NRI is a word which attracts the attention of the RBI, FEMA and other foreign regulations. Before going to know the various types of Accounts maintained by NRI we just have a glance at when a person will be called as Non-Resident.

The word Non-Resident has been defined differently in various Acts, as far as FEMA is concerned Section 2 of the FEMA, 1999, in order to understand the definition of Non-Resident, one has to understand the definition of Resident. A person will be called as Resident if he resides in India for more than 182 days in the Previous Financial Year,

1. But while computing the residence the following are not included:

1. Who has gone out of India or stays outside India, in either case: a. For or on taking employment outside India
   1. For carrying on outside India business or vocation outside India, or
   2. For any other purpose, in such circumstances as would indicate his intention to stay outside India for any uncertain period

1. Person who has come to or stays in India, in either case, otherwise than:

1. For or on taking up employment in Indi, or
2. For carrying on in India a business or vocation in India, or
3. For any other purpose, in such circumstances as would indicate his intention to stay in India for any uncertain period

1. Any person or Body Corporate registered or incorporated in India

1. An office, branch or agency outside India owned or controlled by a person resident outside India

1. An Office, branch or agency outside India owned or controlled by a person resident in India

As per the Foreign Exchange Management(Deposit) Regulations, 2016 that no person Resident in India shall accept any deposit form, or make any deposit with, a person resident outside India.

RBI has given few Exemptions to the above mentioned provision which are as follows:

1. An authorised dealer may accept deposit from a non- resident Indian under the following schemes:

• Non-Resident (External) Rupee Account Scheme (NRE Account), specified in Schedule 1

• Foreign Currency (Non-Resident) Bank Account Scheme, (FCNR(B) Account) specified in Schedule-2

(iii)Non-Resident (Ordinary) Rupee Account scheme specified in Schedule-3

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1. Any person resident outside India having a business interest in India may open, hold and maintain with an authorised dealer in India, a Special Non-Resident Rupee Account (SNRR Account) specified in Schedule-4

• Resident or Non-Resident acquirers may, subject to the terms and conditions specified in Schedule-5 , open, hold and maintain Escrow Account with the Authorized Dealer.

And other few exemptions has been prescribed by RBI.

Let us learn a bit deeper into the schemes formulated by RBI under which an authorized dealer can accept deposits.

Non-Resident (External) Rupee Account (NRE Account):

The Non-Resident (External) Rupee Account NR(E)RA scheme, also known as the NRE Account scheme, was introduced in 1970

Permitted Credits:

1. Proceeds of remittances to India in any permitted currency.

2. 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.

Note: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.

3. Proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India

Provided:

• The amount was declared on a Currency Declaration Form (CDF), where applicable

• 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.

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4. Transfers from other NRE/FCNR(B) accounts.

5. Interest accrued on the funds held in the account.

6. Current income in India due to the account holder, subject to the payment of applicable taxes in India

7. Maturity or sale proceeds of any permissible investment in India which was originally made by debit to the account holder’s NRE/ FCNR (B) account or out of the remittances received from outside India through banking channels.

8. 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 (B) account of the account holder or by remittance from outside India through banking channels.

9. Refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for purchase of residential/ commercial property, together with interest, if any (net of income tax payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of the account holder or remittance from outside India through banking channels and the authorised dealer is satisfied about the genuineness of the transaction

10. Any other credit if covered under general or special permission granted by Reserve Bank

Permitted Debits:

1. Local Disbursements

2. Remittances outside India
3. Transfer to NRE/ FCNR(B)/NRO accounts of the account holder or any other person eligible to maintain such account

4. Investment in shares/ securities/ commercial paper of an Indian Company or for purchase of immovable property in India provided such investment/ purchase is covered by the regulations made, or the general permission/ special permission granted by RBI

5. Any other transaction if covered under general or special permission granted by RBI.

Others:

Change of Residential Status:

In case if the Non-Resident becomes Resident then the

1. NRE account will be re-designated as resident’s account

2. Funds held in the accounts may be transferred to the Resident Foreign Currency (RFC) accounts(if the person is eligible for maintaining such RFC Account)

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If the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in India

Tax Exemption:

Income form the interest on balances standing to the credit of NRE Accounts is exempt from Income Tax.

Note: These accounts need to be opened by Non-Resident Account holder but not by the holder of Power of Attorney in India.

Foreign Currency (Non- Resident) Account (Banks) –FCNR(B) Account:

Introduction:

• FCNR(B) scheme was introduced with effect from May 15, 1993 to replace the then prevailing FCNR(A) scheme introduced in 1975

• In FCNR (A) Scheme the foreign exchange risk was borne by RBI and subsequently by the Govt. of India.

• The FCNR(A) scheme was withdrawn in August, 1994 in view of its implications for the central bank’s balance sheet and quasi-fiscal costs to the Government.

• The minimum maturity period of the deposit under the FCNR(B) was Six months initially, later it has been raised to 3 years and from July 26,2005 banks were allowed to accept the deposits upto a maximum maturity period of 5 Years.

These accounts can be opened only with the below mentioned funds:

1. Funds remitted from outside India through banking channels (Convertible Foreign Exchange)

1. Funds received in rupees by debit to the account of a NRE account maintained with the Authorized dealer in India

1. Funds which are repatriable nature in terms of the regulations made by RBI
2. Transfer of Funds from existing NRE/ FCNR (B) Accounts

• Earlier the deposits under FCNR(B) was permitted to be accepted only in Pound Sterling, US Dollar, Japanese Yen, EURO, Canadian Dollars & Australian Dollars. With Effect from October 19, 2011 banks were permitted to accept the FCNR(B) deposits in any permitted currency.

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In case if the depositor desires to make a deposit in FCNR(B) other than the designated currency then the Authorised Dealers may undertake fully covered SWAP in that currency against the desired designated currency.

Maturity of Deposit

The deposits should be accepted under the Scheme for the following maturity periods

• One year and above but less than Two years
  • Two years and above but less than Three years
  • Three years and above but less than Four Years
  • Four years and above but less than Five Years
  • Five Years only

Permissible Debits/ Credits:

All Debits/ Credits permissible in respect of NRE Accounts shall be permissible in respect of FCNR(B) Accounts.

Conversion of FCNR(B) Accounts to Other Accounts& Vice-Versa

RFC

• The depositor can convert the amount in the FCNR(B) into RFC Account even before the maturity of the Deposit and the banks should pay interest at its discretion at the time of conversion subject to the condition that the rate of Interest should not exceed the rate payable for the deposits held under RFC Account Scheme.

• Penal provisions will not apply in case of premature conversion of balances held in FCNR(B) deposits into RFC Accounts by Non- Resident Indians on their return to India

NRE

• Conversion of FCNR(B) into NRE deposits or vice-versa before the maturity is subject to the penal provisions applicable to the premature withdrawal.

• Transfer of funds from existing NRE accounts to FCNR(B) accounts and vice versa, of the same account holder, is permissible without the prior approval of Reserve Bank of India.

Manner of Payment of Interest:

• Interest on balances held in these accounts may be paid half-yearly or on an annual basis as desired by the depositor.
• Interest may be credited to a new FCNR (B) account or an existing/ new NRE/ NRO account in the name of the account holder, at his option.

Other Points:

• Repatriation of funds in foreign currencies is permitted.

• The facility of Opening and maintaining FCNR(B) Accounts by Overseas Corporate Bodies which are owned directly or indirectly to the extent of at least 60 % by NRI’s and overseas trusts in which at least 60 per cent of the beneficial interest is irrevocably held by such persons (OCBs) has been withdrawn

with effect from September 16, 2003.

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Note: Opening of NRO account requires approval in the following cases:

1. Individuals/ entities of Pakistan nationality/ ownership

2. Entities of Bangladesh Ownership
3. Individuals of Bangladesh Nationality may be allowed to open NRO account without the approval subject to satisfying itself that the individuals hold a valid visa and valid residential permit issued by

FRO/ FRRO

• Post offices in India may maintain savings bank accounts in the names of persons resident outside India subject to the same terms and conditions as are applicable to NRO accounts.

Permissible Credits:

• Proceeds of remittances received in any permitted currency from outside India through 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

• Legitimate dues in India of the account holder
• Transfers from other NRO accounts
• Any amount received by the account holder in accordance with the rules or regulations made under the Act

Permissible Debits:

• All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank.
• Remittance outside India of current income in India of the account holder net of applicable taxes.
• Transfers to other NRO accounts.
• Settlement of charges on International Credit Cards issued by authorised dealer banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016

Note:

• Balances in NRO accounts are eligible for remittance outside India only with the general or specific approval of RBI .

• Funds received by the way of remittance from outside India in Foreign Exchange which have not lost their identity as remittable funds will only be considered by RBI for remittance outside India.

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• An account being opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of his departure to the Foreign Currency for payment to the account holder provided that the account has maintained for a period not exceeding 6 months and the account has not been credited with any local funds apart from the interest accrued thereon.

Change in Residential Status:

• If any Non-Resident having NRO account return to India for taking up the employment, or for carrying on business or vocation or for any other purpose indicating his intention stay in India for an uncertain period then the NRO account will be designated as resident rupee account.

• Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.

If any resident person leaves India for any country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation or for any other purpose indicating his intention stay in India for an uncertain period then his existing account could be designated as a Non-Resident Ordinary Account (NRO)

Whether a person being resident in India can accept and possess foreign currency?

Many persons are interested at preserving old currency, new released currency, foreign currency received by them. Few of them possess the foreign currency for some specified purpose. Many times they counter questions regarding eligibility for possession of foreign currency and the permitted limit to which they can possess the foreign currency.

This is an attempt to address those queries at the best possible way with the help of Notification no.

FEMA.11/2000-RB dated 3rd May, 2000.

Possession of foreign currency by an authorised person

Reserve Bank, may on application made to it, authorize any person to be known as authorised person to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking or any others. Authorised Dealers/ Authorised Money Changers/ franchisees may freely purchase foreign currency notes, coins and travellers cheques from residents as well as non-residents. Authorised person may possess foreign currency and coins without any limit.

Possession of foreign currency by a resident other than authorised person

1. Foreign Coins:

Any person can possess foreign coins without any limit. That is, person can hold foreign coins for uncertain period for uncertain purpose.

1. Foreign Currency:

Possession of foreign currency by resident is again divided into two categories depending upon whether resident individual is either permanently resident or not.

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1. Resident in India

Any person resident in India may possess foreign currency notes and foreign currency travellers’ cheques not exceeding USD 2000 or its equivalent in aggregate if it-

lwasacquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India, or

lwasacquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation, or

lwasacquired by him by way of honorarium or gift while on a visit to any place outside India, or remains as unspent amount of foreign exchange acquired by him from an authorised person for travel abroad.

1. Receipt for services rendered

If the foreign exchange due or accrued as remuneration for services rendered, whether in or outside India, or in settlement of any lawful obligation, or an income on assets held outside India, or as inheritance, settlement or gift by a resident individual, then he must surrender the foreign currency so received to Authorised Dealer within seven days from the date of its receipt.

1. Others

In case, foreign exchange purchased for a specific purpose is not utilized for that purpose, it could be utilized for any other eligible purpose for which drawal of foreign exchange is permitted. However, resident individual has to surrender received / realised / unspent / unused foreign exchange to an Authorised Person within a period of 180 days from the date of return to the India.

Person resident in India but not permanently resident

A person resident in India but not permanently resident may possess foreign currency without any limit, if such foreign currency was acquired, held or owned by him when he was resident outside India and has brought the same into India. Here, ‘not permanently resident’ means a person resident in India for employment of a specified duration (irrespective of length) or for a specific job or assignment, the duration of which does not exceed three years.

Note: -

1. The above mentioned limits do not apply to Foreign Exchange in the form of foreign currency of Nepal or Bhutan.

Foreign Currency means any currency other than Indian Currency

1. What is the objective of Equalization Levy?

Equalization levy is introduced to reduce the unfair advantage enjoyed by multinational digital enterprise over its Indian competitors and ensure fair market competition.

2. Is Equalization Levy an income tax?

No. Equalization levy is not tax on income. It is levied on payments. For the same reason, a new chapter vide Chapter VIII of the Finance Bill, 2016 has been introduced to provide for equalization levy.

3. From when would this Equalization levy come into effect?

Equalization levy shall be levied on consideration received or receivable for specified services provided on or after the commencement of Chapter VIII of Finance Bill, 2016.

4. What is the rate of Equalization Levy?

The levy shall be @ 6% on the amount of consideration for any specified service received or receivable.

5. Is Equalization levy applicable on import of goods?

Equalization levy will not be levied on goods to be imported. Orders placed and payments made on the internet will not attract equalization levy. The levy is only on specified services.

6. All e-commerce transactions are covered under this levy?

Levy is on specified services only. It will not be levied on services that are not specified even if such services are procured by making payments from India over the internet. For example, if Indian resident books hotel rooms abroad and payment is made on the internet, such hospitality services are not specified service for the purpose of levy.

7. Does Equalization Levy apply to specified services received from a Resident?

No. Equalization levy comes into play only when specified services are provided by a non-resident to a person resident in India carrying on business or profession or non-resident having a permanent establishment in India (referred to as assessee).

8. What are the specified services for the purpose of levy?

Specified services means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government.

9. Is equalization levy imposed on all specified transactions irrespective of amount?

No. If aggregate amount of consideration for specified services received or receivable in a previous year by a non-resident from assesse exceeds Rs. One Lakh, equalization levy will be imposed.

10. What is the due date for payment of Equalization Levy?

The Equalization Levy so deducted during any calendar month shall be paid by every assessee to the credit of Central Government by 7th day of next month.

11. Whether grossing up is allowed?

Any assessee who fails to deduct the levy be liable to pay the levy to the credit of Central Government. (No grossing up of amount)

12. Whether the payment chargeable to Equalization levy would include indirect taxes paid in India?

The Committee on Taxation of E-Commerce recommends that the equalization levy should be chargeable on the amount received by the beneficial owner excluding any indirect taxes or levies paid in India. Hence, there cannot be any equalization levy on indirect taxes.

13. Whetheron the same amount equalization levy and income tax can be charged?

Income of a non-resident from services that are covered by equalization levy and on which equalization levy is paid will be fully exempt from income tax.

14. What are the consequences if Equalization levy is not paid?

Any consideration on which equalization levy is deductible and if such levy has not been deducted or after deduction has not been paid on or before the due date specified U/S 139(1) such consideration will not be allowed as deduction.

15. Will Equalization Levy paid after due date u/s 139(1) of Income Tax Act,1961 shall be allowed as deduction in another year?

Where in respect of any such consideration, the equalisation levy has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such levy has been paid.

16. Can benefit under tax treaties be claimed with respect to Equalization levy?

No. Equalization levy is not charged on income. Hence it is not covered by Double Taxation Avoidance Agreements (DTAA). No tax credit under the tax treaties available to the beneficial owner in the country of its residence in respect of such levy.

17. Are provisions of Transfer Pricing and GAAR applicable to Equalization levy?

Since the levy is not under Income-tax Act, the provisions of transfer pricing and General Anti Avoidance Rules will not be applicable to it.

Organizations face numerous risks to their success; economic risk, disaster risk, supply-chain risk, regulatory risk, and technology risk all affect organizations in different ways and to varying degrees. While fraud risk is just one of the many entries on this list, it is universally faced by all business and government entities. Any organization with assets is in danger of those resources being targeted by dishonest individuals. And, unfortunately, a notable portion of that threat comes from the very people who have been hired to carry out the organization’s operations.

Organizations of different sizes tend to have different fraud risks. Corruption was more prevalent in larger organizations, while cheque tampering, skimming, payroll, and cash larceny schemes were twice as common in small organizations as in larger organizations.

As per the recent report by Association of Certified Fraud Examiners (ACFE), the total loss caused by the cases in their study exceeded $6.3 billion, which an average loss per case of $2.7 million. Approximately two-thirds of the cases reported to ACFE targeted privately held or publicly owned companies.

Smaller organizations had a significantly lower implementation rate of anti-fraud controls than the large organizations. This gap in fraud prevention and detection coverage leaves small organizations extremely susceptible to frauds that can cause significant damage to their limited resources.

The most cost-effective way to limit fraud losses is to prevent fraud from occurring. The following is the checklist designed by ACFE to help organizations test the effectiveness of their fraud prevention measures.

1. Is ongoing anti-fraud training provided to all employees of the organization?

• Do employees understand what constitutes fraud?
• Have the costs of fraud to the company and everyone in it — including lost profits, adverse publicity, job loss, and decreased morale and productivity — been made clear to employees?
• Do employees know where to seek advice when faced with uncertain ethical decisions, and do they believe that they can speak freely?
• Has a policy of zero-tolerance for fraud been communicated to employees through words and actions?

2. Is an effective fraud reporting mechanism in place?

• Have employees been taught how to communicate concerns about known or potential wrongdoing?
• Is there an anonymous reporting channel, such as a third-party hotline, available to employees?

• Mandatory vacations

7. Does the internal audit department, if one exists, have adequate resources and authority to operate effectively and without undue influence from senior management?
8. Does the hiring policy include the following (where permitted by law)?

• Past employment verification
• Criminal and civil background checks
• Credit checks
• Drug screening
• Education verification
• References checks

9. Are employee support programs in place to assist employees struggling with addiction, mental/emotional health, family or financial problems?
10. Is an open-door policy in place that allows employees to speak freely about pressures, providing management the opportunity to alleviate such pressures before they become acute?
11. Are anonymous surveys conducted to assess employee morale?

We strongly recommend every organization to circulate the above fraud prevention checklist and seek the answers from Individual level as well as from the Organization level.