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Special Facilitied to NRI
Special Facilities Available To NRI

SPECIAL FACILITIES AVAILABLE TO NON RESIDENT INDIANS

Contents
Introduction

NRIs whether they are Indian passport holders or foreign passport holders, including second, third and fourth generation NRIs have made the country proud by their hard work and achievements in their adopted countries. Many of the NRIs who had left the shores of India with only education provided by the country and inherent entrepreneurial capabilities, have established themselves as prominent citizens in their adopted countries as entrepreneurs, businessmen, professionals and skilled workmen. However, their ties with their motherland are strong and they have the desire to contribute to the economic and social development of their motherland. NRIs have the potential for investment and providing entrepreneurial and professional skills for the economic development of India.
India embarked on the path of liberalisation in 1991. Since then the Government has been progressively liberalising the industrial policy, the foreign collaboration policy, trade policy and bringing in economic and financial reforms to attract investments. Appreciating the role of Non Resident Indians in the economic development of the country, the Government has progressively announced various schemes to facilitate investment by Non Resident Indians.
In the following paragraphs the Indian Investment Centre has attempted to highlight special facilities available to Non Resident Indian Nationals, Persons of Indian Origin and Overseas Corporate Bodies.

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Definitions
For the purpose of investments in India, a Non Resident Indian (NRI) means a person resident outside India or who is a citizen of India or is a Person of Indian Origin.
Person of Indian Origin (PIO) means a citizen of any country other than Bangladesh, Pakistan or Sri Lanka, if:
he at any time held Indian passport;

or

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

the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).
Overseas Corporate Body (OCB)
means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by Non Resident Indians and includes overseas trust in which not less than sixty per cent beneficial interest is held by Non Resident Indians directly or indirectly but irrevocably.

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Investments with Repatriation Benefits

Automatic Route
With the progressive liberalisation of foreign direct investment policy, foreign direct investments including NRI investments up to 100% (subject to sectoral equity caps/statutory ceilings) with repatriation benefits can be made without any prior approval except in the following cases:-
Industiral Licence is required – Industrial Licence is required for manufacture of items reserved for the public sector, industries which require compulsory licensing and where the proposal attracts locational restrictions.
Certain specified activities like civil aviation, housing and real estate development, etc.
FDI is sought in excess of specified sectoral caps.
Foreign investment more than 24% in the equity capital of units manufacturing items reserved for the Small Scale Sector or companies registered as Small Scale Units.
The foreign entity has previous tie-up(s) in India.
Acquisition of shares of an existing share holder in an Indian company.
A trading company incorporated in India and primarily engaged in exports and registered as Export House/Trading House/Star Trading House/Super Star Trading House with the Ministry of Commerce and Industry, Department of Commerce, Government of India, may issue shares/convertible debentures up to 51% under the automatic route. In the case of newly set up trading companies primarily engaged in exports, issue of shares is subject to the condition that registration as an Export House/Trading House/Star Trading House/Super Star Trading House is obtained, before remittance of dividends to the foreign investor.
In addition, the following special schemes are available for investments:-
Export Oriented Units
Free Trade Zone/Export Processing Zones
Software Technology Parks
Electronic Hardware Technology Parks
Special Economic Zones
Existing companies with expansion programmes can also issue shares under the automatic route subject to the condition that increase in equity level must result from the expansion of equity base without acquisition of existing shares and the proposed expansion programme is in sector(s) under the automatic route.
Existing companies without expansion programme can issue shares under the automatic approval scheme if they are engaged in industries under the automatic approval route and increase in equity level is from expansion of the equity base.
The investment by NRI/OCB can be either through inward remittance through normal banking channels or from the NRE/FCNR(B) account of the investor.
The Indian company is required to give a report not later than 30 days from the date of receipt of the investment and another report in form FC-GPR, within 30 days of issue of shares to the Reserve Bank of India.
Government Approval
Where the company is not eligible for automatic approval, prior approval from the Secretariat for Industrial Assistance/Foreign Investment Promotion Board of the Government of India is required.
ADR/GDR/FCCB Route
Indian company can, with the approval of the Ministry of Finance, issue American Depository Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds.
Special Facilities available for Investment by NRIs and OCBs
(i) Housing and Real Estate
100% investment with repatriation benefits is allowed in the following areas:-
Development of serviced plots and construction of residential premises
Investment in real estate covering construction of residential and commercial premises including business centres and offices
Development of townships
City and regional level urban infrastructure facilities including both roads and bridges
Investment in manufacture of building materials
Investment in participatory ventures in (a) to (e) above
Investment in Housing Finance Institutions
Prior permission is required for such investments.
(The Government has recently allowed FDI in the development of integrated town ships subject to prescribed guidelines).
(ii) Civil Aviation
100% investment by NRIs/OCBs is permitted.
Prior permission is required for such investments.

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Investments on Non -Repatriation Basis

Investment in Companies
NRIs, PIOs and OCBs may without any limit purchase on non-repatriation basis shares or convertible debentures of an Indian company issued by public issue or private placement or right issue.
Note: Purchase of shares or convertible debentures of an Indian company engaged in agricultural/ plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights and Nidhi companies and chit funds shall not be permitted.
Investment in Firms and Proprietary Concerns
Non Resident Indian Nationals and Persons of Indian Origin resident outside India may invest by way of contribution to the capital of a firm or proprietary concern in India provided:
Amount invested is received either by inward remittance through normal banking channels or out of permissible accounts maintained with an authorised dealer/bank.
The firm or proprietary concern is not engaged in agricultural/plantation activity or real estate business.
Amount invested shall not be eligible for repatriation.

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Purchase and Sale of Securities other than Shares or Convertible Debentures of an Indian Company by NRIs and OCBs

A Non Resident Indian or Person of Indian Origin or an Overseas Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds;
bonds issued by a public sector undertaking (PSU) in India.
A Non Resident IndianCorporate Body may, without limit, purchase on repatriation basis:
or an Overseas Corporate Body may, without limit, purchase on non-repatriation basis:
Units of Money Market Mutual Funds
Non Convertible Debentures
Commercial Papers (OCBs are not permitted)
Make deposits with Companies

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Portfolio Investments

NRIs and PIOs may purchase/sell shares and/or convertible debentures of an Indian company, through a registered stock broker on a recognised stock exchange, subject to the following conditions:-The NRI/PIO designates a branch of an authorised dealer for routing his transactions relating to purchase and sale of shares/convertible debentures under this scheme and route all such transactions only through the branch so designated;
The paid up value of shares of an Indian company purchased by each NRI or PIO both on repatriation and on non-repatriation basis does not exceed 5% of the paid up value of shares issued by the company concerned.
The paid up value of each series of convertible debentures purchased by each NRI/PIO both on repatriation and non-repatriation basis does not exceed 5% of the paid up value of each series of convertible debentures issued by the company concerned.
The aggregate paid up value of shares of any company purchased by all NRIs and PIOs and OCBs does not exceed 10% of the paid up capital of the company and in the case of purchase of convertible debentures the aggregate paid up value of each series of debentures purchased by all NRIs, PIOs and OCBs does not exceed 10% of the paid up value of each series of convertible debentures.
provided that the aggregate ceiling of 10% may be raised to 24% if a special resolution to that effect is passed by the General Body of the Indian company concerned.
The NRI or PIO investor takes delivery of the shares purchased and gives delivery of the shares sold.
Payment for purchase of shares and/or debentures is made by inward remittance in foreign exchange through normal banking channels or out of funds held in NRE/FCNR Account maintained in India if the shares are purchased on repatriation basis and by inward remittance or out of funds held in NRE/FCNR/NRO/NRNR*/NRSR* account of the NRI/OCB concerned maintained in India where the shares/debentures are purchased on non repatriation basis.
Remittance/Credit of Sale/Maturity proceeds of Shares and/or Debentures
The net sale/maturity proceeds of shares and/or debentures of an Indian company purchased by NRI/PIO under this scheme may be allowed by the designated branch of the authrorised dealer to be:-
Credited to NRSR* account of the NRI/PIO investor where the payment for purchase of shares and/or debentures sold was made out of funds held in NRSR* account, or
Credited to his NRO/NRSR* account where the shares and/or debentures were purchased on non-repatriation basis, at the investors option, or
Remitted abroad or credited to his NRE/FCNR/NRO/NRSR* account where the shares and/or debentures were purchased on repatriation basis at the investors’ option.
Other Facilities

General permission has been granted for transfer of shares/convertible debentures by a person resident outside India as under:-
for transfer of shares/convertible debentures held by a person resident outside India other than NRI/OCB to any person resident outside India provided that the transferee should have obtained permission of Central Government if he had any previous venture or tie-up in India through investment in any manner or a technical collaboration or trade mark agreement in the same field or allied field in which the Indian company whose shares are being transferred is engaged;
NRIs/OCBs are permitted to transfer shares or convertible debentures of Indian company to another NRI/OCB;
A person resident outside India is permitted to transfer shares/debentures of an Indian company to a resident by way of gift.
NRIs/PIOs/OCBs are not allowed to buy shares in print media.

*Regarding NRNR/NRSR accounts, please see Chapter on Bank Accounts.

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Bank Accounts

1. Non Resident (External) Rupee Accounts Scheme - NRE Accounts
Eligibility:
Non Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Corporate Bodies (OCBs) are permitted to open and maintain NRE accounts with authorised dealers and with banks (including co-operative banks) authorised by the Reserve Bank of India (RBI) to maintain such accounts.
The account should be opened by the Non Resident account holder himself and not by the holder of the power of attorney in India. (Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistan nationality/ownership requires approval of RBI)
Types of Accounts
Accounts may be in the form of Savings, Current, Recurring or Fixed Deposit accounts.
Permitted Credits
Proceeds of remittances to India in any permitted currency.
Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India, provided the authorised dealer/bank is satisfied that the account holder is still resident outside India, the travellers’ cheques/drafts are standing/endorsed in the name of the account holder and in the case of travellers’ cheques, they were issued outside India.
Proceeds of foreign currency/bank notes tendered by account holder during his temporary visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF), where applicable, and (ii) the notes are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.
Transfers from other NRE/FCNR accounts.
Interest accruing on the funds held in the account.
Interest on Government securities and dividend on units of mutual funds, provided the securities/units were purchased by debit to the account holder’s NRE/FCNR account or out of inward remittance through normal banking channels.
Maturity proceeds of Government securities including National Plan/Savings Certificate as well as proceeds of Government securities and units of mutual funds sold on a recognised stock exchange in India and sale proceeds of units received from mutual funds, provided the securities/units were originally purchased by debit to the account holder’s NRE/FCNR account or out of remittances received from outside India in free foreign exchange.
Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/FCNR account of the account holder or by remittance from outside India through normal banking channels.
Refund of application/earnest money made by the house building agencies on account of non-allotment of flat/plot, together with interest, if any (net of income-tax payable thereon), provided the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the authorised dealer is satisfied about the genuineness of the transaction.
Any other credit if covered under general or special permission granted by Reserve Bank.
Permitted Debits
Local disbursements
Remittances outside India
Transfer to NRE/FCNR accounts of the account holder or any other
person eligible to maintain such account.
Investment in shares/securities/commercial paper of an Indian
company or for purchase of immovable property in India within
prescribed regulations.
Any other transaction if covered under general or special permission
granted by the Reserve Bank.
Rate of Interest
In accordance with the directions/instructions issued by the Reserve Bank of India.
Loans against Security of Funds held in the account
To the account holder
i) For personal purposes or for carrying on business
activities (except agricultural/plantation activities/investment in real estate business).
For making direct investment in India on non- repatriation basis.
iii) For acquisition of flat/house in India for his own residential use.
To third parties - the loan should be utilised for personal purposes or for carrying on business activities (other than agricultural/plantation activities/real estate business). The loan should not be utilised for relending.
Loans outside India - Aurthorised dealers may allow their branches/correspondents outside India to grant fund based and/or non-fund based, facilities to Non Resident depositors or to third parties at the request of depositors for bona fide purpose against the security of fund held in the NRE accounts and also agree to remittance of funds from India if necessary, for liquidation of outstandings.
Change of Resident Status of account holder
NRE Accounts should be redesignated as resident account or the funds held in these accounts may be transferred to the Resident Foreign Currency (RFC) Accounts (if the account holder is eligible for maintaining RFC Account) at the option of the account holder immediately upon the return of the account holder to India (except where the account holder is on a short visit to India).
Repatriation of funds to Non Resident Nominee
Can be allowed by the authorised dealer/bank in the case of deceased account holder.
Miscellaneous
Joint Accounts in the names of two or more Non Resident individuals may be opened provided all the account holders are persons of Indian nationality or origin. When one of the joint holder become resident, the authorised dealer may either delete his name or allow the account to continue as NRE account or redesignate the account as resident account at the option of the account holders. Opening of these accounts by a Non Resident jointly with a resident is not permissible.
An Account may be opened in the name of eligible NRI during his temporary visit to India.
Operation by Power of Attorney - allowed for withdrawals for local payments and to facilitate investments in India. Power of Attorney holder is not allowed to repatriate funds held in the account under any circumstances or make payment by way of gift to a resident on behalf of the account holder or transfer funds from the account to anotherNRE account.
Special Series of Cheques
Temporary Overdrawings – permitted from NRE Savings Bank account up to Rs. 50,000 for a period not exceeding two weeks.
Remittances abroad by Resident nominee – application for meeting the liabilities if any of the deceased account holder or similar other purposes, should be forwarded to Reserve Bank of India for consideration.
Tax Exemption – Interest income exempted from income tax, balances held are also exempt from wealth tax.
Reporting – Transactions to be reported to the Reserve Bank of India.

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2. Foreign Currency (Non Resident) Account (Banks) Scheme – FCNR (B) Accounts
Eligibility
NRIs and OCBs are eligible (approval of Reserve Bank is required in the case of those from Bangladesh and Pakistan).
Accounts may be opened with funds remitted from outside, existing NRE/FCNR accounts, etc.
Remittances should be in the designated currency.
Conversion to currency other than the designated currency also permitted at the risk and cost of the remitter.
Designated currencies: Pound Sterling, US Dollar, Deutsche Mark, Japanese Yen, Euro.
Types of Accounts
Term Deposits of maturity - one year or above but less than two years, two years and above but less than three years, and three years.
Rate of Interest
In accordance with the directions issued by the Reserve Bank of India.
Permissible Debits/Credits
Same as in the case of NRE accounts.
Rate for conversion of rupees into designated currencies and vice versa
As per rate on the date of conversion.
Inland Movement of Funds
Permitted/allowed at no extra cost to the remitter.
Payment of Interest
On half yearly or yearly basis as desired by the depositor.
Interest may be credited to a new FCNR(B) account or an existing/new NRE/NRO/NRNR*/NRSR* account in the name of the
account holder at his option.
Loans/Overdrafts against Security of funds held in the account
Same as in the case of NRE Account.
Change of Resident Status of the account holder
When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest if desired by the account holder. However, except for the provisions relating to rate of interest and reserve requirements as applicable to FCNR(B) deposits, for all other purposes, such accounts shall be treated as resident deposits from the date of return of the account holder to India. On maturity the deposits should be converted into Resident Rupee Deposit Account or RFC account at the option of the account holder.
Joint Account, Repatriation of Balances, etc.
As in the case of NRE accounts.
Reporting
Transactions in these accounts are to be reported to the Reserve Bank of India in accordance with the directions issued from time to time.
Other Features
Reserve Bank will not provide foreign exchange guarantee.
Lending of resources mobilised by authorised dealers under these accounts are not subject to any interest rate stipulations.
The premature withdrawal of deposits for opening NRNR* account with a different authorised dealer will attract penalty.

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3. Non Resident Ordinary Rupee (NRO) Account Scheme - NRO Accounts
Eligibility
Any person resident outside India can open NRO Account.
(Opening accounts by those from Bangladesh, Pakistan requires approval of Reserve Bank of India).
The account holder should furnish an undertaking to the authorised dealer/bank at the time of opening of the account that in cases of debits to the account or investment in India and credits representing sale proceeds of investments/disinvestments he will ensure that such investments/disinvestments will be in accordance with the regulations made by Reserve Bank of India.
Post offices in India may maintain savings bank accounts in the names of persons resident outside India.
Types of Accounts

Accounts may be in the form of Savings, Current, Recurring or Fixed Deposit Accounts.
Credits
Proceeds of remittances received in any permitted currency from outside India through normal banking channels or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of Non Resident banks.
b) Legitimate dues in India of the account holder.
Debits
All local payments in rupees including payments for investment.
Remittances outside India of current income in India of the account holder net of taxes.
Remittances of funds held in NRO Accounts
a) Permitted in the case of foreign tourist visiting India.
Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will be considered by Reserve Bank for remittance outside India.
Loans/Overdrafts
To account holders
i) for personal purposes or for carrying on business activities
except for relending, agricultural/plantation activity or for investment in real estate business.
ii) Overdrafts subject to commercial judgement.
Joint Account with Residents
Permitted
Change of Resident Status of Account Holder
From Resident to Non Resident - When a person resident in India leaves India for a country (other than Nepal and Bhutan) for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as NRO account.
From Non Resident to Resident – On return of the account holder to India for taking up employment or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period the NRO account may be re-designated as resident rupee account.
Payment of funds to Non Resident Nominee
The amount due/payable to Non Resident nominee from the account of a deceased account holder shall be credited to NRO account of the nominee with an authorised dealer/authorised bank in India.
Reporting
Transactions to be reported to Reserve Bank of India.

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4. Non Resident (Non Repatriable) Rupee Deposit Scheme - NRNR Accounts*
Eligibility
Any person resident outside India (except individuals/entities of Bangladesh/Pakistan nationality/ownership) may open NRNR accounts with an authorised dealer. Account should be opened in Indian rupees out of funds remitted from outside India through normal banking channel in freely convertible currency. NRIs/OCBs can open such accounts from their existing NRE/FCNR deposit accounts.
Period of Deposit
Six months to 3 years.
Rate of Interest
Banks are free to determine the rate of interest.
Repatriability
Only interest accrued is repatriable.
Renewal/Transfer
Principal amount of deposit together with interest accrued thereon may be renewed for a further period ranging from six months to three years. If the interest accrued on an existing deposit is invested under the scheme, the amount of interest so invested will not be eligible for repatriation. The account can also be shifted from one authorised dealer to another.
Gift
Individual deposit holder can gift to any resident/Non Resident/charitable trust in India.
Joint Accounts with Residents
Permitted.
Loans/Overdrafts - against the security of these deposits permitted to account holders/third parties for personal purposes or for carrying on business activities (except agricultural/plantation activities/real estate business/relending) subject to commercial judgement of the authorised dealer.
Nomination
Nomination in favour of either a resident or Non Resident permitted. Registration of nomination of Non Resident will be subject to the condition that the amount standing to the credit will be non-repatriable.
Reporting
Transactions to be reported to the Reserve Bank of India.
5. Non Resident (Special) Rupee Account - NRSR Account*
Eligibility
NRIs (other than nationals of Bangladesh/Pakistan) are eligible.
Conditions
The principal as well as interest is non-repatriable.
2. Accounts carry same facilities and restrictions as are applicable to
domestic accounts of residents; investment in shares/securities or immovable property will be governed by regulations applicable to such investments by Non Residents.
Application Form
For opening of these accounts an application in form NRSR has to be made to the authorised dealer.
Types of Accounts
Current, Savings, Recurring or Fixed Deposit.
Joint Accounts
May be held with residents.
Rate of Interest
As applicable to resident accounts.
Change of Resident Status of the Account Holder
Account Holder has the option of designating his existing domestic account as NRO account or NRSR account.
Nomination Facility
Available in favour of resident or Non Resident. Non Resident nominee will not be entitled to any remittance facility.
Overdrafts
Permitted subject to the commercial judgement of the authorised dealer.
Miscellaneous
Operation of this account may be allowed freely as in the case of domestic account maintained by the resident individuals.
The account holders are also permitted to transfer funds from NRO/NRE/FCNR accounts to NRSR Accounts but not vice versa.
Safeguards for opening of and granting Loans against Non Resident Deposits
In order to safeguard the interest of Non Resident depositors the Reserve Bank of India has issued the following instructions to authorised dealers regarding opening such deposit accounts and while granting loans and advances against such deposits:-
Fixed deposit receipts should be handed over or sent to depositors directly against acknowledgement.
Loans against NRE/FCNR(B) deposits to third parties should be granted only when the depositor himself executes the loan documents in the presence of bank officials and a witness acceptable to the bank. Advances to third parties against such deposits should not be granted on the basis of Power of Attorney.
Where a fraud has been perpetrated in a Non Resident account and there is no involvement of the concerned Non Resident depositor and his innocence has been proved to the satisfaction of the bank, banks may pay the deposit proceeds to the depositor on due date even when the investigation is in progress. Banks may, however, obtain necessary documents including an indemnity bond with an acceptable surety from the Non Resident depositor before releasing the amount.
In the event of death of Non Resident depositor, banks need not insist on succession certificate as a matter of routine. Since different countries follow different procedures for issuing succession certificates, banks should take a practical view and ascertain the procedure followed in the country of residence of the depositor; and thereafter, obtain such minimum documents for their record as would satisfy the requirements of their being rightful claimant.
*With a view to providing full convertibility of deposit schemes for NRIs and rationalising the existing Non Resident deposit schemes, it has been decided to discontinue NRNR account and NRSR account schemes, with effect from 1st April, 2002.
Accordingly:
Existing accounts under NRNR account scheme may be continued only up to the date of maturity. The authorised dealer shall give notice to the account holder that the maturity proceeds shall be credited to his/her NRE account. The account holder can choose to credit the maturity proceeds to his/her NRE account (Savings or Current) or open a fresh NRE term deposit account, or credit even to his/her NRO account. If no reply is received from the account holder, the maturity proceeds may be credited to his/her NRE account.
Existing term deposits under the NRSR account scheme will continue till the date of maturity and maturity proceeds credited to the NRO account of the account holder.
Existing NRSR accounts other than term deposits, shall not be continued after 30th September, 2002. The account holder can opt to close the account or credit the balance to his/her NRO account. If no response is received from the account holder the authorised dealer may close the account and transfer the balance to the NRO account of the account holder.
The existing facility for premature withdrawal will continue.
In the case of premature closure of term deposits both under NRNR and NRSR Schemes, the option of reinvesting shall be restricted to the NRO account of the account holder.

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Acquisition of Immovable Property in India
For the purpose of acquisition of immovable properties in India, a person of Indian origin means an individual (not being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Bhutan or Nepal) who
at any time held an Indian passport;

or

who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Acquisition and Transfer of Property in India by an Indian Citizen resident outside India
A person resident outside India who is a citizen of India may –
acquire any immovable property in India other than agricultural land/plantation property/farm house
transfer any immovable property in India to a person resident in India
transfer any immovable property other than agricultural land/plantation property/farm house to a person resident outside India who is citizen of India or to a person of Indian origin resident outside India.
Acquisition and Transfer of Property in India by a Person of Indian Origin
A person of Indian origin resident outside India may –
acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of (i) funds received in India 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 under the Act;
acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India;
acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India;
transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India;
transfer agricultural land/farm house/plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India;
transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.
Acquisition of Immovable Property for carrying on a Permitted Activity
A person resident outside India who has established in India a branch, office or other place of business for carrying on in India any activity, excluding a liaison office, may –
acquire any immovable property in India, which is necessary for or incidental to carrying on such activity:
Provided that
all applicable laws, rules, regulations or directions for the time being in force are duly complied with; and
the person files with the Reserve Bank a declaration in the Form IPI not later than ninety days from the date of such acquisition;
transfer by way of mortgage to an authorised dealer as a security for any borrowing, the immovable property acquired in pursuance of clause (a).
Acquisition of Agricultural Land/Plantation Property/Farm House
All requests for such acquisitions by persons resident outside India have to be made to the Chief of General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division, Mumbai 400 001.
Resident Indians holding agricultural land/plantation property/farm house, on acquiring foreign nationality have to regularise the holding of the immovable property by applying to the Reserve Bank of India. The same is applicable for inheritance of agricultural land/plantation property/farm house by foreign nationals of Indian Origin.
Repatriation of Sale Proceeds
In the case of acquisition of immovable property for carrying on a permitted activity, the person or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of the immovable property.
In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied:-
the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;
the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non Resident Account or (b) the foreign currency equivalent, as on the date of payment of the amount paid where such payment was made from the funds held is Non Resident External account for acquisition of the property; and
in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
Remittances out of Inherited Assets
NRIs/PIOs are now permitted to remit up to US $ 100,000 per calendar year out of assets in India acquired by them by way of inheritance/legacies.
Prohibition on Acquisition or Transfer of Immovable Property in India by citizens of certain countries
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years.

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Further Liberalisation for NRIs

Loans from NRI Relatives
On Repatriation Basis

An individual resident in India is permitted to obtain loan not exceeding US $ 250,000 from his close relatives resident outside India subject to the conditions that:-
the loan is free of interest
ii) the minimum maturity period of the loan is 7 years
the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or from the NRE/FCNR account of the lender
the loan is utilised for the borrower’s personal purposes or for carrying out is normal business activity other than agricultural/plantation activity, purchase of immovable property or shares/debentures/bonds issued by companies in India or for relending
RBI will give automatic clearance for such loans.
On Non Repatriation Basis
General permission has been given by RBI for interest free non repatriable loans from NRI relatives for personal purposes and for business activities.
Loans from NRIs/PIOs/OCBs
On Non-repatriation Basis
A person resident in India, other than a company incorporated in India may borrow in rupees on non-repatriation basis from Non Resident Indian or a Person of Indian Origin resident outside India subject to the following conditions:-
the amount is received by inward remittance or from the NRE/FCNR/NRO/NRNR*/NRSR* account of the lender
the period of loan shall not exceed three years
the rate of interest shall not exceed 2% over the bank rate prevailing on the date of availing loan
where the loan is from NRSR* account, the interest and repayment shall also be to the NRSR* account; in other cases interest and repayment shall be made to the NRO account or NRSR account as desired by the lender
the amount borrowed is non repatriable
Borrowing in Rupees by Indian companies
A company incorporated in India may borrow in rupees on repatriation or non repatriation basis from a Non Resident Indian or a Person of Indian Origin resident outside India or an Overseas Corporate Body by way of investment in non convertible debentures.
Restriction on use of borrowed funds
The borrowed fund shall not be used for chit funds, Nidhi companies, agricultural or plantation activities or real estate business or construction of farm houses or trading in Transferable Development Rights or for relending.
Commercial Papers
Indian companies can raise deposits from NRIs subject to the following conditions:-
The issue is in compliance with non banking companies (Acceptance of Deposits through Commercial Paper) Directions 1998 issued by the Reserve Bank of India and any other law, rules, directions or orders applicable.
Payment is received by inward remittance through normal banking channels or from funds held in permissible deposit accounts.
The amount invested shall not be eligible for repatriation.
The Commercial Paper shall not be transferable.
Rupee Loans to NRIs
RBI has granted general permission to Authorised Dealers to sanction rupee loans to NRIs against the security of shares held by them either on repatriation or non-repatriation basis, subject to lending norms.
Remittance of Sale Proceeds of Shares Abroad
NRIs are permitted to raise loans abroad against the security of shares of Indian companies held by them on repatriation basis. However, in case the shares are sold and the amount of sale proceeds is required to be remitted abroad for repaying the loan, prior permission of RBI is required. The aforementioned condition has been waived off and Authorised Dealers are permitted to remit the sale proceeds to the overseas bank who has extended the loan to the NRIs, net of applicable taxes, if any.
Rupee Loans against Immovable Property held in India
NRIs are permitted to raise rupee loans on non-repatriable basis in India against the collateral of their imnmovable property irrespective of the fact whether the property is purchased by remittances from abroad or acquired otherwise.
Other Facilities provided to NRIs/PIOs
Continuance of rupee loan/overdraft to resident who becomes Non Resident.
Continuance of rupee loan in the event of change in residential status of the lender.
Overdraft in rupee account maintained with authorised dealer in India by a bank outside India.
Authorised Dealers (ADs) Permitted to extend Rupee Loans to NRIs
RBI has granted permission to certain housing finance companies to extend rupee loans to NRIs for acquisition of houses in India. These loans are required to be repaid by NRIs by sending remittances from abroad. This facility has been extended to ADs who may be willing to extend rupee loans to NRIs for acquisition of residential houses in India subject to the same terms and conditions as applicable to loans granted to NRIs by housing finance companies.
Loans by Indian Companies to NRI Staff
Indian companies who desire to grant housing loans in India to their NRI staff who have been deputed abroad have been granted general permission to extend such loans under the staff housing loan scheme of the concerned company provided the loans are repaid out of remittances in foreign exchange from abroad by the employee during his period of deputation abroad.
Ceiling on Loans by Housing Finance Institutions
The ceiling on total loan to be advanced and the percentage of the project cost which can be funded, and the purposes for which loans may be given are brought at par with the ceiling and percentage etc. for residents.
Payment of Interest on Delayed Refunds
RBI has granted general permission to Indian companies for payment of interest on delayed refunds of share subscriptions if such payment of interest is as per SEBI guidelines.
Loans Abroad against Securities Provided in India
Authorised dealers may grant, through their overseas branches and correspondents, loans and overdrafts against the security of fixed deposits or other assets in India, to Indian Nationals or Persons of Indian Origin/OCBs established in business or trade, provided they are satisfied that such assets represent funds, which had previously been remitted to India in an approved manner.
Loans in India against Guarantees by Non Residents
In case where rupee loan is granted against guarantee provided by Non Resident and the guarantee is invoked, the Non Resident guarantor may discharge the liability by
payment out of rupee balances held in India

or

debit to his FCNR/NRE account maintained in India.

or

by remitting funds to India
RBI has granted general permission to a resident being the principal debtor to make payment to a person resident outside India, who has met the liability under the guarantee.
The repayment may be made by credit to the account of the guarantor, provided, the amount remitted/credited shall not exceed the rupee equivalent of the amount paid by the guarantor against the invoked guarantee.
Payment to Non Resident Directors
A company in India is authorised to make payment in rupees to its non-whole time director, who is a person resident outside India and who is on a visit to India for company’s work, towards sitting fees, commissions or remuneration, in accordance with the company’s Memorandum of Association or Articles of Association or in terms of any other agreement entered into by it or any resolution passed by its General Body/Board of Directors.
Remittance of Current Income by NRIs
Reserve Bank of India has allowed authorised dealers/authorised banks remittance of current income of Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) by debit to the Non Resident Ordinary Rupee (NRO) account of the account holder. As a further liberalisation of facilities available to NRIs/PIOs the Reserve Bank of India has now allowed repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIOs who do not maintain an NRO account in India, 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.

*Regarding NRNR/NRSR accounts, please refer to the Chapter on Bank Accounts.

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Other Facilities Available to NRIs

(1) Import of Gold/Silver
Non Resident Indian Nationals and Persons of Indian Origin can bring into India gold up to 10 kgs on payment of customs duty @ of Rs.250 per 10 gms. and silver up to 100 kg. on payment of customs duty @ Rs. 500 per Kg. as part of their baggage once in six months. The gold/silver so brought can be sold to residents against payment in rupees, by means of crossed cheque in India, which has to be credited to the NRO account of the importer.
(2) Housing

In various housing projects taken up by the Life Insurance Corporation of India (LIC) for providing residential houses to its policy holders, 5 per cent is normally reserved for allotment to Non Resident Indian policy holders.
LIC Housing Finance Ltd. has a separate scheme for grant of individual housing loan to Non Resident Indians viz Grih Shobha under which loans are granted up to a maximum of Rs.2.5 million for construction/purchase/extension of flat. Life Insurance Corporation also accepts repayment of outstanding balance of housing loans from returning Indians in Indian rupees.
Housing and Urban Development Corporation (HUDCO) also has Housing Schemes for NRIs.
(3) Providing Housing Loans in Rupees to Non Residents
An authorised dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to NRI/PIO resident outside India for acquisition of a residential property in India subject to the following conditions:-
the quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person resident in India;
the loan amount shall not be credit to Non Resident External (NRE)/Foreign Currency Non Resident (FCNR)/Non Resident Non-repatriable (NRNR*) account of borrower;
the loan shall be fully secured by equitable mortgage of the property proposed to be acquired, and if necessary, also by lien on the borrower’s other assets in India;
the installment of loan, interest and other charges, if any, shall be paid by the borrower by remittances from outside India through normal banking channels or out of funds in his Non Resident External (NRE)/Foreign Currency Non Resident (FCNR)/Non Resident Non-repatriable(NRNR*)/Non Resident Ordinary (NRO)/Non Resident Special Rupee (NRSR*) account in India, or out of rental income derived from renting out the property acquired by utilisation of the loan;
the rate of interest on the loan shall conform to the directives issued by the Reserve Bank or, as the case may be, by the National Housing Bank.
(4) Insurance

The New India Assurance Company Ltd., a subsidiary of the General Insurance Corporation of India has devised a scheme for personal accidents and expenses following death (occurring in foreign countries due to accidents or sickness). This is a special scheme offered to meet the requirement of Non Resident Indians. The premium payable is very nominal in comparison to the risk coverage. The New India Assurance Company Ltd. has entered into an agreement with the Government of Kerala for the implementation of the scheme.
The State Bank of Tranvancore along with the United India Insurance Company Ltd. has introduced "UII Co. Ltd. – SBT NRI Family Welfare Scheme" for NRE account holders of the State Bank of Tranvancore. The scheme provides personal accident covers including expenses following unfortunate death of the NRI and medical expenses cover for his/her family (including the NRI). Medical cover is available for expenses incurred through hospitalisation in India only.
(5) Education
In private medical colleges/dental colleges, 15% of seats are reserved for admission to children of NRIs/ PIOs. They are not required to appear for any admission test. There are about 3000 seats available in such institutions which means that the availability of seats for children of NRIs/PIOs in such institutions will be approximately 450.
In other universities and colleges, students including NRIs are admitted as per Government of India Policy and they have to pay fees as applicable to Indian students.
(6) Incorporation of a Company
With a view to facilitating the work of Non Resident Indians intending to set up new industrial projects in India, the Reserve Bank of India has granted general permission to (a) Non Resident Indians or Persons of Indian Origin to subscribe to the Memorandum and Articles of Association and take up shares of an Indian company for the purpose of its incorporation and (b) the company to issue shares to Non Resident Indians/Persons of Indian Origin subject, inter-alia, to the condition that the total face value of the shares to be taken up by such persons should not exceed Rs. 10,000 and the company is engaged in or is being formed for undertaking industrial activity.
(7) VISA
Persons of Indian Origin can visit India on multi entry visa.

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Tax Concessions to NRIs

Basis of Tax Liability in India
The tax liability of a person under the Income Tax Act depends on the residential status in the financial year (1st April to 31st March) in which the income accrues or arises to him or is received by him.
For income tax purposes the residential status of an individual generally depends on his physical presence or stay in India and not on his nationality or domicile.
(1) Resident
An individual is said to be a ‘resident’ in India in any financial year if he has been in India during that year:
for a period of 182 days or more; or
for a period of periods of 60 days or more and has also been in India within the preceding four years for a period or periods of 365 days or more;
However, the period of 60 days is increased to 182 days in the case of:
a citizen of India or person of Indian origin who has been outside India and comes on a visit;
when a citizen of India leaves India for purpose of employment outside India or as a member of a crew of an Indian ship.
(2) Resident But not Ordinarily Resident
An individual is said to be ‘not ordinarily resident’ in any financial year, if:
he has not been resident in India in nine out of ten financial years preceding that financial year; or
has not during the seven financial years preceding that year, been in India for a period of periods of 730 days or more.
An individual would be "not ordinarily resident" if he fulfills either of the above conditions.
A Hindu Undivided Family is said to be ‘not ordinarily resident’ in India if its manager is ‘not ordinarily resident’ in India. For calculating the length of the manager’s stay in India, periods of stay in India of successive managers of a Hindu Undivided Family have to be added up.
The status of ‘resident but not ordinarily resident’ is available only to individuals and Hindu Undivided Familie
(3) Non Resident
A person who is not resident in India is a ‘Non Resident’.
Extent of Tax Liability
Based on the residential status of a tax payer and the place where the income is earned, the income that is included in the total income is as under:-

Residential Status
Nature of Income
Resident
All incomes whether earned in India or outside India
Not Ordinarily Resident

All incomes:

(a) earned in India, and

(b) all incomes earned outside India if the same is derived from a business which is controlled in India or from a profession which is set up in India.

Non Resident
All incomes earned in India

Double Taxation Avoidance
Since a resident is liable to pay tax in India on his ‘total world income’, it is possible that he may have to pay tax on his foreign income in that country also. To avoid such a situation the Government of India has entered into agreements for avoidance of ‘double taxation’ with different countries.
Special Provisions Applicable to NRIs
With a view to attract investment by Non Resident Indians (NRIs), certain reliefs, exemptions and incentives have been provided.
For Income Tax purposes, a Non Resident Indian has been defined as an individual being a citizen of India or a person of Indian origin who is not a resident. A person is considered to be of Indian Origin if he or either of his parents or his grand parents was born in undivided India.
20% Tax Scheme
Income from foreign exchange assets (any specified asset which the assessee has acquired or purchased or subscribed to in convertible foreign exchange) comprising of shares/debentures/deposits with Indian companies. Central Government securities or any other notified assets subscribed to or purchased in convertible foreign exchange can be charged at a flat rate of 20%.
No deduction, basic exemptions etc. will be available under the 20% scheme.
Long Term Capital Gains
Long term capital gains on specified foreign exchange assets such as Units/Bonds/shares and listed securities as specified by the Government held by NRIs are taxable @ 10%.
Minimum holding period for allowing this rate is one year for shares and other securities listed in stock exchanges in India and units of specified mutual funds. For other assets the minimum holding period is 36 months.
If the proceeds are reinvested within six months of such transfer in any specified securities and new assets are retained for 3 years, the proceeds are exempted from payment of Income Tax.
Income from units of UTI are totally exempted from payment of Income Tax.
Tax Exemptions
Income from following investments made by NRIs out of convertible foreign exchange is totally exempt from income tax.
(a) NRE and FCNR(B) Accounts; (b) Units of UTI; (c) Specified Securities, Bonds, Savings Certificates.
The above exemptions will cease immediately on NRI becoming resident.
Where the NRI has income from only foreign exchange assets or income by way of long term capital gains from foreign exchange assets or both, and tax deductible at source from such income has been deducted he is not required to file return of income as otherwise required under the Income Tax Act.
The special provisions in relation to investment income from foreign exchange assets (other than shares of an Indian company) will continue, even after the NRI becomes resident till transfer or conversions of such assets into money, if the NRI so wishes.
Advance Rulings NRIs/OCBs desirous of obtaining advance ruling may make an application stating the question on which the ruling is sought.
The question which could be of law or fact should relate to a transaction undertaken or proposed to be undertaken by the applicant.

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Facilities for Returning Indians

Maintenance Abroad of Assets and Bank Accounts of Returning Indians
Non Resident Indians including Persons of Indian Origin have been exempted from declaring their assets abroad and/or obtaining permission from the Reserve Bank of India to hold the same at the time of their return to India provided such persons have a minimum continuous stay of one year abroad and have acquired such assets lawfully.
The above said general exemption applies to all incomes i.e. interest, dividend earned on foreign exchange assets, bank deposits, investment in foreign shares or securities or immovable properties situated out side India or investment in business out side India. The exemption is also applicable for acquiring foreign currency continuously through such assets. Fresh credit to such assets should be out of foreign currency acquired for which exemption is also available. There is no restriction for the utilisation of such balances held abroad for any bona fide payments, including making further investment in shares, securities or immovable properties abroad provided the cost of such investment and or subsequent payment required is met exclusively out of such balances eligible for such exemption.
Resident Foreign Currency Accounts (RFC Accounts)
Persons of Indian Nationality/Origin, resident outside India for not less than one year, on becoming residents are free to open and maintain such accounts with authorised dealers.
RFC accounts may be in the form of savings (without cheque facility), current or term deposits.
The funds may be allowed to be freely utilised by the account holder, for any bona-fide remittances outside India through normal banking channels and for withdrawals in Indian rupees.
On becoming Non Resident, the funds can be transferred abroad or credited to fresh NRE/FCNR accounts.
Where the stay abroad is less than one year, an application in form RFC has to be made to the authorised dealer and referred to the Reserve Bank of India for specific approvals.

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PIO Cards

The Government has announced a scheme for issuance of Persons of Indian Origin (PIO) Cards for Persons of Indian Origin living abroad and having foreign passports. The PIO cards, which would be extended to Persons of Indian Origin settled in countries other than Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan besides introducing a visa free regime, also confer some special economic, educational, financial and cultural benefits to the holders of these Cards.The Persons of Indian Origin (PIO) Card Scheme has been launched on 31.3.1999.
For this scheme Persons of Indian Origin means a foreign citizen (not being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan or other countries as may be specified by the Central Government from time to time) if,
he/she, at any time, held an Indian passport,

or

he/she or either of his/her parents or any of his/her grand parents or great-grand-parents was born in or permanently resident in India as defined in the Government of India Act 1935 and other territories that became part of India thereafter provided neither was, at any time, a citizen of the countries mentioned above.
he/she is a spouse of a citizen of India or a Person of Indian Origin covered under (i) or (ii) above.
Application in the prescribed form along with an application fee of US $ 1,000/- (US $ 750/- refundable in case of rejection of the application) has to be made to an Indian Mission (Embassy/High Commission/Consulate) in the country where the applicant is ordinarily resident and where the applicant is already in India on long term visa (more than one year) to the designated officers in India.
The PIO Card shall be valid for a period of 20 years subject to the validity of the passport of the applicant.
The following facilities shall be extended to the PIO Card holders:
Visa free entry to India.
For PIO Card holders the requirement for registration with Foreigners Regional Registration Office has been done away with for continuous stay not exceeding 180 days.
All future benefits that would be extended to NRIs would also be available to the PIO Card holders.
Note: Details of the PIO Card Scheme, application form, etc. are available on the IIC website – http://iic.nic.in.

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Indian Investment Centre
The Indian Investment Centre is a service organisation of the Government of India set up four decades ago for the promotion of foreign private investment in India. It advises overseas investors on setting up industrial projects in India by providing information regarding investment opportunities in India, the Government’s industrial policy (including that relating to foreign investment and technology transfer), licensing procedures, taxation laws and facilities and incentives available. It also helps them in finding partners in India.
It is the nodal agency for investment in India by NRIs and OCBs in which NRI holding is not less than 60 per cent and provides them with hand holding services.
It is a service agency providing assistance in the establishment of joint ventures and technical collaborations in India and abroad and third country ventures between Indian and foreign entrepreneurs.
It provides guidance and information to Indian entrepreneurs and assists them in locating suitable foreign firms for collaboration.
It assists Indian and foreign entrepreneurs in meeting the procedural requirements of project approvals and in overcoming bottlenecks, if any, in the process of implementation of the project.
It has a well-maintained reference library covering a wide range of subjects like industry, management, taxation, etc. A cross-section of journals, periodicals and magazines is available for ready reference.
It brings out publications which provide authentic information on various aspects of Government policies, procedures and regulations as also facilities, incentives and opportunities available to entrepreneurs in various industrial fields, both in India and abroad. Some of the important publications are in the fields of industrial policy, facilities and incentives for Non Resident Indians and technological development.
It provides factual information on current economic developments in India through its Monthly News Letter which is an authentic source of information about industrial licences and letters of intent issued, and foreign collaborations approved, by the Government of India/Reserve Bank of India.
It circulates authentic texts of various Press Notes issued by the Department of Industrial Policy and Promotion under Readers’ Subscription Service.
In order to promote investment and technology transfer from abroad the Indian Investment Centre has signed Memoranda of Understanding with various organisations.
Availability of Latest Information
Indian Investment Centre has launched its website on Internet containing latest information relating to NRI/Foreign Investment, Industrial Policies and Procedures, Facilities and Incentives given by Central/State Governments including Questions Asked Frequently by NRIs. The address of the website is as follow:-
Website: http://iic.nic.in
E-mail: iic@giasdl01.vsnl.net.in
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