Policy liberation in investment by NRIs in India
Under the Foreign Direct Investment policy of India, the Non-resident Indians have been allowed to invest in India both on the non-repatriable and repatriable basis, subject to specific conditions. For the purpose of investments in India, Non-resident Indian has been categorized as the separate categories of investors.
• Non-resident Indians have so far enjoyed following additional privileges, in comparison to foreign investors.
• Non-resident Indians are permitted to invest in the partnership firms as well as sole proprietorships, subject to specific terms and conditions.
• Non-resident Indians are permitted to trade on the stock exchanges in India.
• Sectoral caps are higher for the non-resident Indians in sectors like air transport activities, services under the civil aviation sector and the construction development.
Marching ahead with the reformist approach, the Indian Government has further liberalized the FDI or the foreign direct investment policy relating to the investment in India by the non-resident Indians through the Press note No 7 (2015 series). The changes brought about two-fold-
Change in definition of Non-resident Indians
The definition of non-resident Indian has been revised to mean that an individual resident outside India who is also a citizen of India or an Overseas Citizen of India cardholder. Note that individuals who are persons of Indian Origin cardholders are deemed to be the Overseas Citizen of India cardholders as the Persons of Indian Origin category has been merged with an overseas citizen of India category. With the merge of the persons of Indian Origin category with the Overseas Citizen of India, non-resident Indians would now actually mean an overseas resident who is either citizen of India or an overseas citizen of India.
Non-resident Indian investments on the non-repatriable basis
All investments by the non-resident Indians on the non-repatriable basis will be deemed to the domestic investment on par with investments made by the resident Indians. In order to qualify for the treatment, non-resident Indians won’t be allowed to repatriate the money overseas.
The change in the definition of the non-resident Indians is the result of present amendments to the Indian Citizenship Act, 1952 and it simplifies the categories of the foreign investors in India.
The liberalization in the Foreign Direct Investment policy is expected to increase the investments by non-resident Indians in Indian businesses. As the non-resident Indian investment on the non-repatriable basis will be treated as the domestic investments, pricing guidelines, restrictive conditions relating to the sectoral caps, and nature of instruments won’t apply to any such investments. Now, non-resident Indians can invest in sectors in which the foreign direct investment is restricted to a specific percentage. For instance, in the case of print media, foreign direct investment is restricted to 26 percent. Any of the non-repatriable investment by non-resident Indians won’t be counted towards the foreign direct investment while calculating the 26 percent limit, thereby allowing space for other foreign investors to invest into the sectors. Furthermore, non-resident Indians can invest in the sectors where the foreign direct investment is prohibited.
Non-resident Indians are required to adhere to following conditions to qualify for the domestic investment status:
1. They are prohibited from convertible debentures or purchasing shares of companies engaged in the business of Chit Fund, Nidhi company or the company engaged in plantation/agricultural activities or the real estate business or the farmhouse construction or dealing in Transfer of Development Rights.
2. No limitation on buying of convertible debentures or shares of Indian companies whether by public issues or private placement on a non-repatriable basis.
3. Consideration for buying of convertible debentures or shares shall be paid by way of the inward remittance through the normal banking channels from abroad or out of the funds held in the bank account maintained with Authorized Dealer or with the authorized Indian bank as the case may be.
4. Proceeds of redemption or sale under the scheme shall be credited to non-resident special rupee account r the non-resident ordinary account.