Returning Indian

A and B are returning to India for good after working in USA since past 30 years. Are they required to inform anyone on their return to India permanently?

Ans. Once they return to India for good they need to inform the following persons about the change in their residential status:

a) All the bankers, with whom they hold banking accounts and get it re-designated,
b) Their depository participant, with whom they hold DEMAT accounts,
c) Companies, where he and his wife are Shareholders / Debenture holders and firms where they are partners.

How can one hold and operate NRI Banking accounts on his return to India for good?

Ans. A returning NR, upon his return to India has to deal with his various accounts in India in the following manner:                                                                         

Account DescriptionTreatment to be given
NRO A/c Re-designate to Resident A/c.
FCNR A/cHold up to maturity. Upon maturity should be converted into Rupee Resident A/c or RFC A/c.
NRE A/cRe-designate to Resident A/c or Transfer balance to RFC A/c.

If an NRE A/c holder is coming to India on a short visit, is he required to re-designate his A/c?

Ans. No. In case the A/c holder comesfor a short visit to India he can continue to hold a NRE A/c.

Are A and B permitted to retain their assets abroad even after their return to India?

Ans. All kind of foreign exchange / overseas assets such as properties, securities, life insurance policies, loans, company deposits, etc. acquired, held or owned by a NRI while he was abroad can be continued to be so held and dealt in any manner even after the NRI’s return to India for permanent settlement.

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.

What shall be the tax implications on a returning Indian as per the Income-tax Act, 1961 (the “Act”)?

Ans.

  • The tax liability of a person returning to India would depend on the ResidentialStatus of a person as per the Act.
  • A returning Indian who has been a NR as per the Act for 9 years or more, then for 2 successive years he shall be considered as a resident but not ordinarily resident (RNOR).
  • Under the Act, income earned outside India is liable to tax in India only if theperson is ordinarily resident in India (ROR).
  • Interest paid by Scheduled banks to NRI or to a RNOR on RFC A/c is exempt from tax under the Act.

How interest on NRE and FCNR account is be taxed in case of Returning Indian?

Ans. Interest on NRE A/c and FCNR A/c is exempt in the hands of a person who is a Person Resident outside India as per FEMA laws. Further, definition of 'Non-Resident' under the Act is not relevant for this sub section.

What is the best time for A and B to move to India for their permanent return?

Ans. As an NR, A and B should try to come back on or after February 1 (or February 2 in case of a leap year). However, if her stay in India in prior 4 previous years does not exceed 365 days, then she may return after 2nd October (or October 3rd in case of a leap year). In both the cases, she will continue to remain NR for that financial year (i.e. April-March) ensuring her income earned outside India shall be non-taxable in India for that financial year.

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.

What are permissible transactions i.e. permissible credits and debits in the RFC A/c?

Ans.                        

Permissible creditsPermissible Debits
           
  1. Foreign currency received as pension / superannuationor other monetary benefits from his employer outside India;
  2.        
  3. Foreign currency received on sale of the overseas assets / as gift or inheritance / proceeds of life insurance policy and repatriated to India;
  4.      
    
           
  1. 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.
  2.        
  3. Can be remitted abroad for any bona fide purpose of the A/c holder or his dependents.
  4.      
    

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

Ans. Interest on a RFC A/c will be exempt from income tax so long as the returning NRI’s residential status under the Act is determined as ‘Non-Resident’ or ‘RNOR’.