Praveen Saanker

Selling your business ? First get your asset protection plan right..

Kapur, a successful software developer, was selling his business for several million dollars. As is common in such sales, he had to make representations and warranties about the quality of the software. As is also common (more than 45% of the time), the buyer ended up suing the seller for breach of warranty.

Knowing that this was a possibility, Kapur put the proceeds of the sale into an asset protection trust. A year later, when the suit came, his assets were out of the reach of the creditor.

Bottom line

Simple…Anybody selling a business should have an asset protection plan.

Protecting Business Owners Against Liability

Mr & Mrs Kapadia are settled in California with strong roots in India and each own shares in a building-supply company with Mr.Kapadia owning 75% of the stock and Mrs. Kapadia owning 25%. Years ago, they had been told that doing business in corporate form affords the owners a certain degree of asset protection. The problem: that is true if the lawsuit arises out of the operation of the business. But it isn't true if the lawsuit is aimed at Bill or Don personally.

Mr. Kapadia was involved in a minor automobile accident when he was in NJ. He was surprised when we informed him that if the plaintiff obtained a judgment against him, nothing would prevent the plaintiff from obtaining his stock in the company making him the controlling shareholder.

The solution? We coordinated with our Estate Planning Partners in California and converted the company from a corporation to a limited liability company. The result is that there are no shares for the creditor to attach and no possibility of a creditor of one of the owners to seize the assets of the business or otherwise get involved in its operations. Unlike corporate stock, interests in LLCs are protected from claims of creditors in virtually every state

Asset Protection – Case study

 

The company is a successful Delhi based home builder. Over the past few years, following many construction defect lawsuits, the firm found it more and more difficult to carry liability insurance. Coverage was just too expensive. Eventually, the decision was made to stop carrying insurance coverage altogether.

Without insurance coverage, the company-and possibly its owners-were exposed to future lawsuits. Asset protection for the company and its owners was the best alternative to insurance coverage.

The company's operations had to be restructured so that the liability arising out of any one building project would reach only a limited amount of the company's assets, if any. A separate legal entity was established for each construction project. Their protection was enhanced further by having different entities own the real estate and do the developments work.

An additional layer of entities further insulated the individual owners from the liabilities of the business. The ownership of the personal assets of the owners was further restructured.

In its first test, this protective structuring worked as planned-seeing the level of protection it faced, the plaintiff dropped a potential class action lawsuit and accepted a surprisingly low settlement offer.

FEMA - FAQ's

From where does one purchase foreign exchange?
From authorised dealers or money changers.

Who are authorized dealers?
Banks certified by the RBI to transact in foreign exchange and foreign securities are also referred to as authorized dealers.

How much currency is allowed for a business tour?
USD 25,000 is permitted for a business tour to any country, with the exception of Nepal and Bhutan. Requirements in excess of this amount require permission of the RBI. No foreign exchange is permissible for journey to Nepal and Bhutan.

Can additional foreign exchange be taken for a medical trip abroad?
Upto USD 100,000 is allowed for medical treatment overseas. Requirements over and above this will be sanctioned on the basis of an approximation by a doctor or hospital in India or overseas.

How much forex is permitted for studies abroad?
Since students studying abroad are treated as NRIs, all rules applicable to NRIs apply to them as well .They are also entitled to receive forex upto USD 100,000 from relatives towards the cost of their studies.

How much foreign exchange is permitted for persons traveling abroad for employment?
Upto USD100, 000 is allowed from any authorised dealer on the basis of self-declaration.

How much foreign currency can an emigrant take?
Upto USD100, 000 on self- declaration basis is permitted to meet initial expenses in the adopted country. No foreign exchange remittance outside India is permitted to earn points or credits for immigration. Such outward remittances have to be supported by the RBI.

How much foreign currency can be sent as a gift to a person residing overseas?
One can send upto USD 5,000 a year, though amount exceeding this requires permission from the RBI.

How much foreign exchange can be carried by a person visiting India?
Unlimited foreign exchange is allowed .In case the total value of cash instruments – currency notes and travellers cheques - exceeds USD 10,000; a Currency Declaration Form has to be presented to the customs officials on arrival at the airport.

Can a non-resident accept local hospitality from a resident?
Yes.

Can resident Indians open foreign currency accounts in India?
Yes, EEFC Accounts and RFC Accounts can be kept by resident Indians.

In the EEFC account maintained with a bank, residents are allowed to keep 50% of foreign currency remittances received from abroad which can be used for current account transactions and approved capital account transactions as specified by the RBI.

In the RFC Accounts, returning Indians (ex-NRIs), can hold and maintain foreign currency. These funds are free from restrictions on use outside India.

A RFC (Domestic) Account can also be maintained by resident Indians for receiving payments for services abroad, or proceeds of export of goods abroad, or received as gifts from relatives outside India.

Can resident Indians hold possessions outside India?
Yes, as per Section 6 of the Foreign Exchange Management Act, 1999, if such assets were purchased, held or owned during their residence outside India or inherited from a person who was resident outside India.

Can an individual repatriate funds a second time during a calendar year?
Repatriation is allowed only upto a limit of USD 25,000 in a calendar year, and no further remittances are permitted, even if the same funds have been remitted back to India.

How are shares transferred from NRIs to Resident Indians and vice versa?
Transfer from Non-Resident to Non-Resident:
Transfer by way of sale: A person resident outside India can sell his shares or convertible debentures in the following manner:

• The sale can take place provided the receiver does not have any venture in India in the same business
• A NRI may sell the shares and convertible debentures possessed by him  only to another NRI.
• An NRI can sell his shares through an authorised broker in India

Transfer by way of Gift: NRIs can gift to resident Indians as under:

• Any person be located in outside India, can present stocks or convertible debentures to any person resident outside India; provided the receiver does not have an existing tie up in India in the same business.
• A NRI may gift his shares and/ or convertible debentures to another NRI only
• Any person residing overseas may gift shares and/or convertible debentures to a person resident in India.

Transfer from Resident to Non-Resident:
Transfer by sale- General Permission
A resident Indian may sell shares and convertible debentures of any Indian company whose business falls under the Automatic Route, to any person living outside India subject to the sectoral limits.

• Any Indian company that proposes to sell shares or convertible debentures should not be involved in extending any financial service;
• The sale should not fall within the ambit of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997; and
• Pricing procedures, documentation and reporting requirements for such a deal must be as per requirements of the RBI.

Transfer by way of gift:
An Indian resident who proposes to gift to a person resident outside India is required to make an application to the Central Office of Foreign Exchange Department, Reserve Bank with details of
1) Name and address of the involved parties – transferor and transferee
2) Relationship between the two, and
3) Reasons for gifting

What procedure is to be followed in case the transfer does not fall into any of the above categories?
In such cases, an application to the RBI has to be made with

• A copy of FIPB approval.
• Consent/approval letter from transferor and transferee stating the number of shares, name of company in which investment is to be made and the rate at which the transfer is to be made.
• Details of equity participation in the company by residents and non-residents.
• All approvals and copies of FC-GPR from RBI pertaining to existing shares of the non-residents.
• In case the seller is an NRI or an OCB, the copies of RBI approvals of the shares held on repatriation or non-repatriation basis.
• In case the shares by the non-resident are under the SEBI Takeover Regulations, an Open Offer document filed with SEBI
• A Chartered Accountant needs to certify the value of shares in a Fair Valuation Certificate as per guidelines
• If the shares are unlisted, the fair value has to be calculated as per the former Controller of Capital Issue/s.

Can the savings and income earned in India be repatriated?
Yes, except where NRIs invest expressly in non-repatriable schemes. Dividends earned on foreign investments can be remitted without restriction.

Can Foreign Currency Convertible Bonds (FCCBs) be issued by Indian companies?
Yes, in compliance with the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism),1993 provided the External Commercial Borrowing guidelines of the RBI are adhered to.

Can Preference Shares be used as a route to foreign investment?
Yes. Proposals for such investments, which are considered as part of share capital, are filtered either through the automatic route or FIPB depending on the specific case.
 
Can investment be made by NRIs in unlisted shares issued by an Indian company?
Yes.

Is a foreigner allowed to establish a partnership/proprietorship concern in India?
No. Only NRIs/PIOs are allowed to set up a partnership or proprietorship business in India on a non-repatriation basis.

Can rights shares issued by Indian companies be offered to foreigners at a discount?
Yes, provided the rights shares are offered at par to residents as well.
Foreign Technical Collaboration

How are payments made for foreign technology transfer under the Automatic Route of RBI?
Such payments are subject to:

• a maximum of US$2 million;
• Royalty upto 5 % for domestic sales and 8 % for exports, with no bar on the duration of the payments.
• The royalty limits are exclusive of taxes and are calculated as per standard conditions.
• The royalty is worked on the basis of the net ex-factory sale price of the product.
• Payments are made through authorised banks

What is to be done in cases where the Automatic Route of RBI for technology transfer does not apply?
The Ministry of Commerce, Department of Industrial Policy and Promotion, is referred to in such cases.

What is the procedure for foreign firms to establish a Liaison office in India?
RBI approval is required to set up office in India by a foreign company.

How does a foreign company obtain RBI sanction to start a Liaison Office in India?

• The Liaison Office operates as a channel of communication between its overseas Head Office and parties in India. No business activity in India is permitted, and neither can it earn any income in India. The liaison office meets its expenses through inward remittances of foreign exchange from its Head Office abroad.
• To open a liaison office, an submission in form FNC-1 along with relevant documents is made to
  Foreign Investment Division,
  Foreign Exchange Department, Reserve Bank of India,
  Central Office, Mumbai.
• Consent to set up a liaison office at the outset is given for 3 years, which can be subsequently extended by the RBI’s Regional Office
• An annual Activity Certificate from a Chartered Accountant has to be presented at the Regional Office of the RBI, verifying that the Liaison Office is engaged in  only those activities which are allowed by the RBI.

How is a Project Office set up?

• Foreign companies have been granted General Permission by the RBI to open Project Offices in India provided they have secured a contract for a project from an Indian company
• the project is funded wholly by remittance from overseas; or
• the project is funded by a bilateral or multilateral International Financing Agency; or
• the project has been agreed to by a suitable authority; or
• The Indian company awarding the contract has been extended a Term Loan by a financing institution
• In case the above conditions are not met, or if the foreign company is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such requests are sent to the Central Office of the Foreign Exchange Department of the RBI at Mumbai for sanction.

How is a Branch office set up?
RBI permits foreign companies in the manufacturing and trading business to set up Branch Offices in India:

• To represent its parent company to conduct business in India
• To undertake research work in its area of business
• To trade on a wholesale basis
• To encourage possible technical and financial tie-ups between Indian companies and overseas companies.
• Offering professional or consultancy services
• Offering IT and software services
• Giving technical sustenance to the products supplied by the parent company.

Branch offices are not permitted to carry out manufacturing, processing and trading activities on their own. An Activity Certificate from a Chartered Accountant has to be submitted annually to the Central Office of FED. For annual remittance of income, Branch Offices may submit required documents to a bank.

The track record of the Applicant Company, its existing trade relations with India and financial position of the company are taken into account by the RBI while scrutinizing the application

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FEMA - Rules

The Foreign Exchange Management Act, 1999 (FEMA) came into force with effect from June 1, 2000. With the introduction of the new Act in place of FERA, certain structural changes were brought in. The Act consolidates and amends the law relating to foreign exchange to facilitate external trade and payments, and to promote the orderly development and maintenance of foreign exchange in India.

From the NRI perspective, FEMA broadly covers all matters related to foreign exchange, investment avenues for NRIs such as immovable property, bank deposits, government bonds, investment in shares, units and other securities, and foreign direct investment in India.

FEMA vests with the Reserve Bank of India, the sole authority to grant general or special permission for all foreign exchange related activities mentioned above.

Section 2 - The Act here provides clarity on several definitions and terms used in the context of foreign exchange. Starting with the identification of the Non-resident Indian and Persons of Indian origin, it defines "foreign exchange" and "foreign security" in sections 2(n) and 2(o) respectively of the Act. It describes at length the foreign exchange facilities and where one can buy foreign exchange in India. FEMA defines an authorised dealer, and addresses the permissible exchange allowed for a business trip, for studies and medical treatment abroad, forex for foreign travel, the use of an international credit card, and remittance facility

Section 3 prohibits dealings in foreign exchange except through an authorised person. Similarly, without the prior approval of the RBI, no person can make any payment to any person resident outside India in any manner other than that prescribed by it. The Act restricts non-authorised persons from entering into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire any asset outside India.

Section 4 restrains any person resident in India from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property situated outside India except as specifically provided in the Act.

Section 6 deals with capital account transactions. This section allows a person to draw or sell foreign exchange from or to an authorised person for a capital account transaction. RBI in consultation with the Central Government has issued various regulations on capital account transactions in terms of sub-sect ion (2) and (3) of section 6.

Section 7 covers the export of goods and services. All exporters are required to furnish to the RBI or any other authority, a declaration regarding full export value.

Section 8 puts the responsibility of repatriation on the persons resident in India who have any amount of foreign exchange due or accrued in their favour to get the same realised and repatriated to India within the specific period and in the manner specified by the RBI.

 The duties and liabilities of the Authorised Dealers have been dealt with in Sections 10, 11 and 12, while Sections 13 to 15 cover penalties and enforcement of the orders of the Adjudicating Authority as well as the power to compound contraventions under the Act.

Sections 36 and 37 deal with the establishment of an Enforcement Directorate, and empowers it to investigate the violation of any provisions of the Act, rules, regulations, notifications, directions or order issued under this Act.

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Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management,  private banks, about wealth management, fund management, investment companies, financial advisor, asset management company,  banking management,  asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company,Wealth management, investments in India, taxes in india, direct investment in india,Investment in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india,  foreign company in india, the family office,  what is family office, capital investors,  investment in assets,  fdi investments in india, portfolio investments,  investments in property, Praveen Saanker, Praveen saanker, Praveen

 

NRI Banking - Accounts

Repatriable Accounts

Funds that can be transferred or repatriated abroad are maintained in a Non Resident External Bank account. Generally, funds remitted from outside India are credited to this account. Investments made from foreign funds can be repatriated overseas, and such investments are maintained in a Repatriable Demat account.

Non-Resident (External) Rupee (NRE) Accounts

ü  Both Principal and Interest can be repatriated or transferred out of India

ü  Savings rate on NRE accounts is at par with savings rates in resident accounts

ü  Term deposits can be made for 1 to 3 years.

ü  The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP rates as on the last working day of the previous month, for US dollar of corresponding maturity plus 50 basis points.

ü  The interest rates on three year deposits also apply in case the maturity period exceeds three years. The change in interest rate also applies to NRE deposits renewed after their present maturity period.

FCNR (B) Accounts

ü  As in NRE accounts, both principal  and interest are repatriable.

ü  Presently, deposits can be made in 6 specific foreign currencies (US Dollar, Pound Sterling, EURO, Japanese Yen, Australian Dollar and Canadian Dollar).

ü  Interest rate- Fixed or floating within the limits of LIBOR/SWAP rates for the respective currency/corresponding term minus 25 basis points (except Japanese Yen).

ü  The term of deposits can range between 1 to5 years.

NRO Accounts

ü  Only current earnings are repatriable.

ü  Savings NRO accounts are normally operated to credit rupee income from shares, interest, rent from property in India, etc.

ü  In case of term deposits, banks are allowed to determine their own interest rates.

ü  Banks can allow remittance upto USD 1 million per financial year for bonafide purposes from balances in the NRO accounts once taxes are paid out. This limit includes the sale proceeds of immovable properties held by NRIs and PIOs.

Resident Foreign Currency (RFC) Account

NRIs and PIOs returning to India can maintain  an RFC account with an authorized bank in India to transfer funds from their NRE/FCNR (B) accounts. Proceeds of assets held outside India before their return to India can be credited to the RFC account. These funds are free from all restrictions as to their utilization or in investment in any form outside India.

Non-Repatriable Accounts

Non-repatriable funds are those which cannot be taken out of India. These have to be maintained in a separate bank account i.e. a Non Resident Ordinary Bank account.
Investments made from non-repatriable accounts cannot be repatriated but have to be  maintained in a Non-Repatriable Demat account. Money once transferred from an NRE account to an NRO account cannot be transferred back to an NRE account.

Non Resident Ordinary (NRO) Account

ü  When a resident becomes an NRI, his existing savings account is designated as a Non-resident Rupee (NRO) account.

ü  The NRO accounts could be maintained in the nature of current, saving, recurring or term deposits. NRIs can also open NRO accounts for depositing their funds from local transactions.

ü  The interest earned from NRO accounts is accountable to tax laws.

ü  NRO accounts can be opened in the name of NRIs who have left India to take up employment or business temporarily or permanently in a foreign country.

ü  Funds from NRO accounts are not repatriable or transferred to NRE accounts without the prior approval of the RBI.

ü  However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident widows of Indian citizens can remit, through the Authorised Dealer, up to USD one million per calendar year from the NRO account or from income from sale of assets in India.

 

IMD forecasts ‘normal’ rain fall

 

India Meteorological Department’s (IMD) first official long-range forecast predicts a normal South-West (SW) monsoon (June-September) for the country in 2011. This is the first of the two-stage forecast that IMD releases for SW monsoon; a detailed update will follow in June, presenting breakdown of seasonal rainfall over four geographical regions.

 However, in the past, there have been several instances of large deviations between IMD’s projected and actual rainfall.

US Fed remains accomodative

 

Fed has maintained an accommodative stance in its monetary policy, given its view that:

(1) the pace of economic recovery is moderate;

 (2) rising headline inflation is transitory;

 (3) core inflation is subdued;

(4) inflation expectation is anchored.

Going forward, QE3 is unlikely, given that current macroeconomic backdrop is relatively better than the one prevailing during August 2010 when Fed first hinted at QE2. However, I do expect re-investment of treasuries will continue beyond June.

Budget promises to again go unfulfilled...

The Finance Minister's Union Budget-2011 was received with gaiety. The budget promised several things which would all lead to better economic growth for the country. A big promise that was made was to bring down the country's fiscal deficit to 4.6% of GDP from the 2010 level of 5.1%. And another was to provide all support so that the economic growth continues at the higher trajectory.

 However, as time has progressed, the key promises of the Union Budget 2011 appear to be getting challenged. The reason- higher crude oil prices. Since the budget was announced in February this year, crude oil prices have increased substantially. In fact, crude oil has touched US$ 125 per barrel. This is way higher than the Budget estimate of US$ 95 per barrel. This has put substantial pressure on the Government's fuel subsidy bill particularly with respect to diesel which forms nearly 60% of the total fuel subsidy.

 As a result, the government has come under pressure to increase the prices of diesel. If it decides to follow this path, then it adds to the risk of higher inflation. The inflation would be compounded in the event of a failure in monsoons or any other global turmoil that leads to higher commodity prices. In addition, diesel pricing is a sensitive issue for electoral votes.

 Therefore, the government now stands on crossroads. If it decides to take the path of increasing diesel prices, it risks higher inflation. This would lead to further pressures in the economy in the form of higher interest rates as well as slowing economic growth. If it decides to do nothing and allow diesel prices to remain where they are, then it risks a higher subsidy bill. This would lead to a burgeoning fiscal deficit. In either case, the promises made in the Union Budget appear to be in danger of remaining on paper. However, it is important to remember that reading too much into short-term economic forecasts can be very risky for investment decisions.

Source:- Equity Master

RBI's FY12 monetary policy

1. RBI raises short term LAF rates and savings bank rate by 50bp
2. Operating procedure changed, a new borrowing facility (MSF) at 100bp higher than repo
3. FY12 growth seen at 8% while Mar-12 inflation at 6% with upward bias
4. Expect 50bp+ increase in the entire interest rate structure and further 50bp hike in policy rates in 1HFY11
5. Expect savings deposit rate hike to be passed on
6. Tighter provisioning norms to have marginal impact as banks are carrying excess provisions

Gold ETF's...What now ???

 

Gold has seen its prices touch new highs. And along with it the gold Exchange Traded Funds (ETFs) have also seen their prices spiraling upwards. But the rise in prices of the latter has become a cause of concern for all. A large part of the price increase in ETFs is due to the huge amounts invested in them by the hedge funds. And these hedge funds tend to book profits when their targets are realized. Whenever this would happen, it would lead a decline in the prices of these ETFs. The worrisome factor is that the pricing of these ETFs is linked to the pricing of gold. Experts around the world, including IMF (International Monetary Fund) are concerned that any exodus of funds from the ETFs would lead to a decline in the prices of gold. However, the fund houses that have la unched these commodity based ETF s have stated that they do have adequate mechanisms in place to prevent this from happening. Even commodity experts feel that any decline in ETF prices would not lead to a decline in gold prices. It is actually the other way round.

Courtesy: Equity Master

 

Scams and Scandals in India

 

Scams and scandals in India have accelerated in the past one year. Hence, it would surprise some to know that as per CMS (Centre for Media Studies) Corruption Study 2010, there has been a marked decline in corruption rates in India from the levels seen in the year 2005. The study surveyed rural households in twelve states across the country. The results reflect that the households that paid bribes have halved from 56% to 28%. However, the rate is still alarming in states like Chhattisgarh, Bihar, Kerala and Maharashtra. The percentage of households that feel corruption has increased in public services involving the common man has come down by 25% from the levels seen in 2005. The picture is not all that bright though. As per this study, rural households that access PDS (public distribution system) have declined by 10%. However, the government figures reflect a PDS food grain off take of 90%. This points to the diversion of PDS food grains to open markets despite strict laws in place. Nonetheless, the outcome of the survey comes as a breather. Hit by a slew of corruption scams, the timing for an image makeover for India could not have been better.

                                                                                                                                               Courtesy: Equity Master

US Dollar

The US dollar is now close to slipping to all time lows. It has lost 8% of its value against major currencies this year. Now while this makes goods exported from the US cheaper, this decline has huge negative ramifications for the US as well as the rest of the world. A weaker dollar and the Fed's loose interest rate policy have two major effects.

Firstly, the near zero interest rates have been fueling asset prices across the world. Gold, silver, oil have all hit record levels. It has also pushed up inflation in emerging economies like India and Brazil, forcing these countries to either raise interest rates or to limit capital inflows.
Secondly, a weaker dollar makes imports, including oil costlier for US consumers. Higher input and borrowing costs could hurt demand and economic growth. Either way, the Fed and the US government needs to take a long, hard look at its problems. It needs to slash its bourgeoning budget deficit, and increase interest rates. If things continue the way they are currently, the US will have a long, rocky road to climb back into recovery.

courtesy:-Equity Master

The forthcoming annual review of the monetary policy will be conducted against the backdrop of surge in core inflation, high crude and other commodity prices, moderation in domestic industrial activity, slowdown in investment activity, and lingering uncertainties in the global economy. Clearly, the monetary policy dilemma is becoming apparent. However, price stabilization is expected to remain RBI’s dominant concern.
On the annual review of the monetary policy on May 3, 2011, I
expect the Reserve Bank of India (RBI) to raise repo and reverse repo rates by atleast 25bps each. There has been a notable deterioration in inflation dynamics, with drivers of inflation shifting from food to manufacturing categories, reflecting building demand-side pressures.

Acquisition and Transfer of Immovable Property in India by a person resident outside India (RBI Circular as on April 8th 2011)

Introduction

Acquisition of immovable property in India by persons resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in the Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time. Section 2 (v) and Section 2 (w) of FEMA, 1999 defines `person resident in India' and a `person resident outside India', respectively. Person resident outside India is categorized as Non- Resident Indian (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. The Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.s

A person resident in India who is not a citizen of India is also covered by the relevant Notifications.  

2.   In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.

3.   The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open a Branch or Project Office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. Such dispensation is however not available to entities which are permitted to open liaison offices in India.

4.    The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India.

In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the provisions of Section 2(v) of FEMA 1999. The Press Release dated February 1, 2009 issued by Government of India in this regard is enclosed as Annex.

Note: Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease not exceeding five years) without the prior permission of the Reserve Bank.

5.  NRIs/ PIOs are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with applicable tax requirements. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.

6. The FAQs cover the following topics :

A. Acquisition of Immovable Property in India by a person resident outside India, i.e., by a NRI / PIO / foreign national of non-Indian origin by way of purchase / gift / inheritance.

B. Transfer of immovable property in India by a person resident outside India by way of

     i) sale
     ii) gift
     iii) mortgage

C. Mode of payment for purchase of immovable property in India.

D. Repatriation of sale proceeds of residential / commercial property, in India, outside India acquired by NRI / PIO by way of

     i)  purchased
     ii) gift
     iii) inheritance

E. Provisions for Foreign Embassies / Diplomats / Consulates General

F. Other Aspects.

---

A.   Acquisition of Immovable Property in India through
purchase / gift/ inheritance

Q.1.  Who can purchase immovable property in India?

Ans. Under the general permission available, the following categories can purchase immovable property in India:

i) Non-Resident Indian (NRI)¹
ii)  Person of Indian Origin (PIO)²
 
The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India.

Q.2.  Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?

Ans. No.

Q.3.  Are any documents required to be filed with the Reserve Bank after the purchase?

Ans. No.  An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.

Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission?

Ans. There are no restrictions on the number of residential / commercial properties that can be purchased.

Q.5. Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?

Ans. No.

Q.6. Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

Ans. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. However, he / she can acquire or transfer immovable property in India, on lease, not exceeding five years. In such cases, there is no requirement of taking any permission of /or reporting to the Reserve Bank.

Q.7. Can a foreign national who is a person resident in India purchase immovable property in India?

Ans.  Yes, a foreign national who is a ‘person resident in India’ within the meaning of Section 2(v) of FEMA, 1999 can purchaseimmovable property in India,but the person concerned would have to obtain the approvals and fulfil the requirements, if any, prescribed by other authorities, such as, the State Government concerned, etc. The onus to prove his/her residential status is on the individual as per the extant FEMA provisions, if required by any authority. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank.

Q.8. Can the branch / liaison office of a foreign company purchase immovable property in India?

Ans. A foreign company which has established a Branch Office or other place of business in India, in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. A declaration in form IPI should be filed with the Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for the purpose of borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank. Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan and who have set up Branch Offices in India and would require prior approval of the Reserve Bank.

However, if the foreign company has established a Liaison Office in India, it cannot acquire immovable property. In such cases, Liaison Offices can acquire property by way of lease not exceeding 5 years.

Q.9. Can a NRI/PIO acquire immovable property in India by way of gift? Can a foreign national acquire immovable property in India by way of gift?

Ans. (a)  Yes, NRIs and  PIOs can freely acquire immovable property by way of gift either from

i) a person resident in India; or
ii) an NRI;  or
iii) a PIO.

However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.

(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

Q.10. Can a non-resident inherit immovable property in India?

Ans. Yes, a person resident outside India i.e. i) an NRI; ii) a PIO;  and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek prior approval of the Reserve Bank for inheriting immovable property in India.

Q.11. From whom can a non-resident person inherit immovable property?

Ans.  A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

(a) a person resident in India
(b) a person resident outside India

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property.

B. Transfer of immovable property in India

(i) Transfer by way of sale

Q.12. Can an NRI/ PIO/foreign national sell his residential / commercial property?

Ans. (a)  NRI can sell property in India to

i)   a person resident in India; or
ii)  an NRI; or
iii) a PIO.

(b) PIO can sell property in India to

i)   a person resident in India; or
ii)   an NRI; or
iii)  a PIO –  with the  prior approval of the Reserve Bank

(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to

i)  a person resident in India
ii) an NRI
iii) a PIO

Q.13. Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?

Ans. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

(b)  Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.

(ii) Transfer by way of gift

Q.14. Can a non-resident gift his residential / commercial property?

Ans.  Yes.
(a) NRI / PIO may gift residential / commercial property to –
(i) person resident in India or
(ii) an NRI or
(iii) PIO.

(b)  A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.

Q.15. Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?

Ans.  (a) NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India.

(b) A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India.

(iii) Transfer through mortgage

Q.16. Can residential / commercial property be mortgaged by NRI/ PIO?

Ans. i) NRI / PIO can mortgage a residential / commercial property to:

(a) an Authorised Dealer / the housing finance institution in India without the approval of Reserve Bank

(b) a bank abroad, with the prior approval of the Reserve Bank.

ii) A foreign national of non-Indian origin can mortgage a residential / commercial property only with prior approval of the Reserve Bank.

iii) A foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an Authorised Dealer in India.

C.   Mode of payment for purchase of immovable property in India.

Q.17. How can an NRI / PIO make payment for purchase of residential / commercial property in India?

Ans.  Payment can be made by NRI / PIO out of:

(a) funds remitted to India through normal banking channels or
(b) funds held in NRE / FCNR (B) / NRO account  maintained in India

No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above.

Q.18 Is repatriation of application money for booking of flat / payment made to the builder by NRI/ PIO allowed when the flat or plot is not allotted or the booking / contract is cancelled?

Ans. The Authorised Dealers can allow NRIs / PIOs to creditrefund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of residential, commercial property, together with interest, if any, net of income tax payable thereon, to NRE/FCNR account, provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the Authorised Dealer is satisfied about the genuineness of the transaction.

Q.19.  Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account? How the loan can be repaid?

Ans. Yes, such loans are permitted subject to the terms and conditions laid down in Schedules 1 and 2 to the Notification No. FEMA 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time. Banks cannot grant fresh loans or renew existing loans in excess of Rs. 100 lakhs against NRE and FCNR (B) deposits, either to the depositors or to third parties. The banks should also not undertake artificial slicing of the loan amount to circumvent the ceiling of Rs. 100 lakh.

Such loans can be repaid in the following manner :

(a) by way of inward remittance through normal banking channel or
(b) by debit to the NRE / FCNR (B) / NRO account of the NRI/ PIO or
(c) out of rental income from such property
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the  borrower's loan account.

Q.20. Can NRI / PIO, avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?

Ans. Yes, NRI/PIO can avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution subject to certain terms and conditions laid down in Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time. Authorised Dealers/ Housing Finance Institutions can also lend to the NRIs/ PIOs for the purpose of repairs/renovation/ improvement of residential accommodation owned by them in India. Such a loan can be repaid (a) by way of inward remittance through normal banking channel or (b) by debit to the NRE / FCNR (B) / NRO account of the NRI / PIO or (c) out of rental income from such property; or (d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Q.21. Can NRI/PIO avail of housing loan in Rupees from his employer in India?

Ans. Yes, subject to certain terms and conditions given in Regulation 8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003, i.e.,

(i) The loan shall be granted only for personal purposes including purchase of housing property in India;

(ii) The loan shall be granted in accordance with the lender’s Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India;

(iii) The lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No.FEMA.4/2000-RB dated May 3, 2000.

(iv) The lender shall credit the loan amount to the borrower’s NRO account in India or shall ensure credit to such account by specific indication on the payment instrument;

(v) The loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR Account of the borrower and the lender shall not accept repayment by any other means.

D. Repatriation of sale proceeds of residential / commercial property
purchased by NRI / PIO

Q.22. Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?

Ans.  
(a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;

(ii) the amount to be repatriated does not exceed:

• the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
• the amount paid  out of funds held in Foreign Currency Non-Resident Account,  or
• the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and

(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.

(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.

NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance.  Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

(c) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act³ ,  or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.

Q.23. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?

Ans. Please refer to the answer at Q.22 above. NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.

Q.24. If a Rupee loan was taken by the NRI/ PIO from an Authorised Dealer or a Housing Finance Institution for purchase of residential property can the NRI / PIO repatriate the sale proceeds of such property?

Ans. Yes, Authorised Dealers have been authorised to allow repatriation of sale proceeds of residential accommodation purchased by NRIs/ PIOs out of funds raised by them by way of loans from the authorised dealers/ housing finance institutions to the extent such loan/s repaid by them are out of the foreign inward remittances received through normal banking channel or by debit to their NRE/FCNR accounts. The balance amount, if any, can be credited to their NRO account and the NRI/PIO may repatriate up to USD one million per financial year (April-March) subject to payment of applicable taxes from their NRO account balances which would also include the sale proceeds of the immovable property.

Q.25. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property?

Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.  

Q.26. If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?

Ans. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to the following conditions:

(i) The amount should not exceed USD one million, per financial year (ii) This is subject to production of documentary evidence in support of acquisition / inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.4/2009 dated June 29, 2009 (iii) In cases of deed of settlement made by either of his parents or a close relative (as defined in section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler (iv) the original deed of settlement and  a tax clearance / No Objection Certificate from the Income-Tax Authority should be produced  for the remittance  (v) Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer (vi) In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior approval of the Reserve Bank. The foreign national has to approach the Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate mentioned above.

The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of the Reserve Bank.

As FEMA, 1999 specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan. Therefore, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.   

E. Provisions for Foreign Embassies / Diplomats / Consulates General

Q.27. Can Foreign Embassies / Diplomats / Consulates General purchase / sell immovable property in India?

Ans. In terms of Regulation 5A of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000, Foreign Embassies/  Diplomats/ Consulates General, may purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided –

(i) Clearance from the Government of India, Ministry of External Affairs has been obtained for such purchase/sale; and

(ii) The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through the normal banking channels.

F. Other Aspects

Q.28. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?

Ans. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

Q.29. Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO?

Ans. Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO.

Q. 30. In which account can the sale proceeds of such immovable property be credited ?

Ans. The sale proceeds may be credited to NRO account of the NRI /PIO.

Q.31. Can the sale proceeds of the immovable property referred to in Q.No. 29 be remitted abroad ?

Ans. Yes, From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.  

Q.32. Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of the Reserve Bank continue to hold the same?  Can they transfer such property?

Ans. Yes, they may continue to hold the immovable property under holding license obtained from the Reserve Bank. However, they can transfer the property only with the prior approval of the Reserve Bank.

Q.33. Is a resident in India governed by the provisions of the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000?

Ans. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, as amended from time to time, i.e. she/he would require prior approval of the Reserve Bank for acquisition and transfer of immovable property in India even though she/he is resident in India. Such requests are considered by the Reserve Bank in consultation with the Government in India.

The citizens of countries other than those listed above can be PIOs who are covered under the general permission (please refer to Q.No.1). The provisions relating to foreign national of non-Indian origin are covered in detail in Q Nos. 6 and 7.

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Fate can be Fatal, but proper planning can still save you...Asset Protection Case Study

Gaurav was a fairly wealthy man. He had three beautiful adult children, all of whom were married to great partners. He himself had been married to the same women for 35 years. At the age of 57, Rupali, his still young and beautiful wife, had a car accident that disfigured her face so badly that even plastic surgery did very little to restore her once beautiful countenance.

Gaurav and Rupali  were accustomed to a life that included socializing with what I call "the beautiful people." Some of Rupali’s friends were starlets and quite notable individuals. With the disfigurement resulting from the accident, she never seemed to feel comfortable in the same circles. Ruplai went into a deep depression over this and her Dr. put her on prescription medications for anxiety.

Unfortunately, her withdrawal from the social circles left her home with her feelings and she started turning to alcohol and eventually narcotics as an escape. She started herself in a cycle of being up and down, depending on how much of what substance she had in her. The only time she ventured out of the home was to make a trip to the drive-thru liquor store or to see her "dealer." This was devastating to Gaurav. He couldn't comfort her and she was spinning out of control.

Soon came another car accident - Rupali was inebriated, at fault, and she caused injuries to the other parties. With a DUIA charge under her belt, Gaurav, fearing that the worst was yet to come, set up an asset protection plan making their three children equal beneficiaries.

About eight months passed, Rupali had sought help for her substance abuse and was attending meetings and had been sober for almost six months. Even though her license had been suspended due to accident number two, she still drove to her meetings occasionally, whenever Gaurav or a friend couldn't drive her.

She still struggled with depression but was making what "seemed" like progress. Until one night on her way to a meeting, she decided instead to stop and get a single wine cooler. Tragically, this led to a four-hour relapse and ended in a third automobile accident and the bills soared, as well as the legal fees for her defense and the lawsuits from the victims and their insurance companies.

This story doesn't get any better.

Three months later, Gaurav left town on a business trip and Rupali, so deep in her guilt, shame, depression and loneliness, spent the next four days on a cocaine binge which ended in a cardiac arrest. Gaurav returned from his trip to find his once lovely wife sprawled out on the floor, drugs and paraphernalia scattered about their home.

Suspecting foul play, Gaurav immediately called the paramedics…but it was far too late. Once they pronounced Rupali dead, Gaurav called his oldest son to break the news. The next five hours or so must have been very difficult with the police swarming his home gathering evidence.

Sixteen hours later, when the first of his three children arrived at the house, Gaurav was also dead…his son found him in his study…with an empty bottle of his wife's prescription Klonopin, a half bottle of Kelt Petra "Tour du Monde" on the table in front of him and in his lap…a picture of him and Rupali on their 25th wedding anniversary trip.

This story made the local news and the media had a heyday with it… but none of the judgment creditors were able to access any of Gaurav’s wealth, nobody except his children, because he had set up an ironclad asset protection plan.

Summarising..
This is a story that is so tragic that it's hard to say there were any winners. This story does show the frailty and unpredictability of life. The ONLY positive thing here is that the children weren't further tortured by a long and arduous probate period or watching their parents estate be gobbled up by greedy litigants. The painful loss of both parents was excruciating enough for them.

 

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One of the landmarks of change in 2011 will be China overtaking America as the biggest manufacturer. But China too could find itself overtaken by India in economic growth, in what would be a sign of thing to come.

Source:- Daniel Frankilin,Editor, The World in 2011 (The Economist)

LIFE sometime becomes so selfish that it wants everything, But while trying for everything we miss something that is worth everything…..

For all the financial problems that the world faces now, commodities guru Jim Rogers has a medicine. And it is a world without central bankers!

While this view seems too extreme, and highly unlikely, Roger's core ideas are not far from truth. He says that the US central bank has made it worse over the last 20 years with a staggering amount of debt, creating bubble after bubble, going from one mistake after another. Eventually ‘they are going to bankrupt themselves with their own mistakes'

For all the financial problems that the world faces now, commodities guru Jim Rogers has a medicine. And it is a world without central bankers!

“Teaching Your Child To Be Financially Savvy”...An interesting article on cultivating the right financial acumen for your child..A worthwhile read..

by James E. McWhinney

When it comes to money, the advice parents usually give their children goes something like this: "Money doesn't grow on trees", or "Close the door when you leave the house - we're not paying to heat the whole neighbourhood". Although that parental wisdom has stood the test of time, it takes a bit more effort to teach a child sound financial management principles.

Getting Started
The first step in the process is to engage the child's interest. Start with an allowance and have your child dedicate a portion of it to spending and a portion to savings. Be sure to give your child discretion on his/her spending allocation. By giving child money and the power to make decisions regarding its disposition, you will capture the child's interest and give him/her a sense of responsibility.

Lesson No. 1: Saving
The portion of the child's allowance that is dedicated to savings should be deposited into an interest-bearing savings account. Take your child to the bank when the account is opened and involve him/her in the process. Make sure your child understands the purpose of the account and has a working definition of the term interest.

The child's involvement shouldn't end with that first visit to the bank, however. It's a good idea to set up the account so that statements come in your child's name. When the mail arrives, let your child open the envelope. Review the account balance and help your child understand how and why the balance grows. Give your child a binder or folder and have him/her put each monthly statement in the binder. This teaches your child to be organized and to keep records, and it provides a historical document tracing the growth of the account balance.

Take your child to the bank on the day his/her allowance is paid. Let him/her participate in the process of depositing the money. Remember, the point here isn't to try to turn a $5 deposit into a record-setting investment. The point is to teach your child about money, and lesson one is about saving instead of spending. Your objective is to lay the foundation for a lifetime habit of saving.

Lesson No. 2: Investing
every child matures at a different rate, but when your child is older, start talking about making money grow more quickly. Most teenagers are able to grasp the basics of stock ownership. Spend some time explaining the concept of risk, highlighting the potential risks and rewards of investing in the stock market. If you can afford it, give your child a few hundred dollars and help him/her research companies that he/she finds interesting, such as toy or gaming companies, skateboard makers, and so on. Walk your child through the process of conducting research using the internet and the resources available at your local library. Most large public libraries in the U.S. subscribe to Value Line, a investment research provider, or offer net access to a variety of finance sites.

When the research is complete, help your child buy shares. Remember, the purpose of this exercise isn't to create a portfolio that will sustain your child through the ages, and it isn't to demonstrate your fine stock-picking skills. The objective is to give your child the opportunity to learn about money and risk and reward by making his/her own choices. If you don't have a lot of disposable money to give your child, or if you are concerned about his/her research and stock selection abilities, limit the investment to one or two companies at $100 each. Online brokerages make this an affordable exercise for almost everyone.

Don't forget that the possibility of losing money is part of the process. Any investor who claims never to have lost money during a lifetime of investing isn't telling the truth. Keep in mind that this should be a learning experience. You are not expected to hand a 13-year-old child the sum of his/her life's savings and suggest that he/she have a go at the markets. The intention is to teach him/her about investing and the consequences of making decisions.

Once again, statements for the brokerage account should be addressed to the child. The statements should go into your child's folder or binder. You can use them to compare the fluctuations in the account balance against the balances from the savings account. Review the returns on the child's portfolio, discuss the results and stick with this process over a period of years.


Look to the Future
As your child matures, he or she can grasp more sophisticated investing concepts, such as the importance of asset allocation and portfolio diversification and the advantages of different types of investment vehicles. You can explain that, as people age or accumulate assets, fixed-income investments may become an appropriate addition to an investor's portfolio. When possible, you can use your personal portfolio as a tool to demonstrate how portfolio construction evolves over time based on an investor's needs

Conclusion
Knowledge is power. While some adults may blanch at the prospect of giving their child the freedom to pick stocks, it is important to remember that you won't always be around to do the job on the child's behalf. Bear in mind the old saying about teaching a man to fish and feeding him for a lifetime versus giving him a fish to feed him for a day. Ideally, these early exercises in money management will teach your child valuable financial lessons to last him or her well into adulthood.

While affluent adults will invest substantial sums on behalf of their children, including setting up college savings and personal trusts, giving a child the knowledge required to handle his/her own financial affairs is an equally important parental responsibility. In the long run, teaching children about money may be more valuable than giving them cash and no direction on how to handle it. So, start early and make the experience fun. Good saving and investing habits become second nature over time, and your child will be able to draw on these skills for a lifetime.

Source:- Investopedia