If you are already a non-resident Indian or an NRI, or have just become one, receiving and sending funds in India compels you to follow new regulations. Each financial transaction made from or in India is managed and controlled by the Foreign Exchange Management Act or FEMA. Established after the act of FERA was abolished in 1999, it is important to know that when you become an NRI, your regular bank account in India changes to an NRE account or other applicable accounts.
As the Indian government is stringent about its policies of funds being taken out of Indian borders, it keeps a tight rein on any cross-border currency transactions. Whether these transactions have to do with financial investment or the simple holding of bank accounts, with FEMA regulations in operation, the Indian government aims to prevent the outflow of foreign exchange, laundering of money, etc. Hence, it is integral for Indians working or settled abroad to comprehend regulations set forth by FEMA, as this has some influence on the method by which they can transact across borders.
Once you are an NRI, the following 5 key rules must be kept in mind while you wish to handle your finances:
Bank Account Maintenance - You have to maintain bank accounts that apply to your NRI status, and most large Indian banks cater to this need. Depending on what your financial goals are, you can open 3 accounts. The first is called an NRO account, and this may be operated if you wish to send money which is earned in a foreign country back to Indian shores. Another kind of account, an NRE account may be managed by you for the purpose of moveable or repatriable assets like cash and securities. An online demat account for NRIs can also be operated. Finally, as an NRI, you can manage an FCNR account. This acts as a store for foreign currency.
Investments - NRIs are permitted to make investments without limits in non-repatriable or repatriable transactions, except in small savings schemes like PPF. NRIs can use a PPF calculator to see how much their PPF investment would grow over time, even though they are not allowed to invest directly in PPF. This can help them determine whether PPF is a good investment for them, given their financial goals and risk appetite.
Immovable Property - Persons of Indian Origin (POIs) and NRIs are allowed to make purchases of residential and commercial properties within India. The exceptions to this rule are the purchase of plantations, farmhouses and agricultural land.
Students - Students who are also NRIs may receive a maximum amount of US$ 10 lakhs annually from NRE or NRO accounts.
Current and Immovable Assets - FEMA regulations stipulate that NRIs are allowed to send funds to India, earned from assets that are repatriable held abroad, such as rent from property owned in a foreign country.
As an NRI, your investment channels are open in India, and you can invest and trade while adhering to FEMA rules with a reliable brokerage like Motilal Oswal.
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