FEMA for NRIs: A Guide to Sending Money & Investing (2025)

Current Account Transactions

• These are day-to-day transfers and payments made for goods, services, gifts, travel, or education. For example, sending money to support your parents, paying tuition for your niece, or transferring funds for medical expenses are all current account activities. They’re typically straightforward and allowed without prior approval.

Capital Account Transactions

• These involve changing your financial position in India, buying a home, transferring ownership of shares, or repatriating investments. Because they impact India's asset position, they are more tightly monitored and often require permissions or specific documentation.

Unlimited Transfers Permitted

• There are no limits on how much you can send into your Indian accounts, whether it’s your own or a relative’s. The two main account types used for these purposes are:

NRE (Non-Resident External):

• Meant for foreign income

NRO (Non-Resident Ordinary):

• Used for income earned in India (rent, pension, dividends).

Common Purposes

• Family maintenance
• Charitable donations
• Investment in mutual funds, property, or businesses

Funds transferred to these accounts must be routed through approved banks and should comply with FEMA documentation norms to avoid scrutiny.

NRE Accounts

• Since these accounts hold foreign earnings, withdrawals and repatriation from them are fully free. You can move this money back to your country of residence without any tax liability in India. Interest earned is tax-free in India as well.

NRO Accounts

• These contain Indian earnings and come with restrictions. You may remit up to $1 million annually, subject to certain documentation.
• Form 15CA: Declaration of payment details to the Income Tax Department.
• Form 15CB: A certificate from a Chartered Accountant confirming tax compliance.

Delays or errors in these forms can cause transaction hold-ups or fines. So, double-check everything before initiating a transfer.

Permissible

• Residential properties (flats, apartments, houses)
• Commercial properties (shops, offices, showrooms)

Not Permitted

• Agricultural land
• Farmhouses
• Plantation plots (unless inherited or gifted)

Payment Routes

• Use NRE/NRO/FCNR accounts
• Inward foreign remittance
• Indian housing loans (must be repaid via banking channels)

Transactions involving property must be routed through official banks, and all records must be retained in case of future scrutiny by the Reserve Bank of India or income tax authorities.

Repatriation Limits

• Up to $1 million per year is allowed
• Requires documentation (Form 15CA and 15CB again)

If the property was bought using NRE funds or foreign earnings, repatriation is easier. Otherwise, it must adhere to the $1 million annual cap, even if the sale amount exceeds this limit.For jointly held properties or inherited assets, additional affidavits and succession certificates may be necessary.

Allowed

• Equity shares (through Portfolio Investment Scheme)
• Mutual funds (via NRE/NRO/FCNR)
• Fixed deposits
• Government bonds

Not Allowed

• Chit funds
• Real estate companies involved in agricultural development
• Unregistered or speculative ventures

Investments must be made through SEBI-approved brokers, and banks must be notified of the NRI status to ensure proper FEMA classification.

Gifting Funds

• NRIs can gift money to family members, both residents and non-residents. Large gifts might require income tax reporting or FEMA compliance, depending on the recipient’s status and amount.

Inherited Assets

• Assets inherited by NRIs—property, deposits, shares—can be repatriated, but only after the tax dues are cleared. Supporting documents like a will, probate, or succession certificate are required to validate ownership.

Q. I’m an OCI—Do FEMA rules apply to me?

• A. Yes. NRIs, OCIs, and PIOs fall under the same FEMA umbrella for most financial activities.

Q. What if I unintentionally break a FEMA rule?

• A. Don’t panic. You can resolve it through compounding, a legal settlement option offered by the RBI. It involves paying a penalty rather than facing prosecution.

Q. Can I transfer from NRO to NRE?

• A. Not directly. You must go through repatriation, pay taxes, and file Forms 15CA/15CB. After approval, the funds can be credited to your foreign bank.

Key Takeaways:

• Know the purpose of NRE vs NRO accounts
• Use approved channels for all transactions
• Maintain proper records and documentation
• Always check annual remittance caps
• Don’t mix foreign and local income sources in the same account

Following these steps not only keeps you compliant but also brings peace of mind.