Recent Immigrant

Who is a Recent Immigrant?

Ans. Recent Immigrant is a person who leaves India to settle permanently in another country.

Can Recent Immigrant continue to hold Indian Assets?

Ans. All kind of assets in India such as properties, bank deposits, stocks and securities, life insurance policies, loans, company deposits, debentures, bonds etc. acquired, held or owned by an individual while he/she was in India can be continued to be so held and dealt in any manner even after the individual leaves India for permanent settlement.

What shall be the impact on Indian Assets?

Ans.


Asset

Treatment to be given

Resident Savings Bank a/c

Re-designate to NRO a/c

Resident Current a/c

Re-designate to NRO a/c

Resident Fixed Deposit (FD)

Re-designate the Resident FD to NRO FD. Further it is to be noted that depending on Bank’s policy and procedures, FD may be directly designated to NRO FD or may be pre-matured and then a new NRO FD may be opened.

Shares, Debentures, Bonds, Units of Mutual Funds, etc.

Inform all companies, funds etc. as to change of his/her residential status from Resident to non- resident.


Note:
i. NRO Bank a/c can be opened in the form of Savings, Current, Recurring, Fixed Deposit  
ii. Recent Immigrant has an option to open and maintain NRE a/c / FCNR a/c only after becoming a NRI

Can Recent Immigrant continue to operate his/her business in India?

Ans. RBI has given general permission to NRIs to invest on non-repatriation basis by way of capital contribution in any proprietary or partnership concern engaged in any industrial, commercial or trading activity in India subject to FEMA provisions. However, the firm or proprietary concern should not be engaged in any agricultural/plantation activity or real estate business or print media. Therefore the Recent Immigrant may continue business operations in India however he will have to discontinue the business operation if specifically prohibited for NRIs.

What are points to be kept in mind by a person leaving India?

Ans.

i. Planning the date and month of departure out of India so as ensure minimum tax liability in the year of departure (i.e. April to March).
ii. Taxability of Income earned in and outside India in the year of departure and in the subsequent period.
iii. Advice / information on various aspects of Tax Laws / FEMA in respect of holding of assets in and outside India / earning income in and outside India and its taxability.
iv. When filing ROI in India, he should state his residential status as “Non Resident” instead of resident.
v. The person is required to intimate his Bankers about the change in the status as “Non Resident” under FEMA.
vi. He may opt for giving a general / specific POA to a close relative to do things on his behalf during his stay abroad.
vii. Intimate the companies, firms where he is a shareholder, partner, and deposit holder about the change in his status as “Non Resident” under FEMA.
viii. Retire from  firm / company if it is carrying on business of real estate, nidhi, lottery, betting, gambling, manufacturing of cigars, etc., trading in TDRs etc.
ix. Application of Double Taxation Avoidance Treaty, where applicable.

Can an NRI hold and operate Resident banking a/c once he leaves India?

Ans. NRI on his leaving from India has to re-designate his resident a/c in India. Resident savings / current / fixed deposit accounts are to be designated to NRO savings / current / fixed deposit a/c respectively. He shall be eligible to open and maintain a NRE a/c and FCNR Deposit account only after becoming an NRI.

What shall be the taxability of a Recent Immigrant who earns income outside India?

Ans. Recent Immigrant shall have to determine his residential status for the relevant FY. In case he is a ROR, income outside India may be taxable. However, in case he is a “Non Resident” for the FY, income outside India may be outside the scope of taxability and income earned outside India may not be taxable in India. He can avail the benefit of DTAA entered into between India and his country of residence to avoid any double taxation.

Is an individual required to obtain any certificate from Indian Income Tax Department while departing India for good?

Ans.

A person leaving India for good is required to make an application to the Indian Income Tax Department before leaving India. The type of form and related documents differ based on whether the individual is domiciled in India or not. 

Individual domiciled in India
Form 30C should be filed along with necessary supporting documents.

Individual not domiciled in India
Form 30A should be filed along with necessary supporting documents.

Generally, the Income Tax Department is not in issuing such Tax Clearance Certificate/ No Objection Certificate. However, an acknowledgement of the submission filed may be carried by the individual while departing India.

Can a person continue holding shares and securities in Indian Companies on leaving India?

Ans. Yes, a Recent Immigrant can hold the shares and securities in Indian Companies. However, he/ she is required to inform all the companies, fund houses, depository participants, etc. as to change of residential status from resident to “Non Resident”. Also, Recent Immigrant is permitted to make further investments in stock market through PIS route only.

Where a person is a Partner in a Registered Firm in India and intends to move to another country can he continue as a partner of the Firm?

Ans. RBI has not prescribed clear guidelines on continuation as a partner. A person leaving India can continue as a Partner of his firm in India in general. However, it shall be ensured that the firm is not engaged in any agricultural / plantation activity or real estate business, print media or any other activity restricted under FEMA. Further, he shall obtain required permission from RBI in cases where the activities are prohibited / restricted to be undertaken by NRIs.

Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI? 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 can continue to hold the immovable property without approval of RBI even after becoming an NRI. The sale proceeds may be credited to his/her NRO a/c.

Can the sale proceeds of the immovable property referred to in above question be remitted abroad?

Ans. Yes, from balance in NRO a/c, NRI may remit up to USD 1 million, per FY, subject to the procedure mandated by AD Bank and payment of applicable taxes.

Consider a person living in US on H1B work visa for the past 2 years. Prior to that he lived and worked in India and had opened a PPF a/c. Can he continue contributing to that a/c now? If so, what will be the tax implications?

Ans.

PPF a/c can be opened only by an Indian resident. However, if an Indian resident after opening a PPF a/c becomes a NRI, he can still continue to contribute to the account from his/her NRO or a NRE a/c. On completion of period of 15 years, if he is a NRI he will be unable to extend the PPF a/c and will need to mandatorily close the a/c and withdraw the sum.

The person can continue to contribute to the PPF a/c and get the benefit of deduction under section 80C of the Act out of his Indian income. The interest on PPF a/c would continue to be exempt under the Act.

What happens on maturity of his PPF a/c (if he is an NRI)?

Ans. NRI is not eligible for extension on PPF a/c. Hence, at time of maturity NRI is required to withdraw balance from the PPF a/c and transfer to NRO a/c. There is no tax implication in India on maturity of PPF a/c.

What happens if NRI leaves PPF a/c unattended past maturity date?

Ans. In such cases the a/c will be considered ‘extended without contribution’ in blocks of 5 years for an unlimited period of time. Extended without contribution means that the NRI will not have to make the minimum yearly investment of Rs. 500/-. His a/c will continue to earn interest at the prevailing rate.

Can relative of NRI take actions on behalf of NRI while he is outside India?

Ans. Yes, relative can act as long as NRI has given a general/ specific POA to take certain authorized actions on NRI’s behalf while he/she is outside India.