guest post is contributed by Dipanjali
Nagpal of Vinod Kothari & Co. The author may be contacted at [email protected].
upon an earlier more brief post
on the topic.]
Ministry of Commerce and Industry, Government of India reviewed the Consolidated
Foreign Direct Investment (FDI) Policy Circular of 2015 effective from May 12,
2015 with respect to investments by Non Resident Indians (NRIs), Persons of
Indian Origin (PIOs) and Overseas Citizens of India (OCIs) through its Press
Note 7 (2015 series) and accordingly amended Para 2.1.27 and inserted Para
3.6.2 (vii). The press note shall take effect from June 18, 2015.
Schedule 4 by NRIs
(Transfer or Issue of Security by Persons Resident Outside India) Regulations 2000
(FEMA Regulations) will deemed to be domestic investment at par with
investments made by residents, and as such the FDI Policy has been revised with
an amendment to the definition of an NRI as contained in the policy.
NRIs on non repatriation basis is subject to the following terms and conditions
as provided in Schedule 4 of FEMA (Transfer or Issue of Security by Persons
Resident Outside India) Regulations 2000:
of companies engaged in the business of Chit Fund, Nidhi Company or company engaged in agricultural/plantation
activities or real estate business or construction of farm houses or dealing in
Transfer of Development Rights.
debentures of Indian companies whether by public issue or private placement, on
debentures shall be paid by way of inward remittance through normal banking
channels from abroad or out of funds held in NRE/FCNR/NRO/NRSR/NRNR
account maintained with an Authorized Dealer or with an authorized bank of
India, as the case may be.
debentures under this scheme shall be credited only to NRSR account where the
purchase consideration was paid out of funds held in NRSR account and to NRO or
NRSR account at the option of the seller where the purchase consideration was
paid out of inward remittance or funds held in NRE/FCNR/NRO/NRNR account.
compliant with the aforesaid conditions of Schedule 4 shall not be considered
when calculating FDI in Indian companies. Sectoral caps and other restrictions
shall not apply to such investments. Procedurally, there was no requirement of
filing FC-GPR for investments received by NRIs by Indian companies prior to the
Press Note. Hence, the note has only clarified the same.
in definition of NRIs, PIOs
outside India who is a citizen of India or is an ‘ Overseas Citizen of India’
cardholder within the meaning of Section 7 (a) of the Citizenship Act, 1955.
‘Persons of Indian Origin’ cardholders registered as such under Notification
No. 26011/4/98 F.I, dated 19.8.2002, issued by the Central Government are
deemed to be ‘Overseas Citizen of India’ cardholders.
same meaning assigned to him under the Foreign Exchange Management (Deposit)
Regulations, 2000 as under:
a citizen of India or is a person of Indian origin.
any country other than Bangladesh or Pakistan, if
grand- parents was a citizen of India by virtue of the Constitution of India or
the Citizenship Act, 1955 (57 of 1955);Or
Indian citizen or a person referred to in sub-clause ( a ) or (b);
make it more specific. We can expect an amendment in FEMA regulations too in
the light of the aforesaid amendment.