NRI investments now considered as domestic investments

The Union Cabinet has allowed some changes in the FDI Policy whereby NRIs are considered on par with OCIs (Overseas Citizens of India) and PIOs (Persons of Indian Origin). Secondly all NRI investments on repatriable basis will be henceforth considered as domestic investments. Since NRI has been clubbed together with OCI and PIO, that means all investments by NRIs, OCIs, PIOs on repatriable basis will be considered as domestic investments. So all reporting requirements under the relevant FEMA regulations will not be necessary in case of NRI/ OCI/ PIO investments in future. The relevant notification to the FEMA regulations is awaited, but the gist of the Press Release is as given below:

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to review of Foreign Direct Investment (FDI) Policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs).  Following are the amendments approved by the Cabinet to incorporated in FDI policy:

(i)           By amending relevant para, definition of NRI will be as under:

‘Non-Resident Indian’ (NRI) means an individual resident outside India who is 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”.

(ii)   To provide that investment by NRIs on on-repatriable basis is domestic. Following new para is approved to be added:

‘Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.’

The decision that NRI includes OCI cardholders as well as PIO cardholders is meant to align the FDI policy with the stated policy of the Government to provide PIOs and OCIs parity with Non Resident Indians (NRIs) in respect of economic, financial and educational fields. Further the decision that NRIs investment under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment made by residents, is meant to provide clarity in the FDI policy as such investment is not included in the category of foreign investment. The measure is expected to result in increased investments across sectors and greater inflow of foreign exchange remittance leading to economic growth of the country.

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