Globalisation has meant increasing interchange of not only goods and services, but also of persons who provide these. With the Indian economy growing in leaps and bounds and Foreign Direct Investment pouring in, it is inevitable that the number of foreign nationals visiting and staying on in India for business purposes has also witnessed a commensurate increase.

Under Indian law, the legal rights of and the restrictions imposed on foreign nationals depend on whether they are categorised as residents or non-residents. Under the Indian foreign exchange regulations, a person is said to be ‘Resident in India’, if he/she has stayed in India for a period of more than 182 days during the course of the previous financial year for the purpose of taking up employment in India or for carrying on in India any business or vocation or for a course of study or for any other purpose which indicates an intention to stay on for an uncertain period of time. Thus, a foreign national may be a resident in India in the above circumstances. Under this definition foreign tourists in India would naturally be excluded.

Indian law also recognises a distinct category called Persons of Indian Origin (PIO) and extends certain privileges to them. Given the obvious constraints of space in an article of this nature, we have highlighted only the essential features of the legal regime applicable to foreign nationals resident in India. This includes practical aspects like operation of bank accounts, retention and remittance of salary/profits, acquisition of immoveable property and overseas insurance payments.

General Entry Requirements

Entry into India generally requires a valid visa granted by an Indian Mission abroad. Furthermore, foreigners who enter India are required to register themselves with the Foreign Regional Registration Office (FRRO), if they intend to reside in India for a consecutive period of more than 180 days.

Various kinds of visas are available, depending on the purpose of the visit. To take an example, tourist visas are typically non-extendable and are usually granted for a maximum period of six months. The duration of the validity of the visa may, however, vary depending on the country where it is issued. Thus, a ten-year tourist visa is available to US citizens under a bilateral agreement.

Visas granted for business or employment in India are typically of a longer duration and are extendable within India. The duration of the visa may depend on the duration of the employment contract or the business and sometimes, also on the place of issuance of the visa. For instance, the Indian embassy in Washington may issue a business visa valid for ten years with multiple entries, which is available to foreign businessmen who have set up or intend to set up joint ventures in India.

Foreign citizens wishing to pursue further studies in India can get a student visa for a maximum period of five years though it is usually granted for the duration of the course of study. Visas are also available for persons who are attending seminars and conferences and for journalists on assignment in India. It is pertinent to note that change of purpose of the visit is not permissible, and therefore, it is very important to select the right kind of visa before entering the country. In case a person intends to change the purpose of visit to India, he/she would require a fresh visa from the Indian Mission, which issued the original visa.

The Indian Government has recently announced a scheme for PIOs. A PIO is a person who at any time held an Indian passport, or who was born, permanently resided in or whose parents, grand parents or great grandparents were born and permanently resided in India. Spouses of such persons are also considered to be PIOs. Under this scheme, the holder of a PIO card (valid for 20 years) can enter and exit India without a visa. A number of foreign nationals (such as the Managing Editor of Diplomatist Magazine) who are PIOs are likely to benefit from this scheme.

Bank Accounts

A person may bring into India from any place outside India without limit foreign exchange other than unissued notes. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or traveller’s cheques brought in by such person at any one time exceeds US$10, 000 or its equivalent or the aggregate value of the foreign currency notes brought in by such person at any one time exceeds US$5000 or its equivalent, a declaration to that effect is required to be made to the Custom authorities.

Another issue that may be relevant to foreign nationals who are resident in India is that of possession and retention of foreign currency notes. Here, Indian law draws a distinction between residents who are non-permanent and those who are permanent. A non-permanent resident is a person who is resident in India for employment for a specific duration, and a specific job or assignment of duration of not more than three years. Such residents can hold limitless amounts of currency notes acquired when they were abroad. Permanent residents can only hold a specified quantity (equivalent of US$2000) of foreign exchange, if such currency notes were acquired when they were abroad as a gift or honorarium, or as consideration for services rendered or business conducted there, or is the unspent amount of foreign exchange from a foreign visit. Further, the foreign exchange so possessed is permitted to be taken out of India in accordance with the Indian exchange control regulations.

One of the most important issues facing foreigners residing in India is how to deal with any foreign exchange they may earn or possess. Persons resident in India are entitled to open various types of foreign currency accounts. One type of such foreign currency account is the Resident Foreign Currency Account (“RFC”). A person resident in India may open a RFC account out of, inter alia, foreign exchange received from his employer outside India as pension or any other super annuation or other monetary benefits. The funds in the RFC account are free from all restrictions regarding utilisation outside India. The account shall be maintained in the form of current account or savings account or as a term deposit.

Another type of account that can be opened is the Resident Foreign Currency (Domestic) Account (“RFC (D)”). The RFC (D) account can be opened out of the foreign exchange acquired in the form of currency notes, bank notes and traveller’s cheques while on visit outside India, or by way of earning through export of goods/services etc. However, debits to these accounts shall be in accordance with the regulations stipulated by the Reserve Bank of India (“RBI”). The account shall be maintained in the form of a current account and shall not bear any interest.

A third type of foreign currency account that is permitted in respect of foreign nationals resident in India is the Exchange Earner’s Foreign Currency Account (“EEFC”). However, the credits and debits to such accounts shall be in accordance with the conditions stipulated by the RBI.

The abovementioned foreign currency accounts can be opened singly or jointly in the name of the person eligible to open such accounts. Further, foreign nationals resident in India are permitted to open rupee accounts in accordance with the regulations stipulated by the RBI.

Foreign nationals resident in India being employees of a foreign company on deputation to the office/branch/subsidiary/joint venture in India of such foreign companies may open, hold or maintain foreign currency accounts with a bank outside India for receipt of salary payable to them for services rendered in India.

Property

When a foreign national qualifies as a person resident in India, he may continue to hold, own, transfer or invest in foreign currency, foreign security or immoveable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India.

When a foreign national leaves India (and becomes a resident outside India) he may continue to hold, own, transfer or invest in Indian currency, security or property which was acquired, held or owned by such person when he was a resident in India.

It may be noted that the position outlined in the above two paragraphs is subject to specific regulations under Indian foreign exchange laws.

Foreign nationals, though resident in India, require prior approval of the Reserve Bank of India in order to acquire (including buying or leasing) immovable property in India. However, a Foreign Embassy/Diplomat/Consulate General may either purchase or sell immovable property other than agricultural land/plantation property/farm house after obtaining clearance from Government of India, Ministry of External Affairs, and provided that for acquisition of such property consideration has been paid out of the remittance from abroad through normal banking channels.

Remittance of Assets

There is a general prohibition against persons resident in India remitting assets outside India, without the approval of the Reserve Bank of India. Certain categories of foreign nationals – like persons who have retired from employment in India and widows of Indian residents who inherited their assets in India and are residing outside the country – may freely remit assets outside the country up to the value of US$ 1 million per year subject to fulfilling certain conditions.

Students who are foreign nationals and who have completed their studies in India are also permitted to remit their bank balances, as long as they these were received through normal banking channels, or were the rupee proceeds of foreign exchange brought from abroad, or comprised of the stipend or scholarship received from the government or any other organization in India.

Foreign nationals resident in India being employees of foreign companies outside India on deputation to the office, branch, subsidiary or joint venture in India, who hold a foreign currency account with a bank outside the country, are entitled to credit up to 75% of their salaries received from the foreign company to these overseas accounts.

Insurance

Ordinarily, persons resident in India are not allowed to take insurance, life or non-life cover, from companies outside India. However, non-life insurance cover can be taken from a foreign insurance company after the issuance of a ‘no-objection’ certificate from the Government of India. Foreign nationals who become permanent resident in India may also continue to hold any policy issued to them when they were residing outside the country, subject to the condition that premiums are paid out of foreign currency resources or the Resident Foreign Currency account of such persons. In case of a foreign life insurance policy in force for a period of not less than three years prior to the policyholder’s coming to India, premiums may even be paid through a remittance from India, if prescribed conditions are met.

There are also some restrictions on the claims or benefits accruing from insurance policies taken abroad. Proceeds accruing from a policy outside India (for which premiums have been paid from external foreign currency resources or an RFC Account) can be credited to the assured’s foreign currency account held outside India or his RFC account in India. In case of a foreign life insurance policy for which premiums have been paid out of remittances from India, proceeds must be repatriated to India within 7 days of their receipt.

Concluding Remarks

The above introduction to some of the salient aspects of Indian law relevant for foreign nationals in India will hopefully ensure that such Indian laws do not remain alien to them.

India today, thrives under a far from perfect, but, nevertheless, considerably liberalised and flexible regime that offers tremendous opportunities y for those who are aware of its governing structures – laws included. Life in India can be a truly hassle-free and joyous experience for foreign nationals who understand this!

Rajiv K. Luthra is the founder and Managing Partner of Luthra & Luthra Law Offices. He has been ably assisted by Mr. Akhil Anand, Attorney-at-Law, Luthra & Luthra Law Offices in research of this article. This column provides general observations on applicable laws. Readers are requested to consult qualified lawyers for specific legal problems. The author and publisher shall not be responsible in case any damage or loss is caused to any person as a result of action taken on the basis of this article. Contact the author at email: aanand@luthra.com