India Is Expanding Overseas Investment Options For High Net Worth Individuals

India Is Expanding Overseas Investment Options For High Net Worth Individuals

RBI’s recent policy passed the ODI-FDI regulatory relaxation

The Foreign Investment Policy announced by the Reserve Bank of India on 22 August has opened new avenues for investment by HNIs outside India, bypassing the much talked about ODI-FDI (foreign direct investment and investment) immediate cash). Business families in India establish family businesses as part of their estate planning. The new law allows family companies to invest abroad.

India Is Expanding Overseas Investment Options For High Net Worth Individuals
India Is Expanding Overseas Investment Options For High Net Worth Individuals

Family offices have historically struggled to establish offshore holding/investment standards due to ODI regulations that require the host country’s supervisor to approve such an office. Most developed economies (which are the jurisdiction of choice for setting up companies/finances) do not regulate these companies to use their own funds. Under the new regulations, approval is only necessary if the host country’s laws require it. In addition, the family business will now be able to set up an overseas fund, also through its operating company, because under the new law, the Indian company (IE) of not involved in the financial services (SF) currently authorized to do. ODI and companies performing SF activities (except banks and insurance).

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Resident Individuals (RIs) can buy property outside India with repayments under the Liberalized Repayment Scheme or LRS (ie $250,000 per annum). Obviously, the IR must invest money from other family members to acquire the property. Initially, in such cases, all the family members who paid the fee will have the room. This has created significant difficulties for HNIs to acquire their desired properties abroad. Under the new rules, RIs can combine the LRS income of relatives who live outside India. Under the old law, IRs were allowed to conduct ODIs in foreign companies, however, overseas portfolio investments (OPIs) were not clearly defined. The new rules brought a clear line of demarcation between ODI and OPI. An investment, in which less than 10% of the paid-up capital and/or voting rights, by IR in a listed company is automatically classified as an IPO. In addition, the acquisition of shares under the ESOP regime that results in the acquisition of less than 10% of the capital of a foreign listed / unlisted company will also be classified as an IPO. It may be noted that OPI is not subject to sector restrictions and therefore, unlike ODI, it can be in sectors such as real estate, gambling and specific financial products.

It should be noted that shares received through the ESOP program have been excluded from the LRS limit and, therefore, IR can pay without any limit to these accounts. However, the amount of money has been made for the following organization to be reduced to the limit of this year. So, you can make money for $ 1 million to travel, but you can’t go an abroad that year, because you’re going to borge. However, the regulations do not appear to suggest that the transfer fee should be exceeded, so the LRS limit of $250,000 should be reinstated in the next fiscal year.

For IBOs, the limits of ODI and OPI remain at 400% and 50% of their net worth, respectively – the definition of net worth has now become stricter. Net worth was previously defined as net capital and reserves and not invested in reserves. The negatives are now removed. Now, without a doubt, the ratio of ODI and OPI will be calculated based on the “good” values ​​(as defined in the company’s bylaws, which include capital and reserves) of the company, which ‘Many conditions will increase overseas. investment.

The government has gradually reformed the foreign exchange management policy. Using a positive approach, the government has also clarified some key issues in the existing ODI system. The new law is expected to promote foreign investment and expand the sphere of influence of Indian entrepreneurs globally.