Dubai: The Indian government recently issued new guidelines on allowing resident Indians to receive more money from their relatives staying overseas, without having to inform the authorities.
The Indian Union Home Ministry late last week amended limits related to the Foreign Contribution (Regulation) Act (FCRA) which earlier permitted Indians to receive up to Rs100,000 (Dh4,630) in a year.
The new permitted limit is Rs1 million (Dh46,300), the ministry specified in a notification, while adding if the amount exceeds, you will now have 90 days to inform the government instead of 30 days earlier.
What has changed now?
It was earlier stated that “any person receiving foreign contribution in excess of Rs100,000 (Dh4,630) or equivalent thereto in a financial year from any of his relatives shall inform the central government (details of foreign-originated funds) within 30 days from the receipt of such contribution”.
However, an official gazette notification on Friday revealed that for the words “one lakh rupees”, the words “ten lakh rupees” shall be substituted; and for the words “thirty days”, the words “three months” shall be substituted.
The changes also deal with the application of obtaining 'prior permission' to receive funds from overseas. The amended rules have given individuals and organisations 45 days to declare bank account details that are to be used for utilisation of such foreign funds. This time limit was 30 days earlier.
The FCRA regulates foreign donations and ensures that such contributions do not adversely oppose Indian regulations. First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
The Act extends across India and also applies to the citizens of India outside India, which includes NRIs. The entities outside India, either companies or corporate bodies, registered or incorporated in India also have to follow the rules of the act.
How does this affect an NRI?
As an NRI (Non-Resident Indian) residing overseas, like the UAE, you are now allowed to send more money to relatives home, without having to make a declaration, as opposed to earlier when you had to.
“The changes in limit will ease the compliance requirements for the recipient,” explained Dixit Jain, Managing Director at The Tax Experts DMCC. “The FCRA laws were never talked about and lot of people were unaware about such regulation.”
“There may be lot of violations which people would have made without the knowledge of such regulations. The good thing is that the home ministry made five more offences under FCRA ‘compoundable’, making 12 such offences compoundable instead of directly prosecuting the organisations or individuals,” Jain added.
“So in case violation has taken place same can be compounded without worrying about direct prosecution under the amended provisions.” (Compoundable offences are those that can be compromised i.e. the charges levied against the accused can be retracted or taken back.)
The changes in limit will ease the compliance requirements for the recipient
How does this affect overseas companies?
When it comes to overseas companies sending money to India-based bank accounts, the central government has also 'omitted' a rule provision which dealt with declaring foreign funds including details of donors, amount received, and date of receipt, etc.
As per the latest norm amendment, if any Indian entity receives foreign funds from a foreign corporate body, it will have to follow the existing provision of placing the audited statement of accounts on receipts and utilisation of the foreign contribution.
This includes income and expenditure statement, receipt and payment account and balance sheet for every financial year beginning on the first day of April, within nine months of the closure of the financial year, on its official website or on the website as specified by the government.
How it affects Indian residents or companies
Additionally, a rule provision where an India-based individual or corporate body receiving foreign funds had to declare such contributions every quarter on its official website has also been done away with.
In case of change of bank account, name, address etc., of those receiving funds from overseas, the home ministry has now allowed 45 days’ time to inform it, instead of previous 15 days.
The new law also says that Indian organisations receiving foreign funds will not be able to use more than 20 per cent of such funds for its administrative purposes. This limit was 50 per cent before 2020.
What other forex regulations NRIs are to know?
As anyone who has business dealings abroad or has travelled overseas can testify Foreign Exchange Management Act (FEMA) is another law enacted by the Government of India to control the flow of foreign currency across Indian borders.
The bottom line is, apart from the above-mentioned FCRA norms, it’s also important for Indians working abroad to understand FEMA rules for NRIs very carefully since it can affect the way they can send and receive funds from India. Let’s look at forex regulations NRIs are required to follow:
• Opening NRI-mandated bank accounts
This is one of the most crucial FEMA rules for NRIs. Once you change your status from resident status to Non-Resident Indian or NRI, that is, living outside India but still a citizen of this country, you must go through some formalities concerning the savings accounts you hold.
FEMA rules for NRIs do not allow holding a savings bank account. NRIs need to set up an NRO (Non-Resident Ordinary rupee account) or NRE (Non-Resident External) Account as stipulated by the Reserve Bank of India (RBI).
An NRE is a Non-Resident (External) rupee account. It is a bank account opened in India in the name of an NRI, to park his foreign earnings; while an income earned in this account is exempt from taxation.
FCNR is a Foreign Currency (Non-Resident) Account, and NRIs can deposit any foreign currency in it. It’s a foreign currency fixed or term deposit available for one to five years. There is no tax implication on this type of account, and funds are completely repatriable (transferable) on maturity.
• Limitations in NRI investments
NRIs are permitted an unlimited amount of investment options through repatriable and non-repatriable transactions. However, as per the FEMA rules for NRIs, they cannot make investments in small saving or provident fund schemes of the government.
NRIs can purchase residential or commercial property in India. However, purchasing agricultural property, plantations, farmhouse land, etc. isn’t allowed. NRIs can also receive immovable property as gifts from relatives or through inheritance.
NRIs are permitted to remit foreign currency back to India on the foreign repatriable assets such as rent earned from an immovable property owned overseas. According to FEMA guidelines for NRIs, sale proceeds of such assets are non-repatriable outside India without RBI approval.
Repatriation of up to $1 million (Dh3.67 million) per financial year is allowed if you have inherited the property or retired from employment in India.
Students going overseas to study are treated as NRIs and are eligible for all facilities available to NRIs under FEMA. They are entitled to receive remittance up to $1 million (Dh3.67 million) a year from their NRE or NRO accounts or profits on property.