NRIs and residents can ‘exchange' more now

In a move that might make life a little easier for Non-Resident Indians (NRIs), the RBI, in September, announced a series of liberalisation policies with respect to foreign exchange transactions. Here are a few such changes that will simplify the process of remittances both in and out of the country.

Convenience of joint holding

Resident Indians were earlier not allowed to hold a joint local savings bank account with their NRI relatives. A savings account holder in India, for instance, was not allowed to have his/her NRI spouse as a joint account holder. This has changed now. A resident individual is now permitted to include close NRI relatives as joint holders on a ‘former' or ‘survivor' basis. This is applicable for Exchange Earners' Foreign currency (EEFC) accounts and Resident Foreign Currency (RFC) accounts of the local resident, as well. However, the former or survivor clause means that the NRI joint account holder cannot operate the account during the lifetime of the local resident. The move, nevertheless, helps secure another person to immediately operate the account in the event of sudden demise of the local account-holder.

Another, more significant, move by the RBI is to allow a local resident to be a joint holder for NRE/FCNR accounts held by NRIs/ Persons of Indian Origin (PIO). For instance, your son living in the US will now be able to include you as a joint account holder, on a ‘former' or survivor' basis for his NRE account. You can continue to operate the account with a power of attorney, even during the lifetime of the NRI. Before this change, NRE accounts could have a local resident power of attorney holder but not a local joint account-holder.

Gift liberally

Are you a savvy investor, wanting to give away wealth-building gifts? You can now do it more liberally. A person resident in India can now transfer securities such as shares/convertible debentures, by way of gift, to any person outside India, up to $50,000 in a financial year. This limit was earlier $25,000 in a calendar year. Note the difference here - the transfer period will be a12-month period from April to March and not January to December.

If you do not care much for shares, fret not, for you can gift in Indian rupees too. A resident Indian can now make a rupee gift to NRI/PIO who is a close relative, provided it is within the overall limit of $200,000 of outward remittance permitted in a financial year under the Liberalised Remittance Scheme of the RBI. The change here is that such gift can be made through a crossed rupee cheque or an electronic transfer to the Non-Resident Ordinary Rupee account (NRO account) of the NRI/PIO. Earlier, such a credit was not possible in rupee terms in to an NRO account.

Lend in rupees

You can now also lend to your NRI/PIO relative in rupees within the overall limit of $200,000 an annum. This however, comes with a few strings. One, the loan shall be interest-free and have a repayment schedule of not less than one year. Two, the loan shall be utilised only for the borrower's (an NRI/PIO) personal requirements for his own business purpose in India. Such business shall not include any activities related to chit fund/ Nidhi company, agriculture or plantation activities or trading in transferable development rights.

Such loan can be credited to the borrower's NRO account in India and the loan amount shall not be remitted outside India. Repayment can be made through normal banking channels or through the borrower's NRO/NRE/FCNR account. The borrower can also sell shares or securities or any immovable property (against which loan was granted) to repay the loan.

For more, read the circulars in the following link:

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