CHANGES IN FEMA (DEPOSIT) REGULATIONS

CHANGES IN FEMA (DEPOSIT) REGULATIONS;

CHANGES IN A) Non-Resident (External) Account (NRE) Scheme:

i) Authorised Dealers/ banks in India may grant loans against the security of the funds held in NRE accounts to the account holder/ third party in India, without any limits, subject to the usual margin requirements. The loan sanctioned to the account holder can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder. The loan shall be used for the purpose laid down in the regulations and cannot be repatriated outside India.

ii) Authorised Dealers may allow their branches/ correspondents outside India to grant loans outside India to the non-resident depositor or to a third party against the security of deposits, subject to the conditions laid down in the regulations.

iii) The facility for premature withdrawal of the deposits shall not be available where loans against such deposits are availed of.

iv) The term “loan” shall include all types of fund based/ non-fund based facilities.

v) Income from interest on the balances in the account is exempt from income tax and balances are exempt from wealth tax.

vi) Current income like rent, dividend, pension, interest, etc. of NRIs and PIOs will be construed as a permissible credit to their NRE account provided the Authorised Dealer is satisfied that the credit represents current income of the NRI/ PIO account holder and income tax thereon has been deducted/ paid/ provided for, as the case may be.