Returning Indian

Can a Returning Indian hold Overseas Assets?

Ans.

A Returning Indian may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such assets were acquired, held or owned by him when he was a non-resident or were inherited from a non-resident person.

What shall be the impact on Indian Assets?

Ans.

1. Non-Resident Ordinary (NRO) a/c : To be re-designated to Resident a/c
2. Foreign Currency Non-Resident (FCNR) a/c : Permissible to hold up to maturity and then to be convertedinto Rupee Account or Resident    Foreign Currency (RFC) a/c*
3. Non-Resident External (NRE) a/c : To be re-designated to Resident a/c or balance can be transferred to RFC a/c*
4. Shares & Securities: Returning India is required to inform the Depository about change of his/her residential status from non-resident to    resident

*RFC a/c:
  • Returning Indians, on becoming residents and subject to fulfillment of conditions for opening RFC account can open and maintain such accounts with Indian banks.
  • The funds held in RFC a/c can be fully repatriated and also denominated in forex.

NRIs are returning to India for good. Is he required to inform anyone on his return to India permanently?

Ans.

Once they return to India for good they ought to inform the following persons about the change in their residential status:
i) All bankers with whom they hold banking accounts and get it redesignated, 
ii) Depository participant with whom they hold DEMAT accounts,
iii) Companies where NRIs are Shareholders / Debenture holders and firms where they are partners.

Whether a Returning Indian is required to inform Government Authorities about his change in residential status and overseas assets that he holds?

Ans.

A Returning Indian is not required to report about his change in residential status to RBI. However, he is required to mention his revised status while filling his return of income.
Further, a person who is Resident as per Act is required to report his Overseas Assets in his return of income to be filed in India annually. However, he is not required to report about his overseas assets to RBI.

What shall be the tax implications on a returning Indian as per the Act?

Ans.

1. The tax liability of a person returning to India would depend on the Residential Status of a person as per the Act.

2. Under the Act, income earned outside India is liable to tax in India only if the person is ROR. 

3. A returning Indian who has been a NR as per the Act for 9 years or more or whose stay in India was less than 729 days in preceding 7 years, then generally for 2 successive years he may be considered as a RNOR.
 
4. Interest paid by schedule banks to NRI or to a RNOR on RFC deposits is exempt from tax under the Act. The exemption, in respect of RFC account, continues till such time as the account holder continues to be a RNOR.

5. Pension from NRI’s former employer after return to India may be liable to tax in India subject to provisions of the Double Taxation Avoidance Agreement between India and the country from which the NRI is receiving such amount (and was resident in).

What is the best time for Returning Indian to move to India for their permanent return?

Ans.

A Returning Indian should try to come back on or after February 1 (or February 2 in case of a leap year) of a FY in order to ensure NR status in the year of return.

When non-residents return to India for good, are they allowed to keep foreign currency balances held in NRE / FCNR a/cs?

Ans.

Returning Indians, i.e. those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an Authorized Dealer in India a RFC a/c to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The funds in RFC a/c are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment outside India. The facility is also available to residents provided foreign exchange to be credited to such account is received out of certain specified type of funds/accounts.

It shall be noted that returning Indians are required to re-designate their NRE / FCNR a/c to Resident / RFC a/c immediately on their return to India.

What are permissible transactions in the RFC a/c?

Ans.

Permissible credits

Permissible Debits

  1. Foreign currency received as pension / superannuation or other monetary benefits from his employer outside India;
  2. Foreign currency received on sale of the overseas assets / as gift or inheritance / proceeds of life insurance policy and repatriated to India;
  3. Foreign currency acquired or received before 8th July, 1947 or any income arising or accruing thereon which is held outside India or acquired as gift or inheritance therefrom

a. RFC a/c shall be free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India

b.  Can be remitted abroad for any bonafide purpose of the account holder or his dependent.

Can funds in RFC a/cs be remitted abroad?

Ans. Balance in RFC a/c can be utilized without any restrictions for remittance and / or investment abroad. It can also be utilized for maintenance of dependents or any other personal purposes outside India.

What is the tax treatment of interest on RFC a/c?

Ans. Interest on RFC a/c will be exempt from tax so long as returning Indian’s residential status under the Act is determined as “RNOR”.

Is RBI permission required to be obtained by the NRI for retaining assets abroad after his return to India?

Ans. RBI permission is not required.

Can the benefit of concessional tax treatment provided under Chapter XIIA comprising section 115C to 115L be continued even after the NRI returns to India?

Ans. The benefit of concessional tax treatment under Chapter XIIA may continue even after NRI becomes a resident subject to conditions specified in the Act.

Can the RFC a/c be opened only by a returning Indian?

Ans. RFC account can be opened by both a returning Indian as well a resident individual. However, the resident individual shall open Resident Foreign Currency (Domestic) account.

Is the Income taxable of returning Indian from assets held by him outside India?

Ans. Income earned from assets held outside India by a returning Indian will not be taxable till his residential status will be RNOR under the Act.