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.

- Resident Savings Bank Account: Designate the Resident Savings Bank Account to Non-resident Ordinary (NRO) Bank Account
- Resident Current Account: Designate the Current Account to NRO Bank Account
- Resident Fixed Deposit (FD): 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 open new NRO FD.
- Shares, Debentures, Bonds, Units of Mutual Funds, etc: A Recent Immigrant is required to inform all the companies, funds etc. as to change of his/her residential status from Resident to non- resident.

Note:

1. NRO Bank Accounts can be opened in the form of Savings, Current, Recurring, Fixed Deposit Accounts. 
2. Recent Immigrant have an option to open and maintain NRE a/c and FCNR a/c only after becoming a NRI.

Can the Recent Immigrant continue to operate its 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 immigrant can continue its business operations in India however he will have to discontinue its business operation if they are specifically prohibited for NRIs.

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

Ans.

i. The person is required to intimate his Bankers about the change in the status as “Non Resident” under FEMA.
ii. He may opt for giving a general / specific POA to a close relative to do things on his behalf during his stay abroad.
iii. Intimate the companies, firms where he is a shareholder, partner, and deposit holder about the change in his status as non-resident under FEMA.
iv. Retire from the firm / company if it is carrying on business of real estate, nidhi, lottery, betting, gambling, manufacturing of cigars, etc., trading in TDRs etc.
v. 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).
vi. Taxability of Income earned in and outside India in the year of departure and in the subsequent period.
vii. Application of Double Taxation Avoidance Treaty, where applicable.
viii. 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.
ix. When filing return of income in India, he should state his residential status as ‘NRI’ instead of resident.

Can an NRI hold and operate Resident banking accounts once he leaves India?

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

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

Ans. A Recent Immigrant shall have to determine his residential status for the year. In case he is a ROR, his income outside India shall be taxable. However, in case he is a non-resident for the financial year, income outside India shall be outside the scope of taxability and the income earned outside India shall not be taxable in India. He can avail the benefit of DTAA entered into between India and his home country to avoid double taxation.

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 will required to inform all the companies, fund houses, depository participants, etc. as to change of his residential status from resident to non-resident. Also, the Recent Immigrant is permitted to make further investments in stock market through route of Portfolio Investment Schemes only.

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

Ans. RBI has not prescribed clear guidelines on continuation as a partner. But, 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. 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/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 can continue to hold the immovable property without the approval of RBI even after becoming an NRI. The sale proceeds may be credited to NRO a/c of the NRI.

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

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

Consider a person living in US on H1B work visa for the past two years. Prior to that he lived and worked in India and had opened a PPF a/c. Can he continue to hold and contribute to the PPF a/c? ?

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 NR, PPF accounts shall be closed or deemed to be closed from the day on which individual becomes NR. Further, NR shall be eligible for interest at rate applicable to a Post Office Savings Bank account (generally, 4%) from date of becoming NR to the date the PPF account is actually closed. They shall not be eligible for the higher rate of interest on PPFs (generally, 7.8%) once they become NRs. Accordingly, he cannot make any further contributions to such a/c. 

Can a person continue to hold National Savings Certificate (NSC), if he subsequently becomes a NRI?

Ans. If an Indian resident after purchasing NSC becomes a NR during the period of the maturity period, the certificate shall be encashed or deemed to be encashed on the day he becomes a NR, and ab interest shall be paid at the rate applicable to the Post Office Savings Account (generally, 4%), from time to time, from such day and upto the last day of the month preceding the month in which it is actually encashed.

Is there any limit for NRIs to repatriate the income earned in India?

Ans. NRIs are eligible to repatriate income earned in India from rupee assets held in India up to USD 1 million per FY.

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

Ans. Yes. Recent Immigrant may opt to give a general / specific Power of Attorney (POA) to a close relative to take certain actions on his behalf while he is outside India.