FEMA rules for NRI’s ?

POSTED BY Jagoinvestor ON October 11, 2010 5:16 pm COMMENTS (3)

In one of the comments I saw Sundar saying following

“I wanted to mention that All investments for NRIs are governed by definition of FEMA and not Income Tax act. FEMA definition is quite different from IT definition. So far RBI has not brought any clarity on FEMA regarding this.For example if somebody can prove that in the previous year he stayed in India for more than 182 days and then went abroad for a definite period with total intention of coming back, then most probably he is Resident as per FEMA and he can open a PPF account although he is abroad. But I am not an expert on this matter. But I know RBI has not brought forward a single case before Courts till date. Income Tax people do not care for FEMA, they go by their own definition of NRI and only bother about Tax due.

I suppose you had sometimes applied for Mutual funds or PO savings schemes etc. You will always find a small box where you have to tick choices like Resident Individual or NRI or NRO etc. Then you have to provide foreign address for NRIs etc. Have you ever thought this requirement comes not from IT rules but from FEMA rules? If RBI was so severe on FEMA then millions of illiterate Indian workers working in Gulf etc. can be prosecuted as most of them even don’t know what is NRE or NRO etc. They just send money to India and it goes into the system as Residents only. Even Banks don’t know the nitty gritty of FEMA. Basically as long as money keeps flowing from abroad no body cares for FEMA etc.Even RBI does not care it seems. But reverse flow is sensitive as far as RBI is concerned. They are more careful on this.”

Can anyone clarify more on this matter ?

3 replies on this article “FEMA rules for NRI’s ?”

  1. Sidrana7

    Thanks for the answers 🙂

    Manish

  2. sidrana7 says:

    One more thing.
    If you google FEMA the first link goes to RBI website. pretty good information is a very concise format there. helps.

    Now FEMA is an Act and not policy or regulation as such. The Act can not be directly used but the policies/rules/regulations based on the Act are implemented and thats how system works.

    In summary the FEMA is implemented by banks and remittance agencies. Remember the recent debacle with paypal? I am not sure if it was due to some irregularities in following the FEMA based regulations.

    Again its my view and not professional. You can always correct me if wrong.

  3. sidrana7 says:

    To date I have not seen or came across anything which was direct mention of FEMA in my sebi/rbi and other govt literature.

    I a no expecrt in FEMA but it was formerly FERA. This does not necessarily mean nri’s only come under this scrutiny. FII, FDI, Business currency exchanges cross border everything comes udner it.

    Already there are various limited channels of sending money to India and rather to impossible to get money out of India as mentioned in your questioned comment. It must be noted that all the money remittances come through channels which are accounted for.

    Why there should be problem as per comment, that if someone sends remittance and it goes into residents account? It is within the prescribed limits of the origin country and destination country.

    I would doubt if the Banks havent got their foreign exchange rules accoridng to IT dept and FEMA.

    One thing we must appreciate that the financial infrastructure is evolving in regards to cross border transactions. Still miles to go but hey progress is there.

    At least I am happy that license raaj is finished and slowly system is getting transparent and convenient, but not yet perfect. Hence hawala still exists.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.