FEM (Deposit) Regulations, 2000 (Deposit Regulations) permits a person resident outside India to open a (i) Non – Resident Ordinary Rupee (NRO) Account or (ii) Special Non – Resident Rupee Account (SNRR) for remittance in India. The Deposit Regulations specifies the eligibility conditions and the permissible credits or debits with respect to these accounts. The important conditions are mentioned below:
NRO Account
Eligibility: Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transactions in rupees not involving any violation of the provisions of the Act, rules and regulations made thereunder.
These accounts may be opened/ maintained in the form of current, savings, recurring or fixed deposit accounts. At the time of opening of the account, the account holder should furnish an undertaking to the authorised dealer/ authorised bank with whom the account is maintained that in cases of debits to the account for the purpose of investment in India and credits representing sale proceeds of investments, the account holder will ensure that such investments/ disinvestments will be in accordance with the regulations made by Reserve Bank in this regard.
The following are the permissible credits/ debits in NRO Account
(A) Credits
(i) Proceeds of remittances received in any permitted currency (i.e. a foreign currency which is fully convertible) 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.
(ii) Legitimate dues in India of the account holder.
(iii) Transfers from other NRO accounts.
(iv) Any amount received by the account holder in accordance with the rules or regulations made under the Act
(B) Debits
(i) All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank.
(ii) Remittance outside India of current income in India of the account holder net of applicable taxes.
(iii) Transfers to other NRO accounts.
(iv) 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.
Thus, the Deposit Regulation permits receipt of fully convertible foreign currency from outside India through banking channels and also permits all local payments in rupees.
SNRR Account
The following are the conditions relevant under the Deposit Regulations for opening SNRR Account in India:
· Eligibility: Any person resident outside India, having a business interest in India, may open a SNRR account with an authorised dealer for the purpose of putting through bona fide transactions in rupees, not involving any violation of the provisions of the Act, rules and regulations made thereunder.
· The SNRR account should carry the nomenclature of the specific business for which it is in operation.
· The debits and credits in the SNRR account should be specific/ incidental to the business proposed to be done by the account holder.
· All the operations in the SNRR account should be in accordance with the provisions of the Act, rules and regulations made thereunder.
· The tenure of the SNRR account should be concurrent to the tenure of the contract/ period of operation/ the business of the account holder and in no case should exceed seven years. No operations are permissible in the account after seven years from the date of opening of the account.
· The balances in the SNRR account shall be eligible for repatriation.
The Deposit Regulations also permits a person resident outside India to open a SNRR Account when it has a business interest in India and the credits or debits in the SNRR Account should be specific/ incidental to the business proposed to be done by such entity. Accordingly, a person resident outside India is permitted to open a SNRR Account with an authorized bank in India.
From the above, it is clear that a company incorporated in another jurisdiction has the option to open a NRO Account or a SNRR Account subject to satisfying the conditions mentioned in the Deposit Regulations. It may be noted that it is the discretion of the Authorised Banks to entertain such accounts and the standards may vary from bank to bank and banks are particularly cautious while opening such accounts for non – residents, some banks have still not issued the internal guidelines for opening these accounts and refuse to open such accounts considering the regulatory aspects involved in such accounts.
(Author can be contacted @ muthukumaran.adv@gmail.com for queries and comments)
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