | 27-Apr-12 |
Intra bank account Transfer |
Transfer of Account from one branch to another branch made easy |
Save time, procedures and cost, if any |
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| 5 | 20-Apr-12 |
Bank Accounts –MICR & IFSC Codes |
MICR and IFSC codes to be printed on Passbook/Statement of Accounts |
Convenience as codes will be available and visible on front page |
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| 6 | 17-Apr-12 |
Interest Rate |
RBI reduced interest rate by 0.50% |
More liquidity in system could drive growth |
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| 7 | 21-Mar-12 |
NRE, FCNR Account – Loan Proceeds |
Repayment of Loan by Residents to NRIs allowed to be credited to the NRE/FCNR account |
Convenience, save time and cost, easy repatriation |
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| 8 | 19-Dec-11 |
NRE Account |
Deregulation of NRE Bank FD interest rates |
Rate increased from 3.5% to 9.5% TAX FREE, FULLY Repatriable, No PAN, No TDS, No ITR, No RISK except currency |
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| 9 | 25-Oct-11 |
Savings Bank Account |
Deregulation of Savings bank interest |
Rate increased from 4% to upto 7% |
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| 10 | 15-Sep-11 |
NRE, FCNR, EEFC, RFC Account |
Resident close relative allowed to be a Joint Account holder |
Convenience and ease of use, quick and easy transfer on death |
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| Investments and Other Transactions | |||||||||
| 11 | 8-May-12 |
Budget 2012 proposals changed or withdrawn |
GAAR deferred; 1% TDS proposed on transfer of immovable property and levy proposed on precious metal Jewellery withdrawn; onus of proof with Income Tax department. |
Less compliance requirement, positive steps for attracting foreign investments into India |
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| 12 | 8-Apr-12 |
Permanent Account Number (PAN) |
New Form 49AA became operational for Non-Indian citizens |
Require 2 photos, 3 signs, and KYC details including Taxpayer ID in country of residence (e.g. For US residents, SSN/TIN) |
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| 13 | 1-Jan-12 |
Know your Customer (KYC) |
Form Revised. One Common Form for KYC for investing in Indian stocks, bonds and mutual funds |
Convenience – One form for mutual fund and brokerage accounts |
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| 14 | 13-Jan-12 |
Qualified Foreign Investor (QFI) |
Scheme introduced for QFI to invest in Indian equity and equity mutual funds |
Expected Increased investments in India (Only NRIs and FIIs allowed until now; scheme not yet operational) |
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| 15 | 2-Dec-11 |
Validity of Cheques (Checks) |
Checks dated before April 1, 2012 – valid for 6 months; Checks dated on or after April 1, 2012 – valid for 3 months |
Validity reduced from 6 to 3 months so deposit/ encash checks early; increases money rotation |
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| 1-Dec-113-Apr-12 |
PPF Account (not for NRI) |
PPF investment ceiling increased from 70,000 to 100,000 and interest@ 8.8% p.a. Tax free from April 1, 2012 |
Higher tax free secured return for residents |
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Currently, India is very much in need of foreign exchange. Indian Government, including RBI, SEBI, AMFI, Finance Ministry etc. have relaxed terms and are offering attractive secured returns to NRIs to attract foreign investment and to stabilize Rupee (INR). As a result, NRIs earn higher secured return than Residents. NRIs earn 9.5% Tax Free Return from Bank FD compared to 9.5% Taxable Return for Residents.
With exchange rate at ALL TIME HIGH of Rs. 54.70/$, You should not wait. I agree, it could go to 56-57/$ but what if it goes back to 50/$? 54.70 is way better rate than 48.60 about 3 months ago (on Feb 4, 2012). You should realize the opportunity and take benefit of relaxed terms, higher currency rates and better investment returns. It will serve mutual benefit to you (increasing your return) and to India (getting much needed foreign exchange).
3 Comments
This is really helpful. Thanks a lot.
Dear Sir,
I am NRI living in USA and I have money in NRO account in Canara Bank. I also have NRE account in same bank under common ID. What would be the procedure to transfer from NRO to NRE account?
Your guidance will be greatly appreciated.
Thanks
Atul Patel
You would need to contact your bank and understand the procedures as different banks have their own internal requirements and procedures. That being said, if the source of funds in NRO is taxable (rent, interest, sale of asset, etc.), you would need a CA certificate in form 15CB, file form 15CA to the Income Tax department and also complete forms and documents required by the bank. Thanks.