NRI: Send more money now to loved ones back home thanks to recent rule change

Dubai: The Indian government recently issued new guidelines allowing resident Indians to receive more money from their relatives staying abroad, without having to inform the authorities.

Late last week, the Indian Union Home Ministry amended the limits related to the Foreign Contributions (Regulation) Act (FCRA) which previously allowed Indians to receive up to Rs 100,000 (4,630 MAD) per year.

The new authorized limit is Rs 1 million (Dh 46,300), the ministry said in a notification, while adding that if the amount exceeds, you will now have 90 days to inform the government instead of 30 days previously.

What has changed now?

It has previously been stated that “Anyone receiving a foreign contribution exceeding Rs 100,000 (Dh 4,630) or equivalent during a financial year from any of their relatives must notify the central government ( details of funds of foreign origin) within 30 days of receipt of this contribution”.

However, a notice in the official gazette on Friday revealed that the words “one lakh rupees” would be replaced with the words “ten lakh rupees”; and for the words “thirty days”, the words “three months” are substituted.

The amendments also relate to the application of obtaining “prior authorization” to receive funds from abroad. The amended rules gave individuals and organizations 45 days to declare the bank details that must be used for the use of these foreign funds. This deadline was 30 days earlier.

As an NRI (Non-Resident Indian) residing abroad, such as the United Arab Emirates, you are now allowed to send more money to your loved ones, without having to declare, contrary to what you had to do previously.

How to make sense of this rule?

The new rules, now renamed the Foreign Contribution Amendment Rules (Regulations), 2022, came into effect on July 1, with the Ministry of Home Affairs (MHA) issuing a notification and publishing it in the Official Gazette. The new rule is an amendment to the Foreign Contributions (Regulations) Rules 2011.

The FCRA regulates foreign donations and ensures that such contributions do not conflict with Indian regulations. First adopted in 1976, it was amended in 2010 when a series of new measures were adopted to regulate foreign donations.

The law extends to all of India and also applies to Indian citizens outside India, which includes NRIs. Entities outside India, whether companies or corporate bodies, registered or incorporated in India must also follow the rules of the law.

How does this affect an NRI?

As an NRI (Non-Resident Indian) residing abroad, such as the United Arab Emirates, you are now allowed to send more money to your loved ones, without having to declare, contrary to what you had to do previously.

“The limit changes will make compliance requirements easier for the payee,” explained Dixit Jain, managing director of The Tax Experts DMCC. “The FCRA laws were never brought up and many people were unaware of such regulations.”

“There may be a lot of violations that people would have committed without the knowledge of these regulations. The good thing is that the Department of the Interior has made five additional offenses under the FCRA “complicable,” making 12 of those offenses complicable instead of prosecuting organizations or individuals directly,” Jain added.

“Thus, in the event of a violation, the same can be aggravated without worrying about direct prosecution under the amended provisions.” (Aggravating offenses are those that can be compromised, that is, the charges against the accused can be recanted or withdrawn.)

Limit changes will make compliance requirements easier for the recipient

– Dixit Jain, Managing Director of The Tax Experts DMCC

How does this affect foreign companies?

With regard to foreign companies sending money to India-based bank accounts, the central government also “omitted” a rule provision that dealt with the declaration of foreign funds, including donor details, the amount received and date received, etc.

In accordance with the latest amendment to the standard, if an Indian entity receives foreign funds from a foreign legal entity, it will have to follow the existing provision of placing the audited statement of accounts on the receipts and use of the foreign contribution.

This includes the Statement of Income and Expenditure, Receipts and Payments Account and Balance Sheet for each financial year commencing April 1, within nine months of the end of the financial year, on its official website or on the Web specified by the government. .

How it affects Indian residents or businesses

In addition, a regulatory provision that an Indian-based natural or legal person receiving foreign funds should report such contributions quarterly on their official website has also been removed.

In the event of a change in the bank account, name, address, etc., of those who receive funds from abroad, the Ministry of Interior has now granted a period of 45 days to inform it, instead of the previous 15 days.

The new law also stipulates that Indian organizations receiving foreign funds will not be able to use more than 20% of these funds for administrative purposes. This limit was 50% before 2020.

Exchange rupees

Indian organizations receiving foreign funds will not be able to use more than 20% of these funds for administrative purposes.

What other forex regulations should NRIs be aware of?

As anyone with overseas business connections or who has traveled overseas can attest, the Foreign Exchange Management Act (FEMA) is another law enacted by the Indian government to control the flow of foreign currency to across Indian borders.

Ultimately, apart from the above mentioned FCRA standards, it is also important for Indians working overseas to understand the FEMA rules for NRIs very carefully as it may affect how they can send and receive funds from India. Let’s look at the forex regulations that NRIs must follow:

• Opening of bank accounts mandated by the NRI

This is one of the most crucial FEMA rules for NRIs. Once you have changed your residency status to Non-Resident Indian or NRI, i.e. living outside India but still a citizen of that country, you need to complete certain formalities regarding savings accounts that you are holding.

FEMA rules for NRIs do not allow holding a savings bank account. NRIs must create an NRO (non-resident ordinary rupee account) or NRE (non-resident external) account as stipulated by the Reserve Bank of India (RBI).

What is the difference between NRO and NRE accounts?

The NRO account is a bank account opened in India in the name of an NRI, to manage the income he earns in India. It is an ordinary rupee account and can be held jointly by two or more NRIs.

An NRE is a non-resident (external) rupee account. This is a bank account opened in India in the name of an NRI, to park his foreign income; while income earned in this account is tax exempt.

The FCNR is a foreign currency (non-resident) account and NRIs can deposit any foreign currency in it. It is a fixed or term deposit in foreign currency available for a period of one to five years. There are no tax implications on this type of account, and the funds are fully repatriable (transferable) at maturity.

• Limitations of NRI investments

NRIs are entitled to an unlimited number of investment options through repatriable and non-repatriable transactions. However, under FEMA rules for NRIs, they cannot invest in small savings plans or government provident funds.

NRIs can buy residential or commercial property in India. However, the purchase of agricultural properties, plantations, farm land, etc. is not authorised. NRIs may also receive real estate as gifts from relatives or through inheritance.

NRIs are permitted to send foreign currency back to India on repatriable foreign assets such as rent received on real estate held overseas. According to the FEMA guidelines for NRIs, the proceeds from the sale of these assets are not repatriable outside India without the approval of the RBI.

Repatriation of up to $1 million (3.67 million dirhams) per fiscal year is allowed if you inherited the property or retired in India.

Students going to study abroad are treated as NRIs and are eligible for all facilities available to NRIs under FEMA. They are entitled to receive installments of up to $1 million (3.67 million dirhams) per year from their NRE or NRO accounts or profits on the property.

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