What changed
Earlier, credit of FDI sale proceeds to NRE/FCNR(B) accounts was allowed only under Schedules 3, 4, and 5 of FEMA Notification 20/2000. Now, RBI has clarified that the same facility is also available under Regulation 11 of that notification, following a committee recommendation.
What it means for you
Banks can now process credit of FDI sale proceeds to NRE/FCNR(B) accounts for NRIs/PIOs under Regulation 11, provided the original purchase consideration came from inward remittance or those accounts. This simplifies repatriation and reduces compliance ambiguity for such transactions.
What you must do
- Update internal guidelines to allow credit of FDI sale proceeds to NRE/FCNR(B) accounts under Regulation 11.
- Verify that the original investment was funded via inward remittance or from NRE/FCNR(B) accounts.
- Ensure applicable taxes are deducted before crediting proceeds.
- Inform customers about this clarification and update your advisory materials.
Who it affects
Authorised Dealer (AD) banks, Non-resident Indians (NRIs), Persons of Indian Origin (PIOs), Customers dealing with FDI investments in India
Can all FDI sale proceeds be credited to NRE/FCNR accounts now?
Only if the original investment was paid through inward remittance or funds from NRE/FCNR(B) accounts, and subject to applicable taxes. This applies to NRIs/PIOs under Regulation 11.
Does this circular change any tax requirements?
No, it only clarifies the credit facility. Applicable taxes must still be deducted as per existing laws.
Which regulation previously allowed this?
Earlier, it was allowed under Schedules 3, 4, and 5 of FEMA Notification 20/2000. Now it is also clarified under Regulation 11.