FEMA Rules That Every NRI Should Be Aware Of
The Indian government introduced the Foreign Exchange Management Act or FEMA in 1999. With the act, the government attempts to exercise control over the flow of foreign currency in India and curb black money practices. Every non-resident Indian needs to know the FEMA rules to stay away from the Reserve Bank of India’s radar. Following are some important FEMA rules that every NRI should know:
Account holding
Once your citizenship status changes to an NRI, you cannot fulfil your banking requirements through a regular Savings Account. You need to convert them to an NRI Account. If you want to make an international money transfer, you need to hold an NRI Account. Types of accounts you can opt for:
- Non-Resident External or NRE Account is where you can deposit your foreign earrings. The NRE Account deposits are held in INR.
- Non- Resident Ordinary or NRO Account is where you can deposit your Indian income generated from asset holdings and investments.
- Foreign Currency Non-Resident or FCNR Account is where you can hold your deposits in any foreign currency approved by the RBI.
Investments restrictions
As an NRI, there are innumerable investment avenues to invest in. You can invest in a stable investment vehicle like NRI Fixed Deposits and earn reasonable returns periodically. If you have a higher risk appetite, you could invest in Mutual Funds and Stock Markets. However, an NRI cannot invest in government schemes like Public Provident Fund, National Pension Scheme, or Atal Pension Yojana. These schemes are specially curated for Indian citizens.
Real estate investment guidelines
Being an NRI, you can invest in real estate holdings in India. You can easily facilitate the payment by transferring the necessary funds to your NRI Savings Account. You can buy residential and commercial property in India. So, if you plan to gift a house to your parents or help your friend set up their restaurant, you can buy real estate property. But note, you cannot buy any agricultural land, plantation, or farmhouse land in India as an NRI.
Repatriation of funds
Suppose you have inherited your family property and wish to sell it. The proceeds from the sale can be repatriated to your country of residence. However, as per the FEMA guidelines, you need RBI’s approval before doing so. You can repatriate funds up to USD 1 million in a financial year to your home country only if you have inherited the property or retired from Indian employment.
Student provisions
If you are moving abroad to pursue higher education, you are considered an NRI. The same rules and benefits will apply to you. Open NRI Account online before you fly out so you can handle your finances hassle-free.