Monday, July 25, 2011

Various Banks Account Facilities for Non Resident Investors in India: -Resident (External) Rupee Accounts (NRE Accounts)/ Ordinary Non-Resident Rupee Accounts (NRO Accounts)/ Non-resident (Non-reportable) Rupee Deposit Accounts (NRNR Accounts)/ Non-Resident (Special) Rupee Accounts with banks in India/ Foreign Currency Accounts


Various Banks Account Facilities for Non Resident Investors in India: -Resident (External) Rupee Accounts (NRE Accounts)/ Ordinary Non-Resident Rupee Accounts (NRO Accounts)/ Non-resident (Non-reportable) Rupee Deposit Accounts (NRNR Accounts)/  Non-Resident (Special) Rupee Accounts with banks in India/ Foreign Currency Accounts

India is now a favorite destination for foreign Investors and Non Residents to Invest in India and for that they require bank accounts. The Reserve bank of India has prescribed various kinds of bank accounts depending upon the requirements for Investment with regulatory provisions.

NRIs/PIOs/OCBs/ are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India, with authorized dealer.

Such accounts can be opened with banks specially authorized by the Reserve Bank in its behalf [Authorized Dealer (AD)].

There are five types of NRI accounts:-

1. Non-Resident (External) Rupee Accounts (NRE Accounts)

NRIs, PIOs, OCBs are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repartiable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts.
The deposits can be used for all legitimate purposes. The balance in the account is freely reportable. Interest lying to the credit of NRE accounts is exempt from tax in the hands of the NRI.
Funds held in NRE accounts may be freely transferred to FCNR accounts of thhe same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders.

2. Ordinary Non-Resident Rupee Accounts (NRO Accounts)

These are Rupee denominated non-reportable accounts and can be in the form of savings, current recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National/PIO resident in India leaves for taking up employment, etc. outside the country, his bank account in India gets designated as NRO account.
The deposits can be used to make all legitimate payments in rupees. Interest income, from NRO accounts is taxable. Interest income, net of taxes is reportable.

3. Non-resident (Non-reportable) Rupee Deposit Accounts (NRNR Accounts)

NRIs/PIOs/OCBs, other non-resident Individuals/entities are permitted to open these accounts. Accounts can be opened by transfer of freely convertible foreign currency funds from abroad, or from NRE/FCNR accounts. Deposits can be held jointly with a resident. Deposits can be for period from 6 months to 3 years, and can be renewed further. Accounts may also be opened by transfer of funds from the existing NRE/FCNR accounts of the non-resident accounts holders.
The principal is non-reportable; interest can be repatriated. There is no income tax on the interest.

4. Non-Resident (Special) Rupee Accounts with banks in India

NRIs/PIOs presently have the facility of maintaining bank accounts and undertaking financial transactions in India subject to certain exchange control regulations.
In order to simplify the procedures and to provide greater freedom to NRIs/PIOs for putting through financial transactions in India, NRIs and PIOs are now permitted topend bank accounts in India, which will be at par with rupee accounts, maintained fby residents. They can now open Non-Resident (Special) Rupee Accounts with banks in India which will have the same facilities and restrictions as are applicable to rupee accounts maintained in India by residents relating to repatriation of funds held in these accounts and/or income/interest earned on them. The scheme, which has become effective from April 15, 1999 provides thhat the procedure for opening such accounts is the same as that of domestic accounts of resident individuals.
The existing facilities for NRIs/PIOs to maintain and operate Non-resident (Ordinary) i.e., NRO account, Non-Resident, i.e., FCNR account also continues. The repatriation facilities available under these accounts will continue as before.

5. Foreign Currency Accounts

Foreign Currency (Non –Resident) Accounts (Banks) (FCNR (B) Accounts)
NRIs/PIOs/OCBs are permitted to open such accounts in US Dollars, Sterling Pounds, Deutsche Marks, Japanese Yen and Euro. The account may be opened only in the form of term deposit for any of the three maturity periods viz; (a) one year and above but less than two years (ii) two years and above but less than three years and (iii) three years only.

Tax effects
Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws.

Utilization
FCNR (B) accounts can also be utilized for local disbursements including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines.



Friday, July 1, 2011

Reporting Compliances of Foreign Direct Investment in India/ Time Frame for Issue of Shares in case of Foreign Direct Investment in India/ Compliances for Foreign Direct Investment in India


Reporting Compliances of Foreign Direct Investment in India/ Time Frame for Issue of Shares in case of Foreign Direct Investment in India/ Compliances for Foreign Direct Investment in India

With India’s growing economy Foreign Direct Investment in India is also growing up. The companies for the different parts of the globe investing in India by registration of Subsdiary Company in India, or by setting up joint venture in India, or by registering branch office in India or in any other possible manner. The foreign investment issue is a sensitive part of the economy of any country. In India Reserve Bank of India is keeping watch on the Foreign Investments and regulating the same. As it regulatory part there are some reporting requirement that has been imposed by Reserve Bank of India in case of foreign direct investment in India. The following are the provisions related to the same:

Reporting of inflow of Funds

  1. An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank through its AD Category I bank, not later than 30 days from the date of receipt in the Advance Reporting Form enclosed in Annex - 6. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. The Form can also be downloaded from the Reserve Bank's website.

  1. Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex – 7) on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
Time frame within which shares have to be issued
The equity instruments should be issued within 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. In exceptional cases, refund / allotment of shares for the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the Reserve Bank, on the merits of the case.
Reporting of issue of shares
  1. After issue of shares (including bonus and shares issued on rights basis) and shares issued under ESOP)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it’s AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website http://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.

  1. Part A of Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the concerned Regional Office of the Reserve Bank. The following documents have to be submitted along with Part A:
(i) A certificate from the Company Secretary of the company certifying that:
a) all the requirements of the Companies Act, 1956 have been complied with;
b) terms and conditions of the Government’s approval, if any, have been complied with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by Authorised Dealers in India evidencing receipt of amount of consideration.
(ii) A certificate from Category I Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

  1. The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.

  1. Part - B of Form FC-GPR should be filed on an annual basis by the Indian company, directly with the Reserve Bank6. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/re-invested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July 2010 will pertain to all the investments made in the previous years up to March 31, 2010). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated.

  1. Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR.