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The Reserve Bank of India has recently advised the banks that in terms of the Notification No.Fera 158/94-RB dated 24th February 1994, residents (individuals, shops, hotels, etc.) are permitted to receive payments in foreign currency/travellers cheques from persons who are on a visit to India for services rendered or in settlement of lawful obligations. In order to encourage residents who receive such payments to fearlessly encash such amounts through the banking channel, banks have been advised to freely accept such tenders at their branches.
With a view to ensuring prompt and efficient encashment facilities to tourists and Non Resident Indians visiting the country the Reserve Bank has specifically directed the banks to :
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Accept without limit foreign currency notes/travellers cheques if the proceeds are to be credited to the accounts of the tenderers. |
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Accept for cash payment at least US $ 1000 or its equivalent in major cities and tourist centres and US$ 500 at other centres. |
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Prominently display the rules for encashment, rates as also the brand names of TCs accepted. |
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Issued in Public Interest by
RESERVE BANK OF INDIA |
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Facilities for Returning Indians
Introduction
Opening, maintenance and operations of foreign currency accounts abroad by residents require prior approval of the Reserve Bank. The Reserve Bank permission is also necessary for acquisition, holding and disposal of foreign securities or immovable properties abroad by residents. This equally applies to Returning Indians. Returning Indians (including persons of Indian origin) are those persons who were resident outside India but who have returned to India for permanent stay.
In the context of liberalisation of exchange control regulations, the Reserve Bank has granted general permission to Returning Indians and to certain other residents to continue to hold their foreign currency assets abroad subject to certain conditions. This pamphlet attempts to explain, in question-and-answer form, current provisions regarding procedural formalities and the scope of the various exemptions granted by the Reserve Bank on the subject.
DEFINITIONS
Who is a non-resident Indian of Indian nationality?
An Indian citizen who stays abroad for employment or business or takes up a vocation outside India or who stays abroad under circumstances indicating an intention to stay there for an uncertain period, is a non-resident. Persons posted in United Nations' organisations and officials deputed abroad by Central/State Governments and public sector undertakings on temporary assignments are also treated on par with non-resident Indian citizens, Indian citizens who go abroad for business visit, medical treatment, study and such other purposes which do not indicate their intention to stay outside India for an indefinite period are considered as 'persons resident in India' during their temporary absence from India.
Who is a person of Indian origin?
For the purpose of the facilities outlined in this pamphlet, a foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian origin, if -
(i) he, at any time, held an Indian passport, or
(ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).
Note: A spouse (not being a citizen of Pakistan or Bangladesh) of a person of Indian origin is also treated as a person of Indian origin.
FACILITIES
Are persons resident in India required to surrender foreign exchange acquired/held by them?
Yes, Residents receiving foreign exchange from abroad by way of gift, inheritance, remuneration for services rendered, etc. are required to bring it to India within three months of acquiring the foreign exchange and surrender it to an authorised dealer within seven days from its receipt in India. This rule also applies to non-residents who return to India for a purpose other than temporary visit.
Does this rule apply to other assets, viz., foreign currency shares/securities or immovable property held abroad?
Residents are required to declare such assets to the Reserve Bank within three months from acquiring them and obtain permission of the Reserve bank for holding them.
Are any concessions available to Returning Indians from these requirements in respect of assets acquired by them while they were resident outside India?
Yes. Persons who have returned to India on or after April 18, 1992 and have stayed abroad for a continuous period of not less than one year have been granted general permission/exemption from the requirement of surrendering/declaring their foreign currency assets abroad. As a result they can continue to maintain their foreign currency accounts and other assets, viz., foreign currency shares/securities or immovable properties abroad without declaration to the Reserve Bank, provided these funds/assets were lawfully acquired by them out of foreign exchange earned through employment, business or vocation outside India taken up or commenced while they were resident outside India and not in contravention of the provisions of the Foreign Exchange Regulation Act (FERA), 1973.
Is such an exemption available to any other category of persons resident in India?
Yes. Residents who had acquired foreign currency assets abroad before July 8, 1947 can continue to hold them abroad, provided they were held outside India with the general or special permission of the Reserve Bank as on 6th July 1994. This general permission/exemption has been granted by the Government of India vide their Notification dated July 6, 1994.
Do resident donees or legal heirs require the Reserve Bank permission to receive or hold foreign currency assets by way of gift or inheritance from Returning Indians or from those holding assets since prior to July 8, 1947 with the permission of the Reserve Bank?
No. Resident donees or legal heirs of the persons covered under the general permission/exemption as above can continue to maintain the foreign currency assets so gifted or inherited, provided in the case of gift, the resident donee is a relative, i.e. husband, wife, brother, sister or any lineal ascendant or descendant of the donor and gift tax, if any, has been paid in India.
Can such overseas assets covered by the general permission/exemption be utlilised freely?
Yes. Resident donees or legal heirs can freely utilise overseas assets covered by the general permission/exemption as well as income earned thereon or sale proceeds received subsequently, for bona fide payments in foreign currency.
Can persons covered by the general permission/exemption make any settlement or gift of any of their foreign exchange/foreign currency assets in favour of persons resident outside India?
Yes.
What about persons who are not covered by the general permission/exemption?
Persons who are not covered by the general permission/exemption are required to bring the overseas foreign currency balances to India within three months from the date of acquisition and surrender them to an authorised dealer within seven days from its receipt in India. In regard to other foreign currency assets, viz., shares/securities or immovable property, they are required to obtain within three months of owning/date of return to India specific permission of the Reserve Bank for continuing to hold such assets.
What is the procedure for obtaining such permission?
Applications for the purpose should be made in form FAD 1 to the Reserve Bank. The forms are available with the Exchange Control Department (Foreign Accounts Section), Reserve Bank of India, Amar Building, Mumbai 400 001.
Returning Indians are also offered the facility of keeping their foreign currency funds with a bank in India in a foreign currency account. This facility is known as the Resident Foreign Currency Account (RFC account) Scheme.
RFC ACCOUNT SCHEME
What is the Resident Foreign Currency Account (RFC account) Scheme?
This is a Scheme drawn up by the Reserve Bank for Indians who have returned to India after having been resident outside India for a continuous period of not less than one year. Under the scheme, such Returning Indians are permitted to open foreign currency accounts with banks in India for holding funds brought by them to India.
Is any permission from the Reserve Bank required for opening such accounts with authorised dealers?
No.
In which currencies can RFC accounts be maintained?
RFC accounts can be maintained in any convertible currency.
What funds can be credited to RFC accounts of Returning Indians?
Returning Indians can credit to RFC accounts, the entire amount of foreign exchange brought to India at the time of their return to India for permanent settlement as well as balances standing to the credit of their Non-Resident (External) (NRE) and Foreign Currency Non-Resident (FCNR) accounts.
Can income received from their overseas assets in the form of dividends, etc., or sale proceeds of such assets be credited to RFC accounts?
Yes.
Can pension received by the account holder from abroad be credited to his RFC account holder?
Yes.
Can funds in RFC accounts be remitted abroad?
Yes. Funds in RFC accounts can be remitted abroad for any bona fide purpose of the account holder or his dependents.
Can funds in RFC accounts be utilised for local payments?
Yes. Funds in RFC accounts can be withdrawn freely and converted in rupees for local payments.
Can RFC account holders take loan against the security of RFC balances?
No.
Can a Returning Indian desiring to go abroad again for employment, business or vocation, transfer funds from RFC account to NRE/FCNR account?
Yes.
Can persons who have returned to India after a short assignment of less than one year open RFC accounts?
Their applications for opening RFC accounts would be considered by the Reserve Bank. Persons who have gone abroad for studies, training, etc., are, however, not eligible for this facility.
Can Returning Indians continue to maintain their existing NRE/FCNR/NRSR/NRO accounts in India?
No. Returning Indians are required to redesignate immediately on their return to India for permanent settlement their NRE/FCNR/NRSR/NRO accounts as resident accounts or transfer the balances held in their NRE/FCNR accounts to Resident Foreign Currency (RFC) Accounts (if eligible). Holders of FCNR(B) deposits can upon their return to India, continue these deposits at the contracted rate of interest till maturity if they so desire. Except for provisions relating to rate of interest, for all other purposes these deposits would be treated as resident deposits from the dates of return of the account holders to India. On maturity the account holder will have option to credit funds held in these FCNR(B) deposits to his RFC account, if eligible, or to convert the deposits in resident rupee deposits.
Are Returning Indians permitted to acquire fresh foreign currency assets by remittance from India?
Yes, provided the funds for the purpose are drawn out of their Resident Foreign Currency Accounts.
Can persons who returned to India prior to 18th April 1992 who were not maintaining foreign currency accounts or who did not hold foreign currency assets abroad, open RFC accounts?
Yes. Such persons are eligible to open RFC accounts if they are in receipt of pension and/or other monetary benefits from their employers subsequently to their return to India.
Published by B. Maheshwaran, Chief General Manager, Exchange Control Department for Reserve Bank of India, Central Office,
Mumbai 400 001 |