Recent Immigrant

Can a recent Immigrant hold assets in India even after leaving India?

Ans. Yes, all kinds 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 NRI while he was in India can be continued to be so held and deal in any manner even after the NRI’s leave India for permanent settlement.

What are the TDS rates applicable to an NRI?

Ans. The TDS rates depends on the income. The updated rates are tabulated below:

Sr.No. Type of Assets Tax Liability Rate of TDS
1.Interest on NRO Savings Bank AccountTaxable 30.9%*
2.Interest on NRE Bank AccountExempt Nil
3.Interest on FCNR Deposit Account Exempt Nil
4.Long Term Capital Gains on immovable Property Taxable 20.6%*
5.Short Term Capital Gains on immovable PropertyTaxable Slab    Rates
6.Rental IncomeTaxable30.9%*
7.Long Term Capital Gains on Equity Shares, Units of equity based Mutual FundExemptNil
8.Short Term Capital Gains on Equity Shares, Units of equity based Mutual FundTaxable15.45%*
9.Dividend Income on Equity Shares, Units of equity based Mutual FundExemptNil

* Plus surcharge if applicable

What are the aspects to be kept in mind by a Recent Immigrant?

Ans. A Recent Immigrant needs to plan his departure out of India. For this purpose, he needs advice / information on various aspects of Tax Laws / FEMA, 1999. We can guide on issues such as:

a. What is the residential status in the year of departure under Income-tax Act, 1961 and Foreign Exchange Management Act, 1999?
b. 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)?
c. Taxability of Income earned in and outside India in the year of departure and in the subsequent period.
d. Application of Double Taxation Avoidance Treaty, where applicable.
e. 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.
f. Assistance in filing Return of Income in India for the income earned in and outside India.

A recent Immigrant is a partner of a registered firm in India. When he moves abroad permanently, can he continue as a partner in such firm?

Ans. Yes, a recent Immigrant can continue as a partner in the firm as there is no restriction. However, in case the firm is engaged in one of the prohibited activities, the Recent Immigrant shall not be allowed to continue without prior permission from RBI.

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 resident and ordinarily resident, 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 recent Immigrant continue to contribute to PPF account? What are the tax implications thereon?

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

Thus, a recent Immigrantcan continue to contribute to the PPF account and get the benefit of deduction under section 80C of the Income-tax Act,1961 out of his Indian income. The interest on PPF account would continue to be exempt under the Indian income tax laws.

What are the rules regarding recent Immigrant investment in PPF account?

Ans. As per the PPF rules an individual is required to at least invest Rs. 500 per financial year in the PPF account. In case he fails to make the minimum investment in a year or years his account will be considered dormant. Subsequently, when he wants to revive the account, he will have to invest Rs. 500 for each year for which he did not make investment plus a penalty.

What happens on maturity of PPF account of a NRI?

Ans. An NRI is not eligible for extension on the PPF account. Hence, at the time of maturity the NRI is required to withdraw the balance from the PPF account. There is no tax implication on maturity of PPF account. The PPF account amount can be transferred to the NRO account.

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.