FEMA, 1999 defines a person resident in India and a person resident outside India, however it does not define the term ‘Non Resident Indian (NRI)’. The term ‘NRI’ is defined under FEMA rules and regulations as ‘A person resident outside India who is a citizen of India or is a person of Indian origin (PIO)’ (Regulation 2(vi) of Foreign Exchange Management (Deposit) Regulations, 2000).

Thus the following persons are Non Resident Indians:
i). an Indian Citizen residing outside India as also  
ii). a Foreign Citizen of Indian origin residing outside India

As referred above, Person of Indian Origin is defined under Clause 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 and means a citizen of any country other than Bangladesh or Pakistan, if
a) He at any time held Indian passport; or
b) he or either of his parents or any of his grand- parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
c) The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b);

Thus, diagrammatically it can be represented as follows:

However for matters pertaining to immovable properties a Person of Indian Origin is defined as an individual other than citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan with the above mentioned criterion. Thus the PIO’s who are national of the subject nations are denied the advantages pertaining to acquisition of immovable property in India.  

1. No. 26011/01/2014-IC. I.- In exercise of the powers conferred by sub-section (2) of Section 7A of the Citizenship Act, 1955 (57 of 1955), the Central Government has specified that on and from the date of publication of the notification in the Official Gazette, all the existing Persons of Indian Origin cardholders registered as such under notification of the Government of India in the Ministry of Home Affairs number 26011/4/98- F. I, dated the 19^th August, 2002, shall be deemed to be Overseas Citizens of India cardholders.

Hence, all PIO cards issued till 09.01.2015 are deemed to be OCI card. PIO scheme has been withdrawn vide Gazette Notification No.25024/9/2013-F.I dated 09.01.2015.

FRROs will not issue any fresh PIO card w.e.f. 09.01.2015.All PIO applicants received before 09.01.2015 and pending with FRROs may be returned to the applicants with the request to apply for the OCI card on the same fee prescribed for PIO card. All PIO card applicants received after 09.01.2015 may be returned to the applicants with the directions to apply for OCI card as PIO card scheme is no longer in existence.

NRIs can make various types of investments in India and apart from that there are several other advantages of the NRI status, which are outlined below:

NRI can, without the permission from the Reserve Bank, open, hold and maintain the different types of accounts given below with banks specially authorised by the Reserve Bank in its behalf [Authorised Dealer (AD)]. NRO Savings accounts can also be maintained with the Post Offices in India. However, individuals/ entities of Bangladesh and Pakistan require prior approval of the Reserve Bank.

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

These are rupee denominated accounts and can be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney. Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself. Balances held in the NRE account are freely repatriable.

1. Non-Resident Ordinary Rupee Accounts (NRO)

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 of India and/or non-residents. NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes. The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs.

1. Foreign Currency Non-Resident (Bank) Account (FCNR (B) Account)

These accounts may be opened only in the form of term deposits for 1 to 5 years. This Account can be in any freely convertible currency. All debits /credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.

Foreign Currency Account outside India

A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India. However, in case of departure from India for participation in an exhibition/trade fair outside India, the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair.

NRI / PIO / Foreign National who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank) may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds. The NRI may acquire this immovable property also by way of gift or inheritance.

The payment of purchase price, if any, of this immovable property should be made out of (i) funds received in India through normal banking channels by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.

An NRI may transfer any immovable property in India to a person resident in India. He may also transfer any immovable property (other than agricultural or plantation property or farm house) to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

NRI may, without limit, purchase on repatriation basis:

• Government dated securities / Treasury bills
• Units of domestic mutual funds;
• Bonds issued by a public sector undertaking (PSU) in India.
• Non-convertible debentures of a company incorporated in India.
• Perpetual debt instruments and debt capital instruments issued by banks in India.
• Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.
• Shares and convertible debentures of Indian companies under the FDI scheme (including automatic route & FIPB), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
• Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

NRI may, without limit, purchase on non-repatriation basis :

• Government dated securities / Treasury bills
• Units of domestic mutual funds
• Units of Money Market Mutual Funds
• National Plan/Savings Certificates
• Non-convertible debentures of a company incorporated in India
• Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.
• Exchange traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on non-­repatriable basis, subject to the limits prescribed by the SEBI.

Note : NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).

NRI’s can freely acquire immoveable properties abroad out of earnings abroad. He can invest anywhere in the world. He can start any business abroad. He can become trustee-beneficiary of a trust set up abroad. He can retain all these even on his return to India and need not even intimate RBI about his foreign assets.

NRI’s can set up family trusts abroad for education of his children/ maintenance of his family members. Such trusts can also be Asset Protection Trusts where the assets held by the trust are free from attachment by the creditors.

Returning NRIs/PIOs may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India. The income and sale proceeds of assets held abroad need not be repatriated.

Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts. Proceeds of assets held outside India at the time of return can be credited to RFC account. RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.

Students going abroad for studies are treated as Non- Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA.

As non-residents, they will be eligible to receive remittances from India (i) up to USD 100,000 from close relatives in India, on self declaration, towards maintenance, which could include remittances towards their studies also (ii) up to USD 1 million per financial year, out of sale proceeds of assets / balances in their NRO account maintained with an Authorised Dealer bank in India and (iii) up to USD 2,50,000 per financial year (April – March) for any permitted current or capital account transaction or a combination of both, under the Liberalized Remittance Scheme

AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000 or its equivalent to resident individuals for studies abroad on self declaration basis in Form A2 and ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’, without insisting on any estimate from the foreign University. However, AD Category I bank and AD Category II may allow remittances exceeding USD 250,000 based on the estimate received from the institution abroad. 11.2 Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA, 1999. Educational and other loans availed of by students as residents in India can be allowed to continue. A student holding NRO account may withdraw and repatriate up to USD 1 million per financial year from his NRO account. USD 3000 or its equivalent may be carried by the student in the form of foreign currency (which shall be within the overall limit of USD 2,50,000 or the estimate received from the institution abroad) while going for study abroad

Also, as mentioned above, a student who has gone abroad for studies may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India.

NRI’s can bring 10 kgs of gold (on payment of duty) & 100 kgs. of silver (on payment of duty) once in six months on his visit to India. The customs duty on imports of gold and silver is 2% and 6% respectively, of the value. Duty on gold and silver imported by NRIs in hand baggage is Rs 300 per 10 gram and Rs 1,500 per kg respectively.

Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, without prior approval of Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the cardholder’s FCNR (B) / NRE / NRO Accounts.

NRI’s can enjoy several tax concessions in India on his assets in India.

NRI’s can seek Advance ruling from Advance Ruling Authority on taxability (income tax) of transactions.

There are special reserved seats for children of NRIs for Engineering/Medical/MBA courses in certain institutions in India provided the fees are paid in foreign exchange.

Remittance of funds from the sale of capital assets in India held by a person, whether resident in or outside India, requires approval of the Reserve Bank of India except to the extent provided in FEMA or Rules or Regulations made thereunder.
The remittances will be allowed to be made by the Authorized Dealer banks on production of an undertaking by the remitter and a certificate from a Chartered Accountant in the formats prescribed by the Central Board of
Direct Taxes, Ministry of Finance, Government of India in their Circular No. 10/ 2002 dated October 9, 2002 [cf. A.P.(DIR Series) Circular No. 56 dated November 26, 2002].

1. 
   Remittance of current income

Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is permissible. For this purpose, the Authorised Dealer bank will permit debit of NRO Account.

In case of NRIs who do not maintain a NRO account in India, Authorised Dealer banks may allow repatriation of current income like rent, dividend, pension, interest, etc. based on an appropriate certification by a Chartered

Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

1. 
   Remittance of Assets

NRI or a PIO may remit an amount up to USD one million, per financial year, out of the balances held in his Non- Resident (Ordinary) Rupee (NRO) account or from the sale proceeds of assets (inclusive of assets acquired by way of inheritance or settlement), for all bonafide purposes, subject to the satisfaction of the Authorized Dealer bank and in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance.

The sale proceeds of immovable property purchased out of rupee funds can be remitted without any lock-in-period.

In case of assets acquired by way of inheritance or legacy or settlement where there is no lock-in-period, the NRI / PIO may submit to the Authorised Dealer documentary evidence in support of inheritance or legacy of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the prescribed formats.

The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.

The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.

1. Repatriation of sale proceeds of residential property purchased by NRIs / PIO out of foreign exchange

Repatriation of sale proceeds of residential property purchased by NRI / PIO is permitted to the extent of the amount paid for acquisition of immovable property in foreign exchange received through banking channels. The facility is restricted to not more than two such properties. The balance amount can be credited to the NRO account and can be remitted under USD one million  facility as mentioned above in the case of ‘remittance of assets’.

A non-resident Indian or entity can invest in India subject to the Foreign Direct Investment (FDI) policy of the Government.

FDI can be made into the following entities subject to specified conditions:

• In an Indian Company
• In Partnership Firm / Proprietary Concern
• In Limited Liability Partnerships (LLPs):
• In Venture Capital Funds (VCF)
• In Trusts: FDI in Trusts other than VCF is not permitted.

FDI in resident entities other than those mentioned above is not permitted.

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis provided:

1. Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks.
2. The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.
3. Amount invested shall not be eligible for repatriation outside India.

For Investments with repatriation option, the NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.

However, an NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.

FDI can be made in India through the following modes, subject to certain conditions under each mode:

1. Issuance of fresh shares by the company
2. Acquisition by way of transfer of existing shares by person resident in or outside India
3. Issue of Rights / Bonus shares
4. Issue of shares under Employees Stock Option Scheme (ESOPs)
5. Conversion of External Commercial Borrowings (ECB) / Lumpsum Fee / Royalty / Import of capital goods by units in Special Economic Zones (SEZs) in to Equity/ Import payables / Pre incorporation expenses
6. Issue of shares by Indian Companies under American Depository Receipts (ADR) / Global Depository Receipts (GDR)
7. FDI through issue / transfer of ‘participating interest / right’ in oil fields to a non resident

Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations.

However, FDI is completely prohibited in the following sectors:

(a)  Lottery Business including Government /private lottery, online lotteries, etc.

(b) Gambling and Betting including casinos etc.
(Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.)

(c) Chit funds

(d) Nidhi Company

(e) Trading in Transferable Development Rights (TDRs)

(f) Real Estate Business or Construction of Farm Houses

(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(h) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

(i) Agricultural or Plantation Activities