Overseas corporate bodies as an investor entity for NRIs were derecognised in September 2003
In a throwback to pre-2003 years, overseas corporate bodies (OCBs) as a vehicle for non-resident Indian (NRI) investment to India are set to make a comeback. This follows the recent move to relax foreign direct investment (FDI) norms whereby investments by companies, trusts, and partnerships, owned and controlled by NRIs (on non-repatriation basis), are to be treated as domestic investments. In effect, this indirectly recognises OCB as a class of investor entity - something that was derecognised in September 2003.
"It levels the playing field for NRI investors," says Girish Vanvari, head of tax, KPMG in India. Apart from directly investing in their individual capacity, NRIs can also use any other overseas entity that is owned and controlled by them to make the investment. "Such entity's investment will get the same treatment as given to NRI investments," says Lalit Kumar, partner in law firm J Sagar Associates.
According to Foreign Exchange Management Act, no pricing and sectoral restrictions apply if the investment is made by NRI on "non-repatriation basis". Till 2003, OCBs enjoyed the investment facilities available to NRIs. However, instances of 'OCB-shopping' by investors pushed the government to plug this route as a vehicle for NRI investment. After derecognition in 2003, such entities could invest only on repatriable-basis like any other foreign investor.
Tax experts and corporate lawyers note that NRIs will now have more avenues for structuring their investments to India. This "would allow NRIs investing on non-repatriation basis to ring-fence their Indian investments and to have the flexibility for investing though different entity structures depending on commercial and strategic considerations, administrative convenience, tax efficiency," law firm Nishith Desai Associates said in a note to its clients, while commenting on the recent relaxation in FDI norms.
Experts noted investments by such entities of NRIs on non-repatriation basis should not be included while determining whether an Indian company is a foreign-owned company. "From the perspective of downstream investment in companies engaged in sectors subject to sectoral caps or FDI-specific conditions or approval, existing limitations may not apply in case of Indian companies with investment by such entities," the note added.
According to experts, such investment on non-repatriation basis does not attract sectoral caps, filing requirements, pricing guidelines, cap on coupon rate in case of convertible instruments, such as compulsorily convertible debentures and compulsorily convertible preference shares, which are applicable for regular investments.
Experts allay the fears that the move to reinstate OCBs as a vehicle for NRI investment will lead to 'OCB-shopping'. According to Akash Gupt, leader (regulatory services) at PwC India, the regulatory environment of 2015 is very different from that of 2003. "Robust KYC (know-your-customer) norms are in place, while regulatory arbitrages have gone down," says Gupt.
It is not known if the government would want NRIs to hold 100 per cent equity in such an entity, or would allow minimum 60 per cent holding, with the balance held by other investors, as was the case in the pre-2003 OCB regime.
In a bid to woo non-resident Indians (NRIs) from Uttar Pradesh to invest in the state, the state government launched a website for them late Sunday, officials said.
The exclusive website aims to be a single window gateway for the NRIs native to UP and now settled overseas, an official told IANS.
Claiming that the website received a large number of hits and queries within hours of its launch, Mohammad Wali Abbas, head of the information and technology cell of the NRI department in Udyog Bandhu, an autonomous government body dealing with investment, said that the website would "showcase to the world that UP (Uttar Pradesh) was pretty serious about investment, specially from the NRIs".
Investment apart, the website, officials said would also encourage the emotional bonding of NRIs with their mother land, ensure the general welfare of NRIs and in case of emergencies monitor special problems faced by them and coordinate with the Government of India.
The NRI department would also offer to help in the coordination of technical, managerial and financial resources of the NRIs from UP.
A 24x7 call centre ( Migrant Resource Centre) where NRIs can log complaints will be established and the UP government is also planning to felicitate outstanding performers from among the NRIs as per their approach and investment for the state.
Government officials said that the state would also celebrate "UP NRI Day" every year, beginning Jan 17 next year. Madhukar Jaitley, advisor to the NRI department told IANS that the website was "by far the most serious and well meaning effort by the state government to bond with the NRIs".
Non-resident Indians have recently been allowed to open accounts under the National Pension System (NPS). By opening an NPS account, NRIs can create a pension corpus in India.
WHO CAN SUBSCRIBE
An NRI between 18 and 60 years of age can open an NPS account. The account needs to be opened by the individual NRI as power of attorney is not allowed.
NPS subscriber registration form for NRIs needs to be filled. This form can be downloaded and is available at any POP-SP. Overseas address and contact details as well as permanent Indian address need to be provided. NRIs have the option of selecting the Pension Fund Manager.
The following documents need to be submitted to the POP bank for opening the NPS account:
a) Completed subscriber registration form
b) Copy of passport
c) Proof of address, if the local address is different from the address in the passport.
The contributions made into the NPS account by the NRIs can be from either NRE or NRO accounts subject to normal foreign exchange conversion norms.
After submission of documents, the NRI can check the status by accessing https://cra-nsdl.com/CRA/ by using the 17 digit receipt number provided by POP-SP or the acknowledgement number allotted by CRA-FC (Facilitation Centre) at the time of submission of application forms by POP-SP.
POINT TO NOTE
1) If the NRI has taxable income in India, he can get additional benefit of `50,000 offered by NPS over and above the 80C benefits.
2) It is preferable to open an NPS account through the POP bank where the NRI maintains his NRE/NRO account.
3) At the time of payment of pension or annuity, the same is paid only in INR. There is no restriction on repatriation.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
India has allowed non-residents to invest in the National Pension Scheme to provide them an access to old-age income security.
Reserve Bank of India on Thursday allowed NRIs to subscribe to the pension scheme, which is governed and administered by the Pension Fund Regulatory and Development Authority.
RBI said the decision has been taken in consultation with the government, which under Prime Minister Narendra Modi is going all guns blazing to appease NRIs.
A lot of interest has been generated around the new scheme with the Union Budget 2015 giving additional tax benefits for investments up to Rs 50,000. However, there is no ceiling on the investment amount.
RBI said that investment has to be routed through normal banking channels. The subscription amounts should be paid by NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/FCNR/NRO account. There will be no restriction on repatriation of the annuity or accumulated savings.
Minimum annual subscription under NPS is Rs 6,000 while allocation to equities is capped at 50% of investment.
NPS investments mature when the investor turns 60. If the corpus is less than Rs 2 lakh, the entire sum can be withdrawn. If it is more, the subscriber must put at least 40% of the corpus into an annuity to get a monthly pension.
The Reserve Bank of India has allowed nonresident Indians to subscribe to chit funds without limit on condition that they cannot take the money out of the country, opening a new avenue to boost foreign currency inflows.
"It has been decided to permit non-resident Indians (NRIs) to subscribe to chit funds, without limit, on nonrepatriation basis subject to conditions," the central bank said in a release posted on its website late on Thursday, reversing its earlier stand prohibiting NRIs from investing in this segment.
A senior official at a consulting firm said the new investment option are meant for NRIs who intend to return home since the investments cannot be repatriated. "Given that chit funds are popular in the southern states of India, it appears that the NRIs from the southern states are targeted," the official said, requesting not to be named.
Typically, NRIs working in the Gulf countries in mostly semi-skilled manufacturing or construction sectors return to India on retirement from service. NRI subscription to chit funds should be brought in through normal banking channel, including through an account maintained with a bank in India, RBI has said.
To facilitate such investments, the registrar of chits or an officer authorised by the state government on this behalf, may, in consultation with the state government concerned, permit any chit fund to accept subscription from NRIs, it said. The move will help the central bank's efforts to build up foreign exchange reserves, which has crossed $350 billion, or Rs 22,33,300 crore, last month.
Almost 80 percent of non-resident Indians (NRIs) in the United Arab Emirates (UAE) want to buy apartments in India, with Bengaluru and Mumbai being the most preferred choices, a survey has revealed.
The poll showed that 79 per cent of the buyers were interested in buying apartments as compared to plots, villas or commercial property in India, with 72 per cent planning to purchase the property in the next six months, Arabian Business online reported.
"Today, Bengaluru is a much sought after city with NRIs returning to India. Many are keen on making the city their home," Sunil Jaiswal, president of Sumansa Exhibitions that conducted the research said.
"The city has evinced so much interest among NRIs of late that even those who have not had the occasion to visit the city have plunged into investments in real estate here. It is most popular among techies and skilled professionals," Jaiswal added.
Following Bengaluru and Mumbai, NRI property investors also considered Chennai, Pune, Cochin, Delhi, Hyderabad, Navi Mumbai, Goa and Ahmedabad.
The survey showed that 67 per cent of buyers were in the age group of 31-50 years.
The UAE is home to around 2.6 million expatraie Indians, according to Indian embassy figures