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Investments Abroad for Indians coming back to India

Written by The RupeeManager Team

Tuesday, 06 December 2011 21:34

Question: For those who come back to India after staying abroad and having investments abroad, how is their investments abroad treated?

Answer: The RBI has recently clarified that income and sale proceeds of assets held abroad need not be repatriated to India and can be retained and invested outside India. The clarification provides a way out to many of the returning Indians who have sold some of their overseas assets or have made other investments outside India, but do not wish to repatriate the income generated or sale proceeds from these assets to India.

The overseas investments by Indian residents are regulated by the Foreign Exchange Management Act (FEMA), which is implemented by the Reserve Bank of India (RBI). The FEMA has a wide network of notifications and circulars, which lay down permissible avenues for each category of individual.

The residential status under FEMA is one of the primary factors for applicability of permissible foreign exchange transactions. This status is determined based on the intention of the person, as also days spent in India in the prior year concerned (there is a current threshold of 182 days). The analysis of who qualifies as a Resident or a Non Resident Indian (NRI) is a fact specific exercise.

As per the FEMA, any person resident in India may hold, own, transfer or invest in foreign currency, foreign security and immovable property situated outside India; if the person had acquired, held, owned or inherited the same while he was resident outside India. Further, the FEMA also requires that where any amount of foreign exchange is due or has accrued to a person resident in India, such person shall take reasonable steps to realise and repatriate the same within such period and manner as specified by RBI.

Liberalized Remittance Scheme LRS has liberalised and globalised many Indian investors in the true sense. It has allowed Indian resident individuals to remit funds upto USD 200,000 per financial year outside India freely, without the prior approval from RBI for permissible transactions, including acquisition of immovable property, shares, debt instruments and any other assets subject to certain conditions.

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