Chapter 9: Operational Aspects of NRI Business (JAIIB - Paper 2)

1. Which of the following accounts can be opened in India by NRIs and PIOs?

• A. Current Account only
• B. Savings Bank Account only
• C. Resident Foreign Currency Account only
• D. NRE, NRO and FCNR(B) Accounts

NRIs and PIOs are permitted to open three types of accounts in India: Non-Resident External (NRE), Non-Resident Ordinary (NRO), and Foreign Currency Non-Resident [FCNR(B)] accounts.

2. Funds in an NRE account are:

• A. Non-repatriable
• B. Fully repatriable
• C. Partially repatriable up to USD 1 million
• D. Repatriable only with RBI approval

NRE accounts are fully repatriable (principal and interest), making them attractive for NRIs to park overseas earnings in India.

3. Which of the following accounts can be maintained in foreign currency by NRIs?

• A. NRO Account
• B. NRE Account
• C. FCNR(B) Account
• D. Resident Foreign Currency (RFC) Account

FCNR(B) accounts can be maintained in designated foreign currencies (USD, GBP, EUR, JPY, etc.), unlike NRE/NRO which are maintained in INR.

4. Interest earned on which NRI account is exempt from Income Tax in India?

• A. NRE and FCNR(B) Accounts
• B. NRO Account only
• C. All three accounts – NRE, NRO, FCNR(B)
• D. None of the above

Interest on NRE and FCNR(B) accounts is tax-free in India, while interest on NRO accounts is taxable.

5. NRO account is primarily meant for:

• A. Parking foreign income earned outside India
• B. Investment in foreign securities
• C. Depositing export proceeds of NRIs
• D. Managing income earned in India such as rent, dividend, or pension

NRO accounts are meant to manage income earned in India (rent, dividends, pensions, etc.) and are not freely repatriable beyond prescribed limits.

6. A foreign national visiting India for a short stay can open which type of account with an authorised dealer bank?

• A. NRE Account
• B. NRO Account
• C. FCNR(B) Account
• D. SNRR Account

Foreign nationals visiting India can open NRO accounts to manage local payments and receive funds during their stay in India.

7. Which of the following is a key feature of Special Non-Resident Rupee (SNRR) Accounts?

• A. Freely repatriable without any restrictions
• B. Can be used for domestic savings by NRIs
• C. Can be maintained in foreign currency
• D. Can be opened for bona fide business transactions in INR

SNRR accounts are INR-denominated accounts opened by persons resident outside India for permissible business transactions.

8. What is the maximum tenure allowed for an SNRR account as per RBI regulations?

• A. Up to 7 years (extendable with RBI approval)
• B. Up to 10 years without approval
• C. Up to 5 years only
• D. No restriction on tenure

RBI permits SNRR accounts for up to 7 years, with further extension possible only with RBI approval.

9. Which of the following is NOT permitted through SNRR accounts?

• A. External commercial borrowings
• B. Trade credits and export/import transactions
• C. Domestic personal savings and household expenses
• D. Investments under FDI scheme

SNRR accounts are meant strictly for business and investment-related transactions, not for personal savings or domestic expenses.

10. At the closure of an SNRR account, the balance can be:

• A. Retained in India for future use
• B. Freely repatriated outside India
• C. Converted into an NRO account automatically
• D. Transferred to a Resident Savings Account

On closure, the balance in SNRR accounts is freely repatriable outside India, subject to compliance with FEMA regulations.

11. As per FEMA regulations, an NRI is permitted to acquire which types of immovable property in India?

• A. Residential and Commercial property
• B. Agricultural land only
• C. Plantation property only
• D. Farmhouse only

NRIs are permitted to acquire residential and commercial properties in India, but not agricultural land, plantation property, or farmhouses.

12. Which type of immovable property an NRI is NOT allowed to purchase in India without RBI approval?

• A. Residential property
• B. Commercial property
• C. Agricultural land, plantation property, and farmhouses
• D. Shops and office spaces

FEMA prohibits NRIs from acquiring agricultural land, plantation property, or farmhouses unless specifically approved by RBI.

13. An NRI can transfer residential property in India to which of the following without prior RBI approval?

• A. Only to another NRI
• B. Only to a foreign national
• C. Only to a PIO
• D. To a resident of India

An NRI can sell or gift residential or commercial property to any resident of India without RBI approval.

14. Can an NRI gift agricultural land in India to another NRI?

• A. Yes, freely without approval
• B. No, agricultural land can be gifted only to a resident Indian citizen
• C. Yes, but only with RBI approval
• D. Yes, if the NRI is a close relative

Agricultural land, plantation property, and farmhouses can only be transferred (sale or gift) to resident Indian citizens, not to NRIs or PIOs.

15. Payment for acquisition of immovable property in India by an NRI must be made through:

• A. Traveller’s cheques and foreign currency notes
• B. Cash payment in INR
• C. Normal banking channels or funds from NRE/NRO/FCNR(B) accounts
• D. Any foreign exchange brought into India

FEMA mandates that payment for property by NRIs must be routed through banking channels or from permitted NRE, NRO, or FCNR(B) accounts. Cash or traveller’s cheques are not allowed.

16. An NRI can create a mortgage (charge) on residential property in India in favour of:

• A. Only a foreign bank abroad
• B. Only another NRI individual
• C. Only multinational companies
• D. An Authorized Dealer bank or Housing Finance Company in India

NRIs can mortgage their residential/commercial properties in India to Authorized Dealer (AD) banks and Housing Finance Companies for availing loans.

17. For creating a charge on agricultural land by an NRI, prior approval is required from:

• A. Reserve Bank of India
• B. SEBI
• C. Ministry of Finance
• D. State Government

NRIs are generally not permitted to acquire agricultural land. Any charge or mortgage on such property requires prior approval of RBI.

18. An NRI has availed a home loan in India by mortgaging a flat. The repayment of this loan can be made through:

• A. Only cash payments in India
• B. Inward remittances, NRE/NRO/FCNR(B) accounts, or rental income from the property
• C. Foreign exchange brought in traveller’s cheques
• D. Payment in foreign currency directly to builder

Loan repayment by NRIs can be made through inward remittances, balances in NRE/NRO/FCNR(B) accounts, or even rental income from the property in India.

19. Which of the following requires prior RBI approval for an NRI to create a mortgage on immovable property?

• A. Mortgage to an Indian bank for housing loan
• B. Mortgage to a Housing Finance Company in India
• C. Mortgage to a party outside India
• D. Mortgage to an NBFC in India

Mortgage in favour of a party outside India requires prior approval of RBI. Mortgages to Indian banks and housing finance companies are freely permitted.

20. An NRI mortgages his property to an Indian bank. If he defaults, the bank can:

• A. Sell the property to a resident Indian buyer without RBI approval
• B. Transfer the property directly to any foreign national
• C. Retain the property indefinitely
• D. Dispose of the property only with RBI approval

In case of default, banks can enforce the charge and sell the property to a resident Indian buyer, subject to FEMA guidelines.

21. What is the general limit for repatriation of sale proceeds of assets held abroad by an NRI without RBI approval?

• A. USD 500,000 per financial year
• B. USD 100,000 per financial year
• C. USD 1 million per financial year
• D. No limit

NRIs can remit up to USD 1 million per financial year from balances in NRO accounts, subject to production of documentary evidence and payment of taxes.

22. From which type of account are NRIs allowed to repatriate current income such as rent, dividend, or pension?

• A. FCNR(B) Account
• B. NRE Account
• C. Both NRE and NRO Accounts
• D. NRO Account

Current income such as rent, dividend, pension, and interest can be freely repatriated by NRIs from their NRO accounts after payment of applicable taxes.

23. Which of the following requires prior RBI approval for repatriation by NRIs?

• A. Repatriation of rental income
• B. Remittance exceeding USD 1 million per financial year
• C. Repatriation of dividend from Indian companies
• D. Transfer of interest earned on NRE accounts

Repatriation beyond USD 1 million per financial year from NRO balances requires prior approval of the Reserve Bank of India.

24. What is the condition for repatriation of sale proceeds of immovable property acquired in India by an NRI?

• A. The property must have been held for at least 10 years
• B. The sale must be reported to SEBI
• C. Repatriation is not allowed under any circumstance
• D. The property must be commercial only

Repatriation of sale proceeds of immovable property acquired by NRI using foreign exchange is allowed, provided the property has been held for at least 10 years or with RBI approval for earlier transfer.

25. What is required before remitting sale proceeds of assets abroad from an NRO account?

• A. Only a declaration form
• B. RBI automatic approval
• C. Payment of applicable taxes and submission of a Chartered Accountant’s certificate
• D. Proof of NRE account balance

Repatriation of funds from NRO account requires prior payment of applicable taxes and submission of Form 15CA/CB certified by a Chartered Accountant.

26. Which of the following is TRUE regarding investments by NRIs/PIOs in India?

• A. They cannot invest in mutual funds
• B. They can invest only in government bonds
• C. They are permitted to invest in shares, debentures, and mutual funds, subject to FEMA regulations
• D. Investments are allowed only through NRO accounts

NRIs/PIOs are permitted under FEMA to invest in shares, debentures, government securities, and mutual funds, subject to prescribed limits and reporting requirements.

27. What is the maximum investment limit for NRIs/PIOs in the paid-up capital of an Indian company under the Portfolio Investment Scheme (PIS)?

• A. 10%
• B. 15%
• C. 20%
• D. 5%

Under PIS, NRIs/PIOs can invest up to 5% of the paid-up capital of an Indian company. The aggregate ceiling for all NRIs/PIOs in a company is generally 10%, extendable to 24% by passing a special resolution.

28. Through which accounts can NRIs/PIOs make their investments in India?

• A. Only through NRO accounts
• B. Through NRE, NRO, or FCNR(B) accounts depending on the nature of the investment
• C. Only through FCNR(B) accounts
• D. Only through SNRR accounts

NRIs/PIOs can invest through NRE, NRO, or FCNR(B) accounts. NRE/FCNR(B) accounts allow repatriable investments, while NRO accounts are generally used for non-repatriable investments.

29. Which of the following investments by NRIs/PIOs are NOT permitted under FEMA?

• A. Investments in agricultural/plantation properties or farmhouses
• B. Investments in listed company shares
• C. Investments in government bonds
• D. Investments in mutual funds

NRIs/PIOs are prohibited from investing in agricultural land, plantation properties, or farmhouses. Investments in shares, bonds, and mutual funds are permitted subject to regulations.

30. Under the Foreign Direct Investment (FDI) route, how can NRIs/PIOs invest in Indian companies?

• A. Only through debt instruments
• B. Only through secondary market purchases
• C. By subscribing to new shares/convertible debentures issued by Indian companies under the automatic or approval route
• D. Only through venture capital funds

NRIs/PIOs can invest in Indian companies through the FDI route by subscribing to new shares/convertible debentures under the automatic or approval route, as per sectoral caps and RBI guidelines.