RBI/2007-2008/242 Master
Circular No. 03 /2007- 08 February 21, 2008 To, All
Authorised Persons in Foreign Exchange Madam / Sir, Master
Circular on Non-Resident Ordinary Rupee (NRO) Account The
acceptance of deposits by an authorised dealer / authorised bank from persons
resident outside India are regulated by the provisions of subsections (1) and
(2) of section 6 of the Foreign Exchange Management Act, 1999 read with FEMA
Notification No.5/2000 RB dated May 3, 2000, as amended from time to time. 2.
This Master Circular consolidates the existing instructions (updated as on January
1, 2008) on the subject of "Non-Resident Ordinary Rupee
(NRO) Account" at one place. The list of underlying circulars/notifications
consolidated in this Master Circular is furnished in the Appendix. 3.
This Master Circular is being issued with a sunset clause. This circular
will stand withdrawn on July 1, 2008 and be replaced by an updated Master Circular
on the subject. Yours faithfully, (Salim
Gangadharan) Chief General Manager
TABLE
OF CONTENTS 1.
Definitions 2.
Eligibility 3.
Types of Accounts 4.
Joint Accounts with Residents / Non- Residents 5.
Permissible Credits / Debits 6.
Remittance of assets 7.
Foreign Nationals of non-Indian origin on a visit to India 8.
Grant of Loans/overdrafts by authorised dealer / bank to account holders and third
parties 9. Change
of Resident Status of Account holder (a) From Resident to Non-resident 10.
Treatment of loans/overdrafts in the event of change in the resident status of
the borrower 11.
Payment of funds to Non-resident/ Resident Nominee 12.
Operation of NRO account by Power of Attorney holder 13.
Facilities to a person going abroad for studies 14.
International Credit Cards 15.
Income-Tax Annex-1 Annex-2 APPENDIX NOTE
|
1. Definitions |
Non-Resident Indian (NRI): NRI for this
purpose is defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000.
In terms of this Notification, an NRI is a person resident outside India who is
a citizen of India or is a person of Indian origin. Person
of Indian Origin (PIO): PIO for this purpose is defined in Regulation 2 of FEMA
ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he
at any time held Indian passport; or (b) he or either of his parents or any of
his grand-parents was a citizen of India by virtue of the Constitution of India
or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an
Indian citizen or a person referred to in sub-clause (a) or (b). |
2. Eligibility |
(a) Any person resident outside India (as
per Regulation 2 of FEMA), may open NRO account with an authorised dealer or an
authorised bank for the purpose of putting through bonafide transactions denominated
in Rupees, not involving any violation of the provisions of FEMA, rules, Regulations
made thereunder. (b) Opening of accounts by individuals/entities
of Bangladesh / Pakistan nationality / ownership requires prior approval of Reserve
Bank. | 3.
Types of Accounts |
NRO accounts may be opened / maintained
in the form of current, savings, recurring or fixed deposit accounts. Rate of
interest applicable to these accounts and guidelines for opening, operating and
maintenance of such accounts shall be in accordance with directives/instructions
issued by Reserve Bank from time to time. |
4.
Joint Accounts with Residents / Non- Residents |
The accounts may be held jointly with residents
and / or with non-residents. |
5. Permissible Credits / Debits |
A. Credits (i) Proceeds of remittances from outside
India through normal banking channels received in foreign currency which is freely
convertible. (ii) Any foreign
currency which is freely convertible tendered by the account holder during his
temporary visit to India. Foreign currency exceeding USD 5000/- or its equivalent
in form of cash should be supported by Currency Declaration
Form. Rupee funds should be supported by Encashment Certificate, if they represent
funds brought from outside India. (iii) Transfers from rupee
accounts of non-resident banks. (iv) Legitimate dues in
India of the account holder. This includes current income like rent, dividend,
pension, interest, etc. as also sale proceeds of assets including immovable property
acquired out of rupee/foreign currency funds or by way of legacy/inheritance. B.
Debits (i) All local payments in rupees including payments for investments
in India subject to compliance with the relevant regulations made by the Reserve
Bank. (ii) Remittance outside India of current income like
rent, dividend, pension, interest, etc. in India of the account holder. (iii)
Remittance up to USD One million, per financial year (April-March), for all bonafide
purposes, to the satisfaction of the authorised dealer bank. |
6.
Remittance of assets |
6.1 Remittance of assets by a foreign
national of non-Indian origin A
citizen of a foreign state, not being a citizen of Nepal or Bhutan or a Person
of Indian Origin (PIO), who has retired from an employment in India, or has inherited
the assets from a person referred to in sub-section (5) of section 6 of the FEMA;
or is a widow resident outside India and has inherited assets of her deceased
husband who was an Indian citizen resident in India, may remit an amount, not
exceeding USD 1,000,000 (US Dollar One million only) per financial year on production
of, documentary evidence in support of acquisition, inheritance or legacy of assets
by the remitter and an undertaking by the remitter and certificate by a Chartered
Accountant in the formats prescribed by the Central Board of Direct Taxes vide
their Circular No.10/2002 dated October 9, 2002. 6.2
Remittance of assets by an NRI/PIO (a) NRI/PIO may remit
an amount, not exceeding USD 1,000,000 per financial year, out of the balances
held in NRO accounts / sale proceeds of assets / the assets
in India acquired by him by way of inheritance / legacy, on production of documentary
evidence in support of acquisition, inheritance or legacy of assets by
the remitter, and an undertaking by the remitter and certificate by a Chartered
Accountant in the formats prescribed by the Central Board of Direct Taxes vide
their Circular No.10/2002 dated October 9, 2002. (b) NRI/PIO
may, within the overall limit of USD 1 mio. as stated above, remit sale proceeds
of assets acquired under a deed of settlement made by either of
his parents or a close relative (as defined in Section 6 of the Companies Act,
1956) and the settlement taking effect on the death of the settler, on production
of the original deed of settlement and an undertaking by the remitter and certificate
by a Chartered Accountant in the formats prescribed by the Central Board of Direct
Taxes vide their Circular No.10/2002 dated October 9, 2002. 6.3
Assets acquired in India out of rupee funds NRI/PIO
may remit sale proceeds of immovable property purchased by him as a resident or
out of Rupee funds as NRI/PIO, without any lock-in-period, subject to the above
limit of USD 1 mio. per financial year. 6.4 Restrictions (a)
The remittance facility in respect of sale proceeds of immovable property is not
available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan,
Iran, Nepal and Bhutan. (b) The facility of remittance of
sale proceeds of other financial assets is not available to citizens of Pakistan,
Bangladesh, Nepal and Bhutan |
7. Foreign Nationals of non-Indian origin
on a visit to India |
NRO account (current/savings) can be opened
by a foreign national of non-Indian origin visiting India, with funds remitted
from outside India through banking channel or by sale of
foreign exchange brought by him to India. The balance in the NRO account may be
converted by the authorised dealer / bank into foreign currency
for payment to the account holder at the time of his departure from India provided
the account has been maintained for a period not exceeding six months and the
account has not been credited with any local funds, other than interest accrued
thereon. | 8.
Grant of Loans/overdrafts by authorised dealer / bank to account holders and third
parties | (a)
Loans to non-resident account holders and to third parties may be granted in Rupees
by authorized dealer / bank against the security of fixed deposits subject to
the following terms and conditions: (i) The loans shall
be utilised only for meeting borrower's personal requirements and/or business
purpose and not for carrying on agricultural/plantation activities or real
estate business or for re-lending. (ii) Regulations relating
to margin and rate of interest as stipulated by Reserve Bank from time to time
shall be complied with. (iii) The usual norms and considerations
as applicable in the case of advances to trade/industry shall be applicable for
such loans/facilities granted to third parties. (b) Authorised
dealer / bank may permit overdraft in the account of the account holder subject
to his commercial judgement and in compliance with the interest rate etc. directives. |
9.
Change of Resident Status of Account holder (a) From Resident to Non-resident |
When a person resident in India leaves India
for a country (other than Nepal or Bhutan) for taking up employment or for carrying
on business or vocation outside India or for any other purpose indicating his
intention to stay outside India for an uncertain period, his existing account
should be designated as a Non- Resident (Ordinary) Account. When a person resident
in India leaves for Nepal or Bhutan for taking up employment or for carrying on
business or vocation or for any other purposes indicating his intention to stay
in Nepal or Bhutan for an uncertain period, his existing account will continue
as a resident account. Such account should not be designated as Non-Resident (Ordinary)
Account (NRO). (b) From Non- Resident to Resident NRO
accounts may be re-designated as resident rupee accounts on the return of the
account holder to India for taking up employment, or for carrying on business
or vocation or for any other purpose indicating his intention to stay in India
for an uncertain period. Where the account holder is only on a temporary visit
to India, the account should continue to be treated as non-resident during such
visit. |
10. Treatment of loans/overdrafts
in the event of change in the resident status of the borrower |
In case of person who had availed of loan
or overdraft facilities while resident in India and who subsequently becomes a
person resident outside India, the authorised dealer / bank may at their discretion
and commercial judgement allow continuance of the loan/overdraft facilities. In
such cases, payment of interest and repayment of loan may be made by inward remittance
or out of legitimate resources in India of the person concerned. |
11.
Payment of funds to Non-resident/ Resident Nominee |
The amount due/payable to non-resident nominee
from the NRO account of a deceased account holder shall be credited to NRO account
of the nominee with an authorised dealer / bank in India. The amount payable to
resident nominee from the NRO account of a deceased account holder shall be credited
to resident account of the nominee with a bank in India. |
12.
Operation of NRO account by Power of Attorney holder |
Powers have been delegated to the authorized
dealers/banks to allow operations on an NRO account by Power of Attorney granted
in favour of a resident by the non-resident individual account holder provided
such operations are restricted to (i) all local payments
in rupees including payments for eligible investments subject to compliance with
relevant regulations made by the Reserve Bank; and (ii)
remittance outside India of current income in India of the non-resident individual
account holder, net of applicable taxes. The resident Power of Attorney holder
is not permitted to repatriate outside India funds held in the account other than
to the non-resident individual account holder nor to make payment by way of gift
to a resident on behalf of the non-resident account holder or transfer funds from
the account to another NRO account. |
13. Facilities to a person going
abroad for studies |
Persons going abroad for studies are treated
as Non- Resident Indians (NRIs) and are eligible for all the facilities available
to NRIs. Educational and other loans availed of by them
as residents in India will continue to be available to them as per FEMA regulations. |
14.
International Credit Cards |
Authorised dealer banks have been permitted
to issue International Credit Cards to NRIs/PIO, without prior approval of Reserve
Bank. Such transactions may be settled by inward remittance or out of balances
held in the cardholder’s FCNR/NRE/NRO Accounts. |
15.
Income-Tax |
The remittances (net of applicable taxes)
will be allowed to be made by the authorised dealer banks on production of an
undertaking by the remitter and a Certificate from a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes, Ministry of Finance,
Government of India in their Circular No. 10/2002 dated October 9, 2002 [cf. A.P.
(DIR Series) Circular No. 56 dated November 26, 2002]. |
Annex-1 Statement/returns
to be submitted to the Reserve Bank. Master Circular on Non-Resident Ordinary
Rupee (NRO) Account
1 |
Facilities to NRIs/PIO and Foreign Nationals
– Liberalisation- Remittance from NRO account. |
Quarterly |
A.P. (DIR Series) Circular No. 12 dated
November 16, 2006. | |
Annex-2 Operational
Instructions for Authorised Dealer Banks. Master Circular on Non-Resident Ordinary
Rupee (NRO) Account
General
| Authorised
dealers may carefully study the provisions of the Act/ Regulations/ Notifications
issued under Foreign Exchange Management Act, 1999. Reserve
Bank will not prescribe the documents which should be verified by the authorised
dealers while permitting remittances for various transactions. In
terms of the provisions contained in sub-section 5 of section 10 of the Act, before
undertaking any transaction in foreign exchange on behalf of any person, authorised
dealer is required to obtain a declaration and such other information from the
person (applicant) on whose behalf the transaction is being undertaken that will
reasonably satisfy him that the transaction is not designed to contravene or evade
the provisions of the Act or any of the Rules or Regulations made or Notifications
or directions or orders issued under the Act. Authorised dealers should preserve
the information/ documents obtained by them from the applicant before undertaking
the transactions for verification by the Reserve Bank. In
case the person on whose behalf the transaction is being undertaken refuses or
does not give satisfactory compliance of the requirements of an authorised person,
he shall refuse in writing to undertake the transactions. Where an authorised
person has reasons to believe that a contravention or evasion of the Act or the
Rules or Regulations made or Notifications issued thereunder was contemplated
in the transaction that he has refused to undertake, he shall report the matter
to the Reserve Bank. With a view to maintaining uniform
practices, authorised dealers may consider requirements or documents to be obtained
by their branches to ensure compliance with provisions of sub-section (5) of section
10 of the Act. |
Opening of accounts by Bangladesh/ Pakistan entities.
| Opening
of accounts by individuals/entities of Bangladesh / Pakistan nationality / ownership
requires prior approval of Reserve Bank. All such requests may be referred to
the Chief General Manager, Foreign Exchange Department, (Foreign Investment Division),
Reserve Bank of India, Central Office, Mumbai-400 001. |
Remittance of current income |
Remittance outside India of current income
like rent, dividend, pension, interest, etc. in India of the account holder is
a permitted debit to the NRO account. Authorised Dealers
may allow repatriation of current income like rent, dividend, pension, interest,
etc. of NRIs who do not maintain an NRO account in India based on an appropriate
certification by a Chartered Accountant, certifying that the amount proposed to
be remitted is eligible for remittance and that applicable taxes have been paid/provided
for. | Restrictions
| (a)
The remittance facility in respect of sale proceeds of immovable property is not
available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan,
Iran, Nepal and Bhutan. (b) The facility of remittance
of sale proceeds of other financial assets is not available to citizens of Pakistan,
Bangladesh, Nepal and Bhutan. |
Tax compliance |
Authorised dealers can allow remittances
to non-residents only on production of an undertaking by the remitter and a Certificate
from a Chartered Accountant in the formats prescribed by the Central Board of
Direct Taxes, Ministry of Finance, Government of India in their Circular No.10/2002
dated October 9, 2002. [cf. Our A.P.(DIR Series) Circular No.56 dated November
26,2002]. |
APPENDIX List
of notifications / circulars which have been consolidated in this Master Circular
– Non-Resident Ordinary Rupee (NRO) Account http://www.rbi.org.in/Scripts/BS_ApCircularsDisplay.aspx http://www.rbi.org.in/Scripts/Bs_FemaNotifications.aspx
Sl.
No. | Circular
No. | Date |
1. |
Notification
No. FEMA 62/2002-RB | May
13, 2002 | 2. |
Notification
No. FEMA 97/2003-RB | July
8, 2003 | 3. |
Notification
No. FEMA 119/2004-RB | June
29,2004 | 4. |
Notification
No. FEMA 133/2005-RB | April
1, 2005 | 5. |
Notification
No. FEMA 156/2007-RB | June
13, 2007 | 1. |
AP
(DIR Series) Circular No.45 | May
14, 2002 | 2. |
AP
(DIR Series) Circular No.1 | July
2, 2002 | 3. |
AP
(DIR Series) Circular No.5 | July
15, 2002 | 4. |
AP
(DIR Series) Circular No.19 | September
12, 2002 | 5. |
AP
(DIR Series) Circular No.26 | September
28, 2002 | 6. |
AP
(DIR Series) Circular No.27 | September
28, 2002 | 7. |
AP
(DIR Series) Circular No.56 | November
26, 2002 | 8. |
AP
(DIR Series) Circular No.59 | December
9, 2002 | 9. |
AP
(DIR Series) Circular No.67 | January
13, 2003 | 10. |
AP
(DIR Series) Circular No.43 | December
8, 2003 | 11. |
AP
(DIR Series) Circular No.45 | December
8, 2003 | 12. |
AP
(DIR Series) Circular No.62 | January
31, 2004 | 13. |
AP
(DIR Series) Circular No.43 | May
13,2005 | 14 |
AP
(DIR Series) Circular No.12 | November
16,2006 | 15. |
AP
(DIR Series) Circular No.64 | May
25, 2007 |
NOTE
- It is also clarified for information of all users that
the Master Circular need not necessarily be exhaustive and a reference to the
relevant A. P. (DIR Series) Circular is needed wherever further information/ clarification
is required.
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