But foremost, it is very important to understand that who is considered NON-RESIDENT in India ?

Who is NRI

An Indian residing abroad is popularly known as Non-Resident Indian (NRI). However, the NRI status is legally defined under the Foreign Exchange Management Act, 1999 and the Income Tax Act, 1961 for applicability of respective laws. Non Resident under FEMA 1999 :

Person resident outside India means a person who is not resident in India and Non Resident Indian is a person of Indian origin resident outside India who is either a Citizen of India or a person of Indian Origin. RBI has further clarified that students studying abroad are also to be treated as NRIs under FEMA and accordingly will be eligible for Foreign Investment and FCNR accounts.

Person resident in India means:

(i) A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-

(A) A person who has gone out of India or who stays outside India, in either case—  

(a) For or on taking up employment outside India, or

(b) For carrying on outside India a business or vocation outside India, or

(c) For any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

(B) A person who has come to or stays in India, in either case, otherwise than—

(a) For or on taking up employment in India, or     

(b) For carrying on in India a business or vocation in India, or 

(c) For any other purpose, In such circumstances as would indicate his intention to stay in India for an uncertain period;

(ii) Any person or body corporate registered or incorporated in India,

(iii) An office, Branch or agency in India owned or controlled by a person resident outside India, 

(iv) An office, Branch or agency outside India owned or controlled by a person resident in India.

The term non-resident is negatively defined under Section 6 of the Income-tax Act. An individual who is not a resident under the Income-tax Act is a non-resident (generally, termed NRI). Thus, One should know the definition of a resident and if he is not a resident then he is a non-resident. The status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act). The definition is explained in pictorial term as under:-

*Not applicable to a resident going outside India for employment, A resident who leaves India as a member of crew of an Indian ship, An Indian citizen or person of Indian origin who is abroad and comes to India for a visit i.e. If such a person stays in India for less than 182 days, he would be a non-resident.

 In the case of a ROR, his global income is taxed in India while in case of a Non-resident; only the income earned or received in India is taxed in India.

A returning NRI would generally be assessed as a R but NOR on his return to India. Up to financial year 2002-03, in a given specific situation, a returning NRI was assessed as a R but NOR on his return to India for nine years i.e. income earned on overseas assets or income accruing outside India (unless it is derived from a business controlled in or a profession set up in India) was not taxed in India for 9 years. However, with effect from financial year 2003-04, this particular benefit has been curtailed from nine years to two years i.e. income earned on overseas assets or income accruing outside India (unless it is derived from a business controlled in or a profession set up in India) would now be taxable in India from the third year itself. Accordingly, ‘A’ would now pay tax on his world income sooner than he would have hitherto done.

The impact of R but NOR status is that foreign passive incomes likes interest, dividend, royalty etc. would not be taxable in India in respect of a person who is R but NOR. Even share of profit of a partnership firm or any other business income would not be taxable in India, if the business in respect of which such income arises is not controlled from India. In other words, all foreign sourced income of a R but NOR is not normally taxable in India unless it is derived from a business controlled in or a profession set up in India.

Income accruing outside India would be taxed outside India as well in most cases in accordance with the tax laws of the foreign country and the Double Tax Avoidance Agreement (DTAA) signed between India and the foreign country. He would be entitled to seek relief under the relevant DTAA i.e. avail credit for foreign taxes paid against income tax paid in India. However there are certain practical difficulties associated with the availing credit for foreign taxes paid such as a possible difference in accounting year of the foreign country and India.

Immaculate planning of income tax implications in advance i.e. prior to return to India holds paramount significance for NRIs intending to return to India. An individual who is non-resident for 9 consecutive years, shall remain RNOR for 2 subsequent years and as such his foreign income is not taxable in India while his status is that of RNOR. The status of RNOR renders certain income of such individual non-taxable as explained in Tax liability of NRIs

Where can we help?

• Determination of your residential status in India
• Interpretation of DTAA with a view to reduce tax liability in India
• Handling of issues relating to inheritance, will, etc.
• Compliances with respect to the Income-Tax Act, 1961,
• Application for Permanent Account Number (PAN)
• Filing of India tax return
• Advising suitable tax saving investments
• Representation before tax authorities, In case required
• Opening if various bank accounts and compliances thereon
• Various compliances in regard to repatriation of funds/investments/property, etc.

PERSON OF INDIAN ORIGIN (PIO)

A Person of Indian Origin (PIO) is literally, simply a person of Indian origin who is not a citizen of India.

PIO for the purpose of acquisition and transfer of immovable property in India : PIO means a citizen of any country other than Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan if –

• He at any time held Indian passport or
• He or either of his Father or any of his Grandfather was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955.

PIO for the purpose of investment of shares in India / opening non-resident account in India/ remittance of assets, PIO means a citizen of any country other than Bangladesh or Pakistan, if-

• He at any time held Indian passport or
• He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 or
• The person is a spouse of an Indian citizen or a person referred to in above sub-clauses.

PIO CARD SCHEME -2002

The new PIO Card Scheme, 2002, is in operation since 15th September, 2002. All persons of Indian origin who are in possession of the passport of any other country except Pakistan, Bangladesh, Afghanistan, Nepal, Bhutan, China, Sri Lanka or any other country specified by the government, are eligible for PIO Card if:

• She/he had any time held an Indian passport.
• He/She or either of his/her parents or grand parents or great grand parents was born in India or permanent resident in India provided neither was at any time a citizen of any other specific country.
• He/She is a spouse of a citizen of India or a person of Indian origin covered under 1 & 2 above.
• Iranian nationals of Indian Origin can be granted PIO card after MHA approval.

Foreigners holding PIO cards-

Foreigners holding PIO cards can travel to India on their new passports with the valid PIO card having endorsement of the old passport on it, even if they are not carrying their old passports. However, such foreigners are advised to have necessary endorsement of the new passport from the competent authority on their PIO cards to avoid any inconvenience in future. The scheme is broad-based, covers up to four generations and also the foreign spouse of a citizen of India or a PIO.

Benefits

The benefits accruing to a PIO card holder:

• PIO card holder shall not require a separate VISA to visit India. The card is valid for 15 years.
• PIO card holder will be exempt from the requirement of registration if his stay on any single visit in India does not exceed 180 days.
• In the event of continuous stay in India of the PIO card holder exceeding 180 days, he/she shall have to get himself/herself registered within 30 days of the expiry of 180 days with the concerned Foreigners Regional Registration Officer/Foreigners Registration Officer. For minor no registration is required on any type of visa.
• The PIO card holder doesn’t require a student VISA for undertaking studies in India and similarly no Employment VISA will be required for taking up employment in India.
• The PIO card holder shall enjoy parity with NRIs in respect of facility available to the latter in the economic, financial and education fields except in matters relating to acquisition of agriculture plantation/properties. However, no parity shall be allowed in the sphere of political rights.

Where can we help ?

• Application for issue of PIO card
• Follow up with the authorities for early issue of PIO card and making all compliances
• Application for issue of duplicate PIO card (in case of loss, etc. of original PIO card)

Non resident Indians who have/ intend to have investments in India

For Non resident Indians who have certain investments, property and bank accounts in India, we manage their financial affairs in India in its entirety as follows:

• Monitor, record and periodically report on his investments.
• Facilitate liquidation/lease of property through a top-notch property consultant.
• Facilitate repatriation of sale proceeds of investment and property.
• Facilitate repatriation of income from investments and rent from the property let out.
• Complete banking and other regulatory formalities.
• Plan his financial transactions to minimise his tax liability in India.
• File Income Tax Services return.

Non resident Indians who inherit assets in India

A NRI inherits assets in the form of investments, property etc in India and intends to either liquidate them and repatriate the sale proceeds of the same or manage the same in most tax efficient manner. We enable him to achieve these objectives by facilitating the clearance from Income Tax Services, RBI and other regulatory authorities.

Non resident Indians/ other Non-residents who have/ intend to set up a business in India

A NRI/ other non-resident businessman intends to set up business in India. We enable him to do so by providing the following services:

• Develop an entry strategy and a financial model.
• Undertake location studies and recommend the ideal location.
• Identify and evaluate potential partners including due diligence reviews
• Arrange for complete set of regulatory approvals.
• Arrange finance for the project by preparing a detailed project report and liaison with banks/ financial institutions/ joint venture partners.
• Facilitate incorporation of a company in India.
• Organise office infrastructure and manpower during the “in-transit period” of the start up or operate as a representative office.
• A NRI/ other non-resident already has a business in India. Besides providing the entire gamut of financial and consultancy services, we operate as a representative office/ manage specific business processes.

RETURNING NRI

NRI who return to India for good, should know various aspects of Foreign Exchange Regulations (FEMA), Indian Taxation and Banking Regulations in order to rearrange his financial affairs in India and outside India.

When relocating to India, the following aspects should be taken care of :

• What is your residential status under:
• Foreign Exchange Management Act, 1999
• The Income Tax Act, 1961
• Compliance of Baggage Rules in India regarding repatriation of overseas assets.
• Redesignation of all Indian bank accounts as Resident accounts and Holding and operating the non-resident Banking accounts on your return to India and Taxability thereof.
• 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)
• Opening of and compliances in respect of ‘Resident foreign currency’ (RFC) account.
• Taxability of Income earned in and outside India
• In the year of return to India.
• In the subsequent period.
• Compliance in respect of the Indian income-tax Act, 1961 e.g. application for PAN in case you do not have a PAN
• Compliances in respect of Wealth-tax Act, in case required e.g. filing of wealth-tax return
• Application of Double Taxation Avoidance Treaty, if any applicable
• 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?
• Assistance in Filing Return of Income.
• 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.
• Miscellaneous other issues.

Where can we help ?

• Compliances regarding repatriation of assets to India
• Procedure for redesignation of all Indian bank accounts
• Opening of ‘Resident foreign currency’ (RFC) account
• Information to all companies, funds, etc., of whom shares and securities are held by the non-resident, regarding the change of residential status/relocation to India
• Compliance in respect of the Indian income-tax Act, 1961 e.g. application for PAN in case you do not have a PAN
• Compliances in respect of Wealth-tax Act, in case required e.g. filing of wealth-tax return
• Repatriation of legacies/inherited assets and taxability in India thereon
• Facilitate clearance required under FEMA from RBI to continue to hold assets outside India.
• Facilitate re-investment of sale proceeds of assets acquired outside India.
• Plan residential status under FEMA and Income Tax Services.
• Plan tax liability in India.
• Make fresh investments in business outside India.
• Investment and business consultancy in India.

Emigrating Indian/ New NRI An emigrating Indian/ new NRI wants to retain/ disinvest assets (property, investments, business) acquired in India and repatriate the income/ sale proceeds thereof. We enable him to do so as follows:

• Obtain clearance required under FEMA from RBI to continue to hold certain assets in India.
• Facilitate repatriation of sale proceeds and income of assets h
eld in India.
• Plan his tax liability in India.
• Monitor, record and report on his investments in India.

BANKING ACCOUNTS

Banking accounts can be ‘Rupee Account’ or ‘Forex Account’.

Rupee Account can be:

• Non-resident External A/c (NRE A/c)
• Non-resident ordinary A/c (NRO A/c)
• Non-resident non repatriable A/c (NRNR A/c)
• Non-resident (special) rupee (NRSR) account scheme

FOREX Account can be:

• Foreign currency non-resident A/c (FCNR A/c)
• Resident foreign currency A/c (RFC A/c)

Where can we help ?

• Opening of various bank accounts in India viz Rupee account, Forex account
• Monitoring of your bank accounts with regard to various compliances as also effective tax planning viz crediting the sale proceeds of immovable property in India and repatriation of the same, current income repatriation, legacy, inheritance, etc
• Issuance of CA Certificate like 15CA & 15CB 

NRI FAQ’s

Q.1 Who can purchase immovable property in India?

 Under the general permission available, the following categories can purchase immovable property in India: Non-Resident Indian (NRI) Person of Indian Origin (PIO). 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.

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.5. 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.  

Q.6. 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.  

Q.7. 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.8. 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.  

Q.9. 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.10. 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 gi

Q.11. 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.12 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 credit refund 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.13. 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:

Q.14. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?

Ans. NRI/PIO may repatriate up to USD 250000per 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.15. 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 1.25 million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes

Q.16. 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.17. Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO? In which account can the sale proceeds of such immovable property be credited?

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

Q.18. Can the sale proceeds of the immovable property referred to in Q. No. 17 be remitted abroad?

Ans. Yes, from the balance in the NRO account, NRI/PIO may remit up to USD 1.25million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Q.19 Is an NRI/PIO is liable to pay taxes and file its Income Tax Return on Sale of Immovable property in India?

Ans. Yes, There exist a liability to file Income Tax Return and pay due taxes, if any, arising out of Sale of Immovable property in India. Further, other Income like Interest, rent, dividend, if any, arising in India will also be included in filing Income Tax Return and will be taxed according to Income Tax Act, 1961.

Q.20 Can a NRI transfer money from NRO to NRE Account?

Yes, the Reserve Bank of India (RBI) has permitted transfer of funds from NRO to NRE account subject to payment of applicable taxes within the overall ceiling of $ 250000 in a financial year and production of Certificates like 15CA & 15CB from Chartered Accountant.

Q. 21. If an individual of Indian origin staying abroad has to remit some money to his parents in India, will such repatriation of money to India affect the taxability of the parents?

Ans.: Repatriation of money to parents of an individual will not be liable to be taxed in India in the hands of the parents. This is because gifts made to relatives are not taxable as per the Income‐tax Act.

Q. 22 If a non resident is willing to invest in the Equity Shares or debentures of an Indian Company by utilizing its foreign currency as a medium of purchase, then are there any specific provisions relating to the taxability of such shares?

Ans.: In case of non‐resident capital gains arising from the sale of shares, or debentures of, an Indian company shall be computed by converting the cost of purchase, and the sale consideration received as a result of sale of such shares and debentures, into the same foreign currency as was initially utilized in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency. Moreover the aforesaid manner of computation of capital gains shall be applicable in respect of all capital gains arising from every reinvestment thereafter in sale of shares or debentures of an Indian company.

Q. 23 Whether dividend income earned by a non – resident individual or foreign company from an Indian Company is taxable?

Ans.: The dividend income earned by a non – resident individual or foreign company from an Indian Company is exempt from tax in India.

Q. 24 Can a Non‐Resident become a shareholder or a director in an Indian Company?

Ans.: Yes, a Non‐Resident can become a shareholder or a director in an Indian Company.

Q. 25 How can a NR file his return of income even if he is not physically present in India?

Ans.: As per the provisions of the Income Tax Act, 1961, a non – resident can file his/ her return of income by authorizing another person through a signed power of attorney to sign his/ her return of income on his/ her behalf. A non‐resident, even though he/she is not physically present in India, can himself file his return of income by furnishing the same electronically on the website of Directorate of Income Tax by following the procedure mentioned therein.

Q. 26 If a Non Resident individual of Indian origin is returning back to India with all his assets including money, then what are the tax implications on his income and assets?

Ans.: If a non‐resident individual is returning back to India then for the purpose of Income Tax his residential status shall be computed as discussed above and accordingly his/her income shall be taxed. While for the purpose of wealth Tax a non‐ resident individual returning back to India will not have to pay Wealth Tax for seven successive years after his return to India on money and assets which have been acquired outside India one year before his return to India.