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B) INDIAN ASSETS
I. BANK ACCOUNTS.
(In India)
Returning NRIs, upon
his return to India has to deal with his various accounts in India in the
following manner:
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Account Description
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Treatment to be given
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NRO A/c
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Re-designate to
Resident A/c.
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FCNR A/c
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Hold upto maturity.
Upon maturity should be converted into Rupee Account or RFC A/c.
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NRE A/c
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Re-designate to Resident A/c or
Transfer Balance to RFC A/c.
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II. RESIDENT FOREIGN
CURRENCY ACCOUNT (RFC Account)
o A
Returning NRIs, on becoming residents are free to open and maintain such
accounts with authorised dealers.
o The
funds held in RFC are fully repatriable and also denominated in Forex.
o Funds
in RFC accounts can be remitted abroad for any bona fide purpose of the
account holder or his dependants.
II. SHARES
SECURITIES ETC
Returning NRI is
required to inform all the companies, funds etc. as to change of
residential status from NRI to Resident.
INCOME TAX ACT
1.
The tax
liability of a person returning India would depend on the
Residential Status of a person as per the Income-tax Act, 1961.
2.
Under the Indian Tax
Laws overseas income is liable to Tax in India only if the assessee is an
ordinarily resident.
3.
A returning Indian who
has been a Non Resident for 9 years or more, then for 2 successive
years he shall be a resident but not ordinarily resident (RNOR).
4.
Interest on Non
Resident External Account (NRE) and Foreign Currency Non-Resident
Account (FCNR) [Section 10(4)(ii)] is Exempt in the hands of a person who
is a Person Resident outside India as per section 2(w) of FEMA, 1999
and definition of 'Non-Resident' under Income Tax is not relevant
for this sub section.
5.
Income in respect of
Interest, premium on redemption, other payment on notified securities,
bonds, certificates and deposits. [Section 10(15)(i)].
§
Interest on India
millennium Deposits (IMDs)/Resurgent India Bonds (RIBs) issued by State
Bank Of India (The exemption from tax continues even if the NRI becomes a
resident and is also available to the nominee or the survivor of the NRI or
to a donee to whom the bonds have been gifted by the NRI.)
6.
Interest paid by
schedule banks to Non Resident or to a person who is not ordinarily
resident on RBI approved foreign currency deposits (i.e. RFC
deposits) is exempt (s. 10 (15) (iv) (fa)). The exemption, in respect of
RFC account, continues till such time as the account holder continues to be
“Resident but Not Ordinarily Resident”.
7.
NRIs have been offered
a separate concessional tax regime in respect of certain types of
income under Chapter XIIA comprising section 115C to 115I. As per section
115E, concessional tax of 20 percent is available in respect of investment
income and 10% in respect of long-term capital gains from the specified
assets, which are acquired out of convertible foreign exchange. The benefit
of concessional tax treatment under chapter XIIA continues even after NRI
becomes a resident.
8.
Pension: If you are
likely to receive pension from your former employer after you return to
India, it may be liable to tax in India subject to provisions of Double
Taxation Avoidance Agreement between India and the country from which you
are receiving it.
WEALTH TAX
ii.
If NRI return to India
with the intention of permanently residing in India, the assets brought by
him will be exempt. Also, the money and the assets acquired from the money,
brought by NRI within one year after his return, will be exempt. This
exemption is available to NRI for a period of seven years after his return
to India. [Sec. 5(1)(v)]
PIO CARDS
The Government has
announced a scheme for issuance of Persons having foreign of Indian Origin
(PIO) Cards for Persons of Indian Origin living abroad and passports.
The PIO cards, which would be extended to Persons of Indian Origin settled
in countries other than Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal and Bhutan besides introducing a visa free regime, also
confer some special economic, educational, financial and cultural benefits
to the holders of these Cards.
The following
facilities shall be extended to the PIO Card holders: -
a.
Visa free entry to
India.
b.
For PIO Card holders
the requirement for registration with Foreigners Regional Registration
Office has been done away with for continuous stay not exceeding 180 days.
All future benefits
that would extended to NRIs would also be available to the PIO Card
holders.
ASPECTS TO BE KEPT IN
MIND BY RETURNING INDIAN
A Returning Indian
needs to plan his return to India. For the purpose, he needs advice /
information on various aspects of Tax Laws / FEMA, 1999.
1.
What is your
residential status under:
i.
Foreign Exchange
Management Act, 1999
ii.
The Income Tax Act,
1961
2.
Planning the date and
month of return to India so as ensure minimum tax liability in the year of
return (i.e. April to March)?
3.
Holding and operating
of non-resident Banking accounts on your return to India and
Taxability thereof.
4.
Taxability of Income
earned in and outside India
i.
In the year of return
to India.
ii.
In the subsequent
period.
5.
Application of Double
Taxation Avoidance Treaty, if any applicable
6.
Advice / information on
various aspects of Tax Laws / FEMA, 1999 in respect of holding of assets in
and outside India / earning income in and outside India and its taxability?
7.
Assistance in Filing
Return of Income.
8.
Reorganize your asset
portfolio in India/outside India with professional assistance to ensure
minimum tax. Thus we also advise on setting up Business/Investment Outside
India.
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