Do you invest in India from abroad?

Or, do you transfer money from your NRO or NRE account from a foreign country?

Making transactions from any bank in the world is permissible. But, you need to know the related rules and regulations. You can remit hundreds to millions of rupees. But at the same time, you should know your transaction limits and taxability. If you want to save your money, you should know about the remittance guidelines.

Yes, an insight of these guidelines would prevent you from uncertain loss via tax. This article will help you to know the nuts and bolts of these norms. Catch them below:

What do you mean by remittance of funds?

Do you send money to parents or any relative in India from overseas?  If yes, your money transfer is known as the remittance of funds. Be it a peer-to-peer bank transfer, or an online delivery, your transaction would be considered the remittance of funds.

In all, it implies the transferability of funds. India’s Reserve Bank (RBI) is the regulator of this kind of foreign and indigenous exchange of money. It has set up separate investment laws non-residents (NRIs), citizens and foreigners to invest in India. The NRIs can invest in many profitable and tax-saving schemes, like PPF. But first, they should be acknowledged of the remittance policy.

Let’s have a look over the defined guidelines for NRIs to transfer money.

Rules Regarding Remittance for NRIs:

• Defined Limit: The RBI has defined how much amount you could transfer in a financial year (FY). Currently, you (NRI) can remit $250,000 per FY. If your fund transfer falls behind this limit, it’s permissible. But, it must not exceed. (This Apex fund regulation authority can change this limit the next year.) And, you can remit from your current account or capital transaction (that falls under the Liberalized Remittance Scheme or LRS). If you want to know more about LRS, you can check its details from the official website of the RBI (i.e. https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11255&Mode=0).
• Defined Status: The Apex Bank regulation authority permits only the citizens of India to transfer funds under the LRS scheme. It has defined the citizens as a person who has been in India for more than 182 days or more in the previous financial year.

If you’ve any doubt to identify your status, you can consider these facts:

1. A foreigner who has come to an appointment in India or to carry out his business or to accommodate India for an uncertain period will not be deemed the resident of India, although he has been here for more than 182 days.
2. An Indian who settled abroad on appointment or to carry out business or accommodate a foreign country will not be deemed the resident, although he has been here for more than 182 days.

• Defined Transactions: The NRI can’t deal in all fund transfer. He can transact for:

1. Travel expenses outside India
2. Donations
3. Gifts
4. Helping close relative abroad
5. Business trip
6. Foreign study
7. Medical treatment
8. Foreign immovable property
9. Foreign investment
10. Lending Rupees to NRIs/PIOs under certain conditions.

• Defined Prohibitions: The non-residents are disallowed to transfer money for:

1. Purchasing lottery ticket
2. Purchasing foreign convertible bond via an Indian company that deals in foreign market.

• Defined Relaxation: If you want leniency, you can seek it. But, the limit criterion will be there. It would be $250,000 or less. Here are a few permissible grants:

1. Medical treatment abroad
2. Study in the foreign country

If the remittance exceeds the defined limit, you can seek a general permission from the doctor or a university. It would be granted when you would prove that your necessity is genuine.

Transactional Policies for NRIs:

• Permissible bank accounts: Generally, NRIs are permitted to open account in any of the four types of bank accounts. They are NRE, NRO, FCNR and the special non-resident rupee account. The popular accounts in Indian diaspora are NRE and NRO accounts.
• Privileges:

The NRE account is meant for the resident Indians who live abroad. It’s repatriable. Also, the foreign citizens who originally belong to India can also open this account. The NRE account holders can remit funds from the foreign country. Even, this remittance covers the income from NRI investment in India, current income and so on.

On the other hand, the NRO account is meant for the non-residents, including the foreigners originated from India. If you have this type of account, the inward remittance is permissible. It means that you can make transactions from overseas. The rental income from Indian property, pension and interest can also be remitted via this account. If you ask about the repatriable amount, the NRO account holders can transfer $1million as per prescribed regulation of the RBI.

How NRIs can comply for paying tax?    

1. What documents should they have?

The amount that you remit from overseas would be taxable. The amount would be debited to the Indian treasure. You should have all these documents to pay tax:

• Form A2
• A Chartered Accountant’s Certificate (Form 15 CB)
• Self-declaration form (Form 15 CA)
• PAN card, if you’re remitting amount exceeds $250,000 under the LRS.

2. Tax on gift:

The relatives of the NRIs can gift anything. But, its valuation should not exceed $250,000 in a FY. Otherwise, it’s taxable.