The Government has provided a wide range of incentives and concessions to Non-Resident-Indians, some of which are being listed here. It should, however, be remembered that many of the following definitions, rules and regulations are under regular review and the latest position should be precisely ascertained from the concerned authorities.

Non-Resident Indians (NRIs) generally fall under the following categories:

• A citizen of India staying abroad for employment or for carrying on business on vocation or for any purpose in the circumstances indicating an indefinite period of stay outside India.
  
  
• A citizen of India proceeding abroad for higher studies, touring, recreation, training, or medical treatment or taking up employment on completion of studies, training etc., such a person is treated as an NRI from the time he/she takes up a job abroad.
  
  
• A Government servant posted abroad on duty with Indian Missions or similar agencies set up abroad by the Government and those deputed abroad on an assignment with a foreign Government or regional/international agencies like the World Health Organization, International Bank for Reconstruction and Development, International Monetary Fund, etc.
  
  
• An official of a public sector undertaking or an autonomous organization deputed abroad on a temporary assignment or posted to its branches or offices abroad are also treated as an NRI.

The various investment opportunities for NRIs on repatriation as well as non-repatriation basis are as follows:

Investment in Non-Resident Bank Account

- Non-Resident (External) (NRE) rupee account
NRE accounts were opened to encourage remittances from NRIs. Such accounts opened in Indian rupees and all foreign exchange remittances received for credit of these accounts are first converted to Indian rupees at the buying rates by the banks.

- Foreign Currency Non-Resident (FCNR) account
Such accounts help protect NRIs to some extent against exchange rate fluctuations and permit the acceptance of deposits in designated foreign currencies instead of Indian rupees.

- Foreign Currency (Ordinary Non-Repatriable) account
Under this scheme, deposits are kept denominated in US dollars for a fixed period varying between six months and three years.

Such accounts may be opened in freely convertible foreign exchange transferred from outside India in an approved manner from the country of residence of the prospective non-resident account holder or from any other country.

- Non-resident (Non-Repatriable) rupee deposit account
The only additional benefit in this account scheme, apart from the ones in the FCNR account schemes, is that authorized dealers in foreign exchange can grant loans/overdrafts in India to deposit holders against security of these deposits without any limit for purposes other than investment. Authorized dealers may allow premature withdrawal and levy penalty for premature withdrawal as per their discretion.

Investment in Shares and Other Miscellaneous Facilities

NRIs are allowed the following benefits:

• Subscription to the memorandum and articles of association of an Indian company;
• Sale and transfer of shares/debentures through stock exchanges in India or by private arrangements;
• Safe custody of shares, securities, fixed deposit receipts, etc.;
• Export of shares and securities;
• Refund of excess subscriptions;
• Operations by resident Indians under a power of attorney granted by non-residents; and
• Remittance of dividends/interest.

To open up more areas for investment by NRIs, OCBs and Foreign Institutional Investors, the RBI has decided to allow them to invest in shares/convertible debentures in all activities, except agriculture & plantation activities, on a repatriation basis, provided the aggregate allocation to NRIs qualifying for the facility does not exceed 24 per cent of the new issue. Investments by FIIs, too, will be subject to the guidelines applicable to them for making investments in the Indian capital market.

Acquisition of Immovable Property for Residential Purposes

Facility of acquisition of immovable property for residential purposes

Investment in immovable property in India is allowed only on non-repatriation basis. Sale proceeds of the property of income earned thereon are not allowed to be repatriated outside India under any circumstances.

Renting out temporarily the immovable property acquired for bona fide residential used by NRI citizens would amount to business or commercial activity and no permission for such renting out will be necessary. The rent received in this regard cannot be repatriated and is allowed to be credited to NRO accounts of the owners.

NRIs can purchase immovable property in India from proceeds of forming inward remittances or from balances held in their NRE/FCNR or NRO accounts.

Gifting of properties by NRIs relatives is freely permitted subject to taxation without prior permission. NRIs will be permitted to acquire up to two houses, provided the purchase is effected using foreign exchange. The required permission for purchase of the house will be given by the Income Tax Department within 15-30 days.

Foreign Inward Remittance Payment System (FIRPS)

In order to simplify the form and procedures of banks for payment of inward remittances and to ensure that such remittances are received by the beneficiaries with minimum delay and least expenses, the Foreign Exchange Dealers' Association of India (FEDAI) has evolved a common instrument under the FIRPS which can be used by all banks for settlement of payment of foreign inward remittances.

FIRPS can be issued only in favour of resident Indians for a maximum amount of Rs.50,000. It cannot be issued in favour of firms/associations/companies, etc. The validity of the FIRPS instruments is three months from the date of issue.

Under the system, banks authorized to deal in foreign exchange shall, without delay, convert into rupees, foreign currency remittances received from abroad by telegraphic transfers, pay orders, etc. and issue a FIRPS instrument from any branch of any bank authorized to deal in foreign exchange. This allows for expeditious payments.

Facilities to Returning Indians

Indian and persons of Indian origin holding a foreign passport residing abroad and desiring to return to India for securing suitable employment or for exploring possibilities of setting up small-scale industrial units in India or for any exploratory purpose are eligible, to avail of the benefits under this scheme.

1) Such persons shall not be required to surrender their foreign currency balances within 3 months of their return to India as required by exchange control regulations and shall be allowed either of the following options:

• To retain foreign currency balance abroad for a maximum period of 5 years from the date of return to India. Such foreign currency can be utilized to pay for import of machinery, raw materials, components, etc. for which import licences have been issued by the Import Trade Control authorities.
  
  
• To surrender foreign currency balances immediately on their arrival in India with a right to retransfer the amount of foreign currency so surrendered, in the event of their deciding to go back to a foreign country within a period of 5 years from the date of return to India or within such extended period as may be allowed by the Reserve Bank of India.

2) As a part of the process of liberalization and with a view to giving greater freedom to non-resident persons of Indian nationality/origin returning to India, general exemption has been granted to retain all foreign exchange assets such as investments in foreign currency, shares or securities, immovable properties outside India or investment in businesses, etc. outside India, lawfully acquired by such persons. All income by way of interest/dividend, etc. and also the sale proceeds are also exempted from surrender. Pensions received by such persons from erstwhile employers outside India are also eligible for exemption.

Setting Up an Industrial Unit in India

The Government has progressively liberalized its policies for allowing investments in India by NRIs and they have been provided a range of facilities for direct investments in firms and companies.

NRIs and overseas corporate bodies (OCBs) predominantly owned by them will be permitted to invest up to 100 per cent foreign equity in 34 high-priority industries with full benefits of repatriation of capital invested and income accruing thereon. All such business proposals will be automatically cleared by the RBI, subject to the condition that capital goods imports, if any, are met from the NRI's equity contribution.

Direct investment by NRIs up to 100 per cent is also welcome in industries other than the 34 referred to above, except the areas reserved for the public sector. However, such proposals will be cleared and processed by the Secretariat for Industrial Approvals in the Ministry of Industry.

Investments in industries manufacturing items reserved for the small- scale sector and NRI equity holding up to 100 per cent will also be permitted in hotels and tourism-related industries, hospitals, advanced diagnostic centres, shipping, export-oriented deep-sea fishing and oil exploration services with full repatriation benefits. Equity investment in existing companies through stock exchanges is allowed up to 24 per cent of the equity by NRIs or OCBs controlled by them.

NRIs are permitted to make investments in proprietorship/partnership concerns in India on a non-repatriation basis. Similarly, NRIs and OCBs are permitted to invest in new issues of shares, debentures of Indian companies on a non-repatriation basis.

Loans/Overdrafts

Loans/overdrafts in India can be granted by authorized dealers to account holders themselves for purposes other than investment in India, provided the regulations relating to normal margin, interest rate etc. are complied with. Grant of loans/overdrafts for investment in Indian companies requires the permission of the RBI. Authorized dealers have been permitted to grant rupee loans/overdrafts to their NRI constituents against the security of NRE/FCNR fixed deposits for the purpose of making direct investment in India on a non-repatriation basis in the capital of Indian firms/companies engaged or proposing to engage in manufacturing/industrial activities, hospitals, hotels of three- star or higher grades, shipping, computer software and oil exploration services, subject to certain conditions. Repayment of loans granted against NRE/FCNR deposits may be done either from proceeds of fresh inward remittances or by way of adjustment of fixed deposits under NRE/FCNR accounts held as security. Adjustment of loans from a local source requires permission from the RBI.

The Government also permits NRIs to transfer shares of Indian companies by way of a gift to a resident in India.

Tax Savings

1. Exemption from income and wealth tax on investment in bank deposits
   Income payable in respect of units of the UTI purchased by a non-resident Indian in foreign currency or out of funds of a Non-resident (external) account maintained with any bank in India, will be omitted from Tax deduction at source.
   
   
2. Maximum income tax rate is 40 per cent above Rs.100,000 (US$ 3,333)
   
   
3. Exemption of deposits, shares, securities, etc. from the purview of wealth tax

Baggage Rules

Used articles of personal wear (excluding jewelry but including not more than one wrist-watch) of a certain value and articles of personal use of passengers (for satisfying daily necessities of life) may be passed free of duty. NRIs can import every six months, 5 kilograms of gold at a nominal duty of Rs.220 per 10 grams of gold.