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How can NRIs use PoA in India to manage their banking needs?
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Advantages and use cases for a Power of Attorney (PoA) by NRIs
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Points to consider while drafting a PoA
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Process of executing a PoA in India and from abroad
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. The position reflected in this article has been updated as of November 15, 2023.
As a Non-Resident Indian (NRI), you may not be physically present in India (due to work, personal commitments or otherwise) to attend to your financial and legal matters. By granting a PoA to a trusted person who can act as your legal representative in India, you can manage your affairs without being present in the country. Broadly, laws governing a PoA in India include the Indian Contract Act, 1872, and the Powers of Attorney Act, 1882.
A PoA is a legal document that grants someone else the authority to act on your behalf in certain matters such as banking, real estate, and others.
The one who grants the PoA is called the Principal/Grantor.
- The one who is granted the authority is called the Constituted Attorney/Grantee.
Types of PoA
Depending on the purpose, you may choose from different types of PoAs such as:
General power of attorney by NRI
- A general PoA provides the Grantee with broad powers to act on your behalf. The Grantee, via a general PoA, can step in on your behalf for all kinds of general activities including banking and finance, business, or legal matters. For example, you can use a general PoA to have your Grantee manage all your properties in India, handle documentation and other formalities for disbursement of home loans in India, and represent you in various legal matters.
- You can specify in the PoA, any matters outside the scope of such a general PoA and the restrictions regarding the powers of the Grantee.
Special power of attorney by NRI
- A special PoA can be used to provide powers for a special or specific purpose, including banking and finance purchase/sale of an identified property, or any other specific legal matter in India.
- Once the purpose is completed, the special PoA will cease to exist.
You should specify the purpose and timelines, if any, for the task to be carried out by the Grantee
Why is a PoA important for an NRI for banking matters?
A PoA allows you to designate anyone above the age of 18 years to act on your behalf. For NRIs who are not physically present in India, you may choose to have a PoA to handle many of your banking transactions.
Here are some of the common transactions that can be executed effectively using a PoA:
Please note, tables are best viewed on desktops and in landscape mode on mobile phones.
| Banking and financial operations | Managing real estate | Commercial and other matters |
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The PoA can be cancelled by the Grantor at any time before the actions mentioned in the PoA are complete.
Difference between a PoA and a mandate holder
To meet your banking needs, you can also consider appointing a mandate holder for your Non-Resident External (NRE)/Non-Resident Ordinary (NRO) account. You can appoint a mandate holder by submitting a mandate form along with the requisite documents to the bank. However, to appoint a Grantee through a PoA, the documents must be signed before a public notary and stamped with appropriate stamp duty. Also note that with respect to a mandate holder, various Know Your Customer (KYC) documents are required to be submitted to the bank at the time of appointment. This is not the case with a PoA.
Operation of your NRO account through a PoA
As per the prevailing Foreign Exchange Management Regulations (FEMA), Indian banks, subject to compliance with applicable laws, may allow the following activities to be performed by your Indian resident Grantee:
- Local payments in Indian Rupees (₹), including payments for eligible investments
- Remittance outside India from your current income in India (net of applicable taxes)
However, the Indian resident Grantee is not permitted to:
- Repatriate outside India, funds held in the NRO account to an account held by any other person
- Make payment by way of gift to an Indian resident on your behalf
- Transfer funds from
your account to another NRO account
Operation of your NRE account through a PoA
As per the prevailing FEMA, Indian banks, subject to compliance with applicable laws, may allow the following activities to be performed by your Indian resident Grantee:
- Withdrawal for local payments or remittance of funds held in the NRE account to you through banking channels
- Making investments in India
However, the Indian resident Grantee is not permitted to:
- Repatriate outside India, funds held in the NRE account to an account held by any other person.
- Make payment by way of gift to an Indian resident on your behalf
- Transfer funds from your account to another NRE account
- Open an NRE account on your behalf
The terms and conditions applicable to NRE accounts concerning operations by a PoA apply similarly to Foreign Currency Non-Resident Bank (FCNR (B)) accounts.
Safeguarding yourself against the misuse of a PoA
While a PoA can be extremely useful, it also puts you at risk of being susceptible to misuse. In order to avoid such misuse, you could consider including the following to safeguard your interests:
Please note, tables are best viewed on desktop and in landscape mode on mobile phones
| Details of principal and Grantee | Reasons of PoA | Others |
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Procedure for creating a power of attorney for NRI
You can choose to have your PoA executed within or outside India.
In either case, you will need to ensure that your Grantee is:
- At least 18 years old
- Of sound mind and character
- Trustworthy
| Execution in India | Execution outside India |
|---|---|
For a PoA to be valid, it must be executed before a public notary. Some states in India require you to register the PoA, depending on its nature or purpose. |
The laws of the relevant country for execution would apply. In case such PoA relates to matters/ assets in India, you may need to further:
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Navigating Indian state-wise requirements of a PoA
The notarisation and registration requirements for a PoA may vary across states in India. Further, registration requirements also vary depending on the purpose of a PoA. For instance, a PoA for the sale of immovable property is mandatorily required to be registered in the majority of states in India, including Maharashtra, Gujarat, Kerala, and Rajasthan.
It is important to keep in mind that the quantum of stamp duty payable on the PoA may also vary from state to state. Therefore, please consult with a lawyer who can guide you through the state-specific Stamp Act.
Conclusion
You could execute a PoA to handle your banking, financial and legal interests and affairs from afar, ensuring you have oversight over all your important matters.
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Frequently Asked Questions
Does the NRI need to register a PoA executed outside of India?
In case you execute (and, if required, authenticate whether by #apostille or otherwise) the PoA outside India, the PoA may require registration in India, depending on the purpose and the state specific laws.
# Apostille- Legal certification that makes a document from one country valid for use in another country. In this regard, it is essential that both the countries should be party to the Hague Convention of October 5, 1961, Abolishing the Requirement of Legalisation for Foreign Public Documents (HCCH 1961 Apostille Convention).
What is the time limit for registration of a PoA?
Generally, a document should be registered within four months from the date of its execution as per the Registration Act, 1908.
What is the time limit for stamp duty payment for a PoA executed outside India?
As per the Indian Stamp Act, 1899, a PoA executed outside India is subject to stamp duty and may be stamped within three months after it has been first received in India.
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Disclaimer:
The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.
