NRI / RI Investing via Gift City or Overseas Funds.

Since you have returned to India for long-term stay, your case should now be examined as a Resident under FEMA. In such a situation, the NRE account should generally be redesignated, and the FCNR proceeds on maturity should ideally be transferred to an RFC Account or Resident Account, as applicable.

Accordingly, if you now wish to make fresh investment in overseas USD funds or GIFT City products, the correct and safer route is generally through your RFC / Resident banking channel, and LRS would ordinarily apply if you are treated as a Resident Individual under FEMA.

Therefore, direct transfer from NRE account to overseas / AMC account is generally not the proper route. Even if the bank technically permits such transfer, FEMA / LRS compliance will still apply.

In our view, you should first regularise the funds through the RFC Account and then make the investment through the proper banking channel after checking your exact FEMA residential status.

For a more detailed opinion based on your facts, bank status, and proposed investment structure, kindly book a phone consultation.

Please find below answers

a) Yes since you are residen tin India for FEMA purpose the transaction shall be classified as LRS Transaction only for transfer to GIFT City

b) Yes LRS still will be applicable since nature of account is irrelvant, more important is your legal status under the act which will be Resident for the purpose of FEMA and therefore LRS shall be applicable

Dear Sir,

With reference to your query, please find below a concise clarification:

1. Transfer from NRE / FCNR Accounts:
   You may remit funds directly from your NRE/FCNR accounts to an overseas or GIFT City-based AMC, provided the funds represent balances accumulated while you were an NRI. Such remittances are treated as repatriation of existing foreign currency funds and do not fall under the Liberalised Remittance Scheme (LRS).

2. Applicability of LRS:
   LRS becomes applicable in the following situations:

   • If the funds are first transferred to your resident savings account and then remitted abroad; or

   • If the investment is treated as a fresh overseas investment made after becoming a resident in India.

   In such cases, the remittance will be subject to the USD 250,000 per financial year limit under LRS, along with applicable regulations.

3. Bank Processing:
   Even if your bank permits a direct overseas transfer, the regulatory treatment will depend on the nature and source of funds, not merely the transaction route.

Conclusion:
To avoid LRS applicability, it is advisable to remit funds directly from your NRE/FCNR accounts before any re-designation or transfer to a resident account.

You may also consider obtaining a confirmation from your authorized dealer bank to ensure proper classification of the transaction.

Thanks & Regards,

Payal Chhajed