FEMA & Regulatory Compliance for NRIs in USA

NRE, NRO, and FCNR accounts -- what each is for

An NRE (Non-Resident External) account holds foreign earnings remitted into India; both principal and interest are freely repatriable, and interest is tax-exempt while NRI status is maintained. An NRO (Non-Resident Ordinary) account is for income that arises in India (rent, dividends, pension) and existing resident-account balances re-designated on NRI status; interest is taxable, and repatriation is subject to specific limits and documentation. An FCNR (Foreign Currency Non-Resident) account holds foreign-currency term deposits, avoiding exchange-rate risk on the deposited currency. Continuing to operate an ordinary resident savings account after becoming an NRI is a FEMA violation -- it must be converted to NRO (or closed) once residency status changes.

The USD 1 million repatriation scheme for NRO funds

Under RBI's remittance facility for NRIs, balances in an NRO account -- including sale proceeds of inherited or purchased property, and other legitimate India-sourced funds -- can generally be repatriated up to USD 1 million per financial year, subject to payment of applicable taxes and submission of the prescribed certificates (typically Form 15CA/15CB, certified by a Chartered Accountant, confirming tax has been paid or provided for). This limit and the supporting documentation requirements are set by RBI and can be revised, so the current limit and forms should be confirmed with the remitting bank at the time of transfer.

PAN and Aadhaar for NRIs

A Permanent Account Number (PAN) is required for most financial transactions in India -- opening NRO/NRE accounts, buying property, filing tax returns, and investing in securities. Aadhaar is generally not mandatory for NRIs the way it is for resident Indians, and an NRI's Aadhaar (if previously obtained while resident) does not need to be linked to PAN in the same way a resident's does, though banks and other institutions may still ask for it as one acceptable form of KYC -- carrying valid, current KYC documents (passport, OCI card, overseas address proof) avoids friction with Indian banks and registrars.

Investment compliance -- what NRIs can and cannot hold

NRIs can invest in most listed securities, mutual funds, and non-agricultural property on a repatriable or non-repatriable basis depending on the funding source (NRE vs. NRO), and can invest in Indian companies under the FDI/portfolio investment framework described in this platform's Business section. NRIs generally cannot purchase agricultural land, plantation property, or farmhouses (these can typically only be inherited, not purchased), and specific instruments (e.g., certain small savings schemes) may not be open to NRIs at all -- it's worth confirming eligibility for any specific scheme before investing.

Annual compliance checklist for an NRI with Indian assets

1. Confirm accounts are correctly designated as NRO/NRE/FCNR, not left as resident accounts.
2. File an Indian income tax return if Indian-sourced income exceeds the applicable threshold.
3. Keep Form 15CA/15CB documentation current for any planned repatriation during the year.
4. Review whether any FEMA reporting is pending for property purchases, gifts received, or business investments made during the year.
5. Re-confirm residential status for the year under Section 6 (see this platform's Tax section) since it can change year to year based on days spent in India.