Remittance of Dividend/Interest and other Income

I. Remittance of Dividend/Interest on Shares/Bonds/Debentures held by NRIs/OCBs on repatriation basis

1. In cases where the dividend/interest is to be credited to the non-residents holder’s NRE account with a bank in India, it may be paid by issuing individual dividend/interest warrants to the shareholder’s mandate banks for credit to NRE account. The following particulars/documents should be furnished by Indian companies alongwith the dividend/interest warrant.

(a) Nationality and origin of the non-resident share/bond/debenture holder and place/country of permanent residence;

(b) A certified statement from the company, under the signature of an authorised official, showing the number of shares/bonds/debentures held by the non-resident, face value, number and date of Reserve Bank’s approval under Section 19(1)/ 29(1)(b)/29(4) (a) of the Act for issue/purchase holding of the shares/bonds/debentures, rate of dividend declared or interest payable, year/period to which it relates, gross dividend/interest, tax deducted at source and net remittable amount;

(c) A certified statement from the company, under the signature of an authorised official, that in terms of permission granted by Reserve Bank for acquisition of the shares/bonds/debentures there is no prohibition for the remittance of dividend/ interest.

On receipt of the above particulars/documents and after verifying documents evidence that the permission granted by Reserve Bank to the non-resident share/bond/debenture holder for purchase/holding/issue of shares/bonds/debentures under Section 29(1) (b)/29(4)(a)/19(1) of FERA 1973 does not prohibit the remittance of dividend/interest, authorised dealers may credit the amount of the dividend/interest warrant to the NRE account of the non-resident share/bond/debenture holder.

2. While granting permission to bank branches of authorised dealer to purchase shares/debentures on behalf of NRIs, under the Portfolio Investment Scheme, Reserve Bank also authorises the bank branch concerned to remit or to credit the dividend/interest to the non-resident investor’s NRO/NRE/FCNR account as the case may be. Dividend/interest due to the non-residents may accordingly by credited to the respective accounts for ensuring that the conditions laid down in this regard are satisfied.

Dividend/interest due to non-resident share/bond/debenture holders who are not eligible for having them remitted abroad should be paid to their mandate bankers in India for credit to their NRO accounts. Reserve Bank would permit repatriation of the net (i.e. after payment of tax) income/interest earned during the financial year 1994-95 and onwards on such investment in accordance with the procedure laid down.

4. Before allowing remittance of dividend/interest to an OCB, authorised dealers should ensure that it has submitted the required annual certificate in Form OAC Or Form OAC1 as the case may be, and that the ownership/beneficial interest of non-resident individuals of Indian nationality/origin had remained at or above the level of 60% upto the end of the period for which dividend is to be remitted.

II Remittance of Income on Investment on non repatriation basis

Non- resident of Indian/origin (NRIs) and overseas corporate bodies (OCBs) predominantly owned by NRIs have been permitted to make investment with Indian companies/ banks unit of Unit Trust of India, etc. on non-repatriation basis. NRIs are also permitted by Reserve Bank to grant loans to resident persons/firms/companies on non-repatriation basis. Further the investment/deposits held in India by Indian national who have become non-residents on account of their going abroad on employment/emigration, as well as income/interest earned on such investments/deposit/loan is also not allowed to be repatriated abroad. Investment made by NRIs out of rupee loans from banks in India against the security of NRE/FCNE account, sale proceeds of the house/flat acquired/ constructed out of loans obtained in India against the security of NRE/FCNR accounts, if sold, continue to be non-repatriable Authorised dealers may allow repatriation of net income/interest earned (i.e. after payment of tax) on these investments/deposits/loans as also of net income by way of rent earned on house/ flat acquired/constructed, in phased manner as under:

Income earned Amount eligible for repatriation During financial year 1995-95 Upto US $ 1,000 (U.S. dollars one thousand) in full and one third of the balance amount of income.

1995-96 Upto US $ 1,000( U.S. dollars one thousand) in full and two third of the balance amount of income.

1996-97 onwards Entire income.

Since the entire income will be repatriable from 1996-97 onwards, remittance.

Pertaining to the period 1996-97 and onwards will be permitted to be made either in One lumpsum or suitable instalments, if so desired by the applicants.

(ii) For the purpose of availing of this facility the concerned NRI/OCB Should designate a branch of an authorised dealer through whom the remittance on income is sought to be made and submit an application to it in Form RCI duly completed, together with the documents specified therein and details of income earned on investments/deposits as also any other income like pension earned. Authorised dealer on satisfying himself with reference to the particulars /documents and the Chartered Accountants certificate furnished that the income/interest etc. sought to be repatriated is eligible for remittance, may allow the remittance out of the relevant funds held in the applicants NRO account or credit the same to the NRE/FCNR account of the applicant after ensuring that the Income-Tax has been paid as per the provisions of Income-Tax Act and an undertaking/ certificate regarding payment of Income –Tax has been produced from the Income tax Authorities.

III. Repatriation of Interest/Dividend/Maturity Proceeds of Government Securities/National Plan and Savings Certificates/Units

Interest and maturity proceeds of Government securities including National Plan/Savings Certificate, sale proceeds of Government securities sold on Stock Exchange as well as dividend on Units of UTI and repurchase proceeds thereof may be credited by authorised dealers to the NRO accounts of non-resident investors without reference to Reserve Bank. As far as credits of such funds to NRE/FCNR accounts are concerned powers of authorised dealers are restricted to cases where the original investment was made by remittance from abroad or by debit to the NRE/FCNR account to make remittance to the investor abroad only if the payment is received from UTI with a confirmation that the investment in those units was made out of funds received from abroad in an approved manner or by debit to NRE/FCNR account of the unit holder. In all other cases, dividend/repurchase proceeds should be credited to NRO accounts.

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- Vakilno1 is a group of Law Enthusiasts and Legal Experts in India with a passion to provide the latest info and articles on Indian Legal System

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