In its midterm monetary policy review announced on 31^st of October this year, the Reserve Bank of India (RBI) had announced that Resident Indians would be allowed to invest USD 50,000 abroad in place of the earlier USD 25,000 limit.

Yesterday, on December 20th, this intention was finally executed in terms of the release of AP (DIR Series) Circular No. 24. The circular simultaneously relaxes some terms and conditions applicable earlier. Earlier a resident individual was permitted to remit

- Upto USD 5000 per calendar year as a gift to anyone overseas.
- Upto USD 5000 per calendar year towards donation
- An investment in overseas companies was only allowed in stocks (a) listed on a recognised stock exchange abroad and (b) which has the shareholding of at least 10 per cent in an Indian company listed on a recognised stock exchange in India e.g. one could buy Unilever as it holds more than 10% in Hindustan Lever but not say Google.

Now,
- The limit of USD 50,000 is applicable for the financial year as against the calendar year and includes remittances towards gift and donation by a resident individual. Which means an individual can if he or she so chooses gift a person overseas USD 50,000 per calendar year if desired, in place of the earlier USD 5,000 limit.
- The requirement of 10 per cent reciprocal shareholding as mentioned above has been dispensed with.

In other words, USD 10,000 representing the allowable limit for gifts and donations respectively will no longer exist and there will be one single limit of USD 50,000 per annum, per person for gifts, donations and investments.

It has also been clarified that soliciting of deposits etc. by entities, which do not have an operational presence in India, gives rise to supervisory concerns. Therefore, all banks, both Indian and foreign, including those not having an operational presence in India would need to seek prior approval from RBI for the schemes being marketed by them in India to residents either for soliciting foreign currency deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.  That being said, it must be noted that though a bank or a fund house is expected to take RBI permission, a resident individual’s right is in no way restricted from availing of the scheme. In other words, you as an investor can very well approach an Authorised Dealer (AD) and request remittance of the funds in an off-shore deposit or a mutual fund or a stock of your choice. And the AD will have to comply. But, the story does not end here. Foreign markets too have their own regulatory and permission mechanism in place. Therefore, before deciding upon an investment, (though India’s RBI allows you), you will have to determine whether you are eligible to invest in that market as per the rules and regulations of that country. If you are, USD 50,000 per year is there for the asking.  In terms of the paperwork, the person intending to make the remittance would need to submit an Application cum Declaration, which will contain the details of the person including the PAN, source of funds and nature of investment desired. The Bank through which the remittance is sought to be made will issue a certificate stating that the remittance is not being made to ineligible entities and is indeed in conformity with RBI regulations.

Related posts:

1. Demat FAQs (NRI)
2. You can’t transfer shares from old demat to the new
3. Flash PAN every time you invest
4. How NRIs can invest in Indian markets